2024 - CAC40: weighed down by geopolitics, finally taken into account

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(CercleFinance.com) – The Paris Stock Exchange is sinking into the red after spending almost 2 hours in positive territory.
The CAC40 drops -1.1% towards 7,550 and is notably penalized by Renault (-3.3%) as well as by the luxury sector (Kering, L’Oréal, Hermès and LVMH at -2.5/-3%).

The CAC40 peaked around 7,654 (+0.2%) before being caught cold by a more negative opening on Wall Street than expected.

After 90 minutes the declines ranged between -0.7% for the Dow Jones, -1.1% for the S&P500 and -2% for the Nasdaq.
The ‘VIX’, stress index, jumps +20% towards 20.00, a pivotal threshold which could foreshadow a stock market correction.
A drop that investors in the Eurozone did not see coming because there was nothing obvious about it… unless they were concerned – well – about the geopolitical context and the risk of conflagration in the Middle East, to which no one believed yesterday, before hundreds of Israeli tanks entered Lebanon Monday evening around 8 p.m. (an unprecedented offensive since 2006), for a ‘limited operation’ in perimeter and time… which in 90% ends by a large-scale conflict with no horizon of resolution.

The link with the cautious comments made by the Chairman of the Federal Reserve, Jerome Powell, is not obvious since the US indices did not react to them Monday evening.
The head of the Fed affirmed that monetary policy in the United States would evolve ‘over time’, without pre-established direction, and that decisions would be taken ‘meeting by meeting’.

From a ‘macro’ point of view, manufacturing activity remained stable at 47.2 in the United States in September, shows the monthly survey published Tuesday by the Institute for Supply Management (the index stagnates at a plus annual low).
If the new orders sub-index increased by 1.5 percentage points, to 46.1 against 44.6 the previous month, it still remains in contraction territory below the 50 point mark.
The one measuring employment fell to 43.9 compared to 46 in August.

Job openings in the United States increased in August, according to the latest ‘Jolts’ survey published Tuesday by the Department of Labor.

The number of job openings reached eight million on the last day of August, compared to 7.7 million a month earlier, the strength of employment in the construction sector (+138,000) and administration (+138,000). +78,000) having more than compensated for the weakness of services (-93,000).
From one year to the next, however, the statistics show a decrease of 1.3 million positions, which tends to indicate a relaxation in the labor market.
In Europe, the latest ‘stats’ are rather reassuring: this morning, investors took note of the HCOB PMI index for the French manufacturing industry, produced by S&P Global. This stood at 44.6 in September, up compared to August (43.9), but still below the 50 mark of no change.

Furthermore, the HCOB PMI index for the euro zone manufacturing industry, produced by S&P Global, fell from 45.8 in August to 45 in September, its lowest level for 2024, thus signaling a strengthening of the deterioration in the sector’s economic situation.

The first estimate of inflation for the region in September confirmed the decline in inflationary pressures with a score of 1.8%, below the ECB’s 2% target, with ‘core’ inflation falling towards 2.7%.

Such indicators – pointing to a contraction in activity and a slowdown in consumer prices – should support the scenario of a further cut in ECB rates on October 17.

With the tense context in the Middle East, the barrel of crude is losing almost 4% in London, to $74.5.
On the bond compartment, on the other hand, a rush is emerging on Treasury bonds considered the safest: the 10-year Bund relaxes by -11Pts to 2.026%, our OATs by -11.5Pts to 2.812% while the T- Bonds of the same maturity clear -9Pts 3.722%.

The dollar once again appears as a refuge against the euro, which fell by -0.6% to around $1.107/E.

In French company news, LVMH announces the sale of Off-White, an international luxury streetwear brand founded in 2012 by Virgil Abloh, to the New York-based brand management company Bluestar Alliance, a transaction whose terms do not are not disclosed.

JCDecaux announces that JCDecaux Top Media, of which it is the majority shareholder, has acquired 70% of IMC, one of the leaders in outdoor communications in Central America and the number one in Costa Rica, from its founders.

Veolia announces that it will build a new heating network in London which will supply heat from the SELCHP waste-to-energy unit (UVE), in partnership with Southwark Council.

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