CAC40 began the week positively, rising 1% to 7,510 points, though momentum waned as US indices pulled back. The index is currently up 0.8%, driven by gains in the luxury and banking sectors. Despite recent growth, uncertainty looms over year-end performance and potential Christmas rallies. Market sentiment is influenced by expectations of a modest European Central Bank rate cut and upcoming US inflation data. Oil prices are rising amid geopolitical tensions, while Alstom secures a significant train order.
Market Overview: CAC40 Sees Positive Momentum
The week kicked off on a high note as the CAC40 index surged by 1% around 4:30 PM, reaching 7,510 points. However, this lead has slightly diminished as US indices are taking a breather after an impressive series of record highs last week. The Dow Jones has dipped by 0.3%, the Nasdaq is down 0.8% (with Nvidia dragging it down by 3.6%), and the S&P 500 has fallen by 0.6%. Notably, the ‘VIX’ has experienced a significant rebound, increasing by 8% to 13.6 after previously falling into a zone of high complacency around 12.6 before the weekend.
Sustained Gains and Market Sentiment
The CAC40, currently holding steady at +0.8%, is working to maintain its position above 7,500, marking its eighth consecutive session of gains with a total of +360 points recovered (nearly +5%). The luxury sector continues to drive growth, with Kering rising by 4.1%, LVMH by 3.6%, and Pernod-Ricard by 2.8%. Additionally, the banking sector is also contributing positively, with Société Générale up by 2.2% and BNP Paribas by 2.1%. Investment strategy advisor Christopher Dembik notes that the recent censorship did not lead to any significant market upheaval.
Since the likelihood of a fall of the Barnier government became apparent, the CAC40 has been on an upward trajectory. Dembik explains that the market has effectively absorbed the idea that a debt crisis in France is not a realistic concern.
While the Paris market recovered last week, experts indicate uncertainty remains regarding a strong finish to the year. Dembik raises the question of whether a Christmas rally is feasible for the CAC40, suggesting it could be challenging. He posits that it would not be surprising to see the CAC40 finish the year below the critical 7,000-point mark, reflecting a decline of approximately 7% for the year. On this Monday, the CAC40 is just 1% away from achieving a positive outlook for 2024, although it trails behind the Euro-Stoxx50, which has gained 10.5%, and the DAX, which stands at +20.5%—both modestly lower than the S&P 500’s +27% and the Nasdaq’s +32% gains since January 1.
Concerns regarding the European Central Bank’s potential decision to implement a modest 25 basis point rate cut on Thursday, rather than a more aggressive 50 basis point reduction, may also influence market trends and hinder the anticipated Christmas rally. According to François Rimeu, a senior strategist at Crédit Mutuel AM, faster cuts would be more appropriate given the European economic landscape, but the declining euro is causing apprehension among central bankers. Despite this, the session remains positive for Euro-denominated debts, with Italian BTPs down by 0.7 points to 3.195%, Bunds up by 0.5 points to 2.120%, and OATs down by 0.5 points to 2.8720%. The OAT/Bund spread is tightening, now around 75 basis points, down from 88 points ten days ago. In the US, T-Bonds are declining by 4 points to 4.188%, while the two-year bond is up by 3 points to 4.1280%.
In addition to monetary policy developments, investors are gearing up for the upcoming consumer price index release in the United States on Wednesday, which is anticipated with great interest a week ahead of the Fed’s final meeting of the year. The consensus estimates US inflation to have increased by 0.3% month-on-month in November, following a 0.2% rise in October.
On the energy front, oil prices are on the rise again this Monday, driven by renewed geopolitical risks and concerns stemming from unrest in Syria following the fall of President Bashar Al-Assad. However, the increase is moderate, with Brent crude oil gaining 1.8% to $72.3 a barrel, marking a relatively ordinary day for Black Gold.
In corporate news, Alstom has secured an order worth nearly 520 million euros to supply SNCF Voyageurs with an additional 35 RER NG trains for the RER E line within the Île-de-France Mobilités network, as part of a framework contract established in 2017.