Market: Valuations are gradually starting to be debated


(CercleFinance.com) – The Paris Stock Exchange should open without much change on Tuesday morning, continuing its pause begun the day before while awaiting future details concerning inflation in the United States.

Around 8:15 a.m., the futures contract on the CAC 40 index – expiring in March – fell 14.5 points to 7933.5 points, announcing a start to the session on a weak note.

The Parisian market closed Monday with a limited decline of around 0.5% to 7,929 points, thus ending a series of eight consecutive sessions of increase.

The favorable streak that ended yesterday was driven by a rather reassuring earnings season, as well as better-than-expected economic indicators.

Investors are preparing for a more uncertain session, with concerns about valuation levels adding to questions about US inflation and rates.

Since their latest records, the stock markets seem to be looking for a direction, a breathing space which is not surprising after several weeks of progression.

Despite a promising start to the session, Wall Street ended in the red Monday evening, with buyer relays now becoming rarer after the Nvidia hurricane which hit last week.

According to strategists, the high valuations reached by stocks increasingly argue in favor of a pause.

After a gain of more than 6% since January 1, the S&P 500 is currently trading at 23 times earnings, well above its 20-year average of 17.3x, Citi analysts argue.

‘The upward movement at work since the start of the year puts increasing pressure on the fundamentals so that they justify the significant valuations,’ underlines the American bank.

In this sense, Thursday’s publication of the PCE index of consumer spending excluding food and energy, the indicator favored by the Federal Reserve to assess inflation, will serve as a test.

On the bond market, the pause in the stock markets does not favor a return on Treasuries, with the yield on the American ten-year close to the threshold of 4.30%, the highest since the end of November.

The dollar, which has been crumbling by a few fractions every day since mid-February, continues to show weakness and is particularly feverish against the euro, which gains 0.1% to 1.0855.

Oil prices are gaining ground, a movement attributed by specialists to a repositioning of institutional investors in energy.

‘Long positions increased by 17% on oil (…) in one week. This is speculation, in our opinion. This is not sustainable,’ note the teams at DeftHedge, a specialist in foreign exchange and commodity risk management, in their latest market update.

The two benchmark contracts on crude nonetheless show a small increase, the barrel of American light crude (WTI) advancing by 0.2% to 77.7 dollars while Brent from the North Sea also gained 0 .2% to 82.7 dollars.

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