After an initial decline of 0.4%, the Paris Stock Exchange is picking up, outperforming the other European markets thanks to the luxury sector, which includes four of the top ten capitalizations of the Cac 40. Investors welcome the first quarterly publications in Europe, and in particular those of Richemont, Burberry and the equipment manufacturer for the semiconductor industry ASML, without however taking their eyes off the evolution of the interest rate markets in reaction to the more aggressive turn taken by the American Federal Reserve.
Europe is not immune, the acceleration of inflation to 5.4% over one year in the United Kingdom, its highest level since 1992, fueling expectations of a tightening of the Bank of England. In Germany, the rise in consumer prices was confirmed at 5.7% and, while it marks a slowdown compared to November, it remains well above the target of the Bundesbank and, therefore, that of the ECB. The yield on the 10-year German bond, which serves as a benchmark in the euro zone, is tending to 0.0050% after a peak at 0.01%, its first passage into positive territory since May 2019.
At 12:15 p.m., the Bedroom 40 gained 0.60% to 7,176.35 points in a relatively substantial business volume of 1.3 billion euros. In Frankfurt, the Dax takes 0.36% and in London, the Footsie grabs 0.15%. The contracts future March on American indices fluctuate between a gain of 0.2 and 0.4%.
10-year Bund yield in positive territory
While economists do not expect an ECB rate hike before the end of the year, eurozone equity and debt markets are largely interconnected with the United States, where the yield of the 10-year borrowing has risen from 1.5% at the end of last year to nearly 1.9% as the market now expects four Fed rate hikes in 2022.
” The movement on German rates is an indirect effect of what is happening in the United States because these markets are interconnected “, explains Ewout van Schaik, of NN Investment Partners, quoted by the FinancialTimes. But he still expects rate swings to be larger on the other side of the Atlantic, adding that eurozone equities should outperform Wall Street this year for that reason.
Luxury regains luster
Hermes, Kering and LVMH gained between 3% and 3.5%, supported by Richemont’s 32% sales growth over the last three months of 2021, boosted by strong demand for its watches and jewelry in Europe and the United States. Burberry, for its part, expects a 35% increase in profits this year. In Zurich, Richemont advances by 8.3%, while Burberry wins 5.8% in London. Associated with the luxury sector, EssilorLuxottica rises 1.8%.
Conversely, M6 gives up 7.4% while an investment company of the Frère family sold its entire stake in the television group at a unit price of 16.80 euros, i.e. a discount of 9.7% compared to the Tuesday’s closing price. TF1, which plans to merge with M6, fell for its part by 7.3%.
Valneva 15.5% drop. According to Reuters, the European Union’s medicines regulator said the biotech’s Covid vaccine was still under review, but was still awaiting additional data.
Note also the 21% increase in Saffron, supported by a rating from Morgan Stanley changed from “underweight” to “line weight” on the title of the engine manufacturer. Conversely, JPMorgan downgraded EDF (-2.1%) by two notches to “underweight”, and reduced its target price from 14 to 7.60 euros. Furthermore, the faults detected or suspected on the safety circuits of the group’s five nuclear reactors in France constitute ” a serious event “, declared the president of the Nuclear Safety Authority (ASN), Bernard Doroszczuk, during a press conference.
North Sea Brent oil remains above $88, the highest in seven years, following the interruption of a pipeline between Iraq and Turkey due to an explosion, and tensions in the Middle East. TotalEnergies appreciated by 1.2%.
The banks Morgan Stanley and Bank of America will announce their fourth quarter results before the opening of Wall Street. Procter & Gamble and UnitedHealth Group, both components of the Dow Jones, will do the same, before Intel, present in the three major indices, after the close.