CAC40: starts the week off on the right foot, approaching 7700pts

( – The Paris Stock Exchange is currently gaining nearly 0.6%, around 7,675 points, driven by Stellantis, Sanofi and Pernod Ricard (+1.5%), and despite the dropout of Eurofins Scientific which loose 19%, penalized by rumors of short selling circulating on the Internet.

The Parisian market will be put to the test this week by a series of important meetings, not only on the economic level but also on the political level.

Investors could indeed be reluctant to take risks before the first round of legislative elections takes place on Sunday, the outcome of which will prove decisive for the future of the country.

‘For the moment, foreign investors are waiting but they are starting to consider two disaster scenarios: a grand coalition within which LFI would have significant economic nuisance power or the absence of an absolute majority for the RN which could lead to a resignation of the President of the Republic’, underlines Christopher Dembik, investment strategy advisor at Pictet AM.

‘All this is obviously very hypothetical’, however, tempers the market analyst.

‘Let’s not forget that France plans to borrow massively on the markets in July. We will have to quickly reassure,’ he warns.

An Ipsos poll currently gives the National Rally and its allies around 35.5% of voting intentions, followed by the New Popular Front in second position with 29.5% of the vote.

‘We believe that European share prices incorporate an appropriate risk premium while awaiting the results of the French elections,’ say UBS strategists.

Closely followed for two weeks, the yield gap (‘spread’) between the 10-year French bond and the German Bund of the same maturity – which today reaches 80 basis points – will continue to be closely monitored until ‘see you on Sunday.

Investors could also be cautious a few days before the first debate between Joe Biden and Donald Trump, scheduled for Thursday, with a view to the presidential election in November in the United States.

The markets should also remain prey to uncertainties regarding the pace of inflation across the Atlantic.

In this context, speakers will closely follow Friday’s publication of the ‘PCE’ inflation index, particularly monitored by the Fed.

In the meantime, investors took note this morning of a sharper deterioration than expected in German business confidence in June, showing that Europe’s largest economy is not yet out of the rut.

The Ifo business climate index, calculated from a sample of some 9,000 companies, fell to 88.6 from 89.3 in May.
This is a three-month low.

In French company news, Safran announces that it has entered into exclusive discussions with a view to acquiring 100% of the capital of Preligens, a leader in artificial intelligence (AI) dedicated to the aerospace and defense industries, for an enterprise value estimated at 220 million euros.

Colas, the transport infrastructure business of the Bouygues group, announced on Monday that it had won seven road maintenance contracts in Finland for a total amount of 78.5 million euros.

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