CAC40 Surges 2% Amid Wall Street’s Euphoria Following US CPI Release

CAC40 Surges 2% Amid Wall Street's Euphoria Following US CPI Release

Investors are buoyed by a 1% rise in the Paris Stock Exchange, with the CAC index surpassing 7,500 points, following US CPI data that met expectations. US stock indices also saw gains, alongside declining Treasury yields, sparking hopes for future Federal Reserve rate cuts. In France, consumer prices rose 1.3% year-on-year. Corporate highlights include Esker achieving record revenue and Nexans securing a billion-euro contract. Commodity prices are trending upward, while the Dollar slips against the Euro.

Positive Market Movements on the Paris Stock Exchange

This Wednesday brings some encouraging news for investors as the Paris Stock Exchange experiences a significant surge, climbing by 1% and pushing the CAC index above the crucial 7,500-point mark. This uptick follows the release of the US Consumer Price Index (CPI), which aligns closely with expectations and even shows slightly improved ‘core’ data, excluding volatile prices.

US Economic Indicators and European Market Reactions

The excitement extends across the Atlantic, with the three primary US stock indices witnessing substantial gains—ranging from a 1.5% increase in the Dow Jones to a 2.3% rise in the Nasdaq since 2:30 PM. Simultaneously, US Treasury rates have softened, decreasing by 12 to 14 basis points. In terms of sector performance, banks lead the charge with a remarkable 2.8% increase, while semiconductors and consumer stocks both rise by 2.3%, and networking stocks see a 1.7% boost.

The yields on US Treasuries are notably down, with the 10-year rate sliding from 4.79% to 4.646%, and the 30-year yield dropping from 4.985% to 4.865%. The 2-year yield also falls, moving from 4.365% to 4.226%. This shift in rates has sparked investor optimism regarding potential rate cuts from the Federal Reserve, with expectations of cuts in June (at 65% probability) and December (nearly 50%). This favorable environment has a positive spillover effect on European debt, leading to a decline in Bunds to 2.516%, OATs to 3.337%, and Italian BTPs to 3.676%. The OAT/Bund spread narrows to 82 points, bolstered by the belief that the Bayrou government will escape censure tomorrow, further enhancing the positive sentiment from the US CPI data.

According to the US Department of Labor, the CPI rose by 2.9% in December 2024 compared to December 2023, aligning with expectations, and reflecting a 0.2-point increase from November. When excluding energy (-0.5%) and food products (+2.5%), the underlying annual inflation rate registered at 3.2% last month, slightly below economists’ forecasts. Sequentially, consumer prices increased by 0.4% from November to December 2024, with a 0.2% rise when excluding energy and food products.

Meanwhile, economic activity in New York State has shown signs of decline, as indicated by the Empire State Manufacturing Survey, which reported a significant drop of fifteen points to -12.6 in the general economic conditions index. New orders saw a minor decrease, while shipments remained relatively stable. Furthermore, labor market indicators point to stable employment levels but a reduction in the average workweek length, coupled with an acceleration in both input and selling prices. Nevertheless, businesses are expressing greater optimism about improvements in economic conditions in the upcoming months.

On the domestic front, inflation data in France reveals a 1.3% year-on-year rise in consumer prices for December 2024, maintaining a stable annual rate compared to November and matching the preliminary estimates from Insee.

As the week progresses, markets brace for a busy schedule filled with earnings reports and critical macroeconomic announcements. US banks are off to a strong start, reporting impressive fourth-quarter results with increases ranging from 3.7% to 6.5% among major institutions, although JPMorgan lags slightly with a 1% increase.

Investors remain attentive to the implications of Donald Trump’s initial political actions on consumer strength and the broader economic outlook. Additionally, commodity prices are experiencing upward movement, with Brent crude rebounding by 1% to $80.90, close to the $81 mark that could influence inflation projections, while WTI rises nearly 1.2% to $77.85, nearing the $78 resistance level. On the currency front, the Dollar has dipped by 0.1% against the Euro, currently at 1.03150, as its rapid ascent may impact US exports negatively.

In notable corporate news, Esker celebrates a record year with a total revenue of 205.3 million euros for the 2024 fiscal year, marking a 15% growth at constant exchange rates. Furthermore, Nexans has secured a significant contract worth one billion euros for the LanWin2 project, following a framework agreement with TenneT established in May 2023. Meanwhile, Voltalia has commenced construction on the Los Venados solar project in Colombia, which will have a total capacity of 19.7 megawatts and is anticipated to be operational by the first quarter of 2026.

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