The CAC40 index is under pressure, dropping 1.3% to around 7,530, with a crucial support level at 7,350. Meanwhile, the Euro-Stoxx50 is also struggling below 4,830. Despite a record high for the Nasdaq, US markets are facing downward trends with significant declines in major indices. Inflation data shows a slight decrease in the US, while spending and income reports reflect steady consumer strength. European inflation estimates indicate a rise, impacting bond yields. Earnings reports from large companies show mixed results.
The CAC40 is facing a decline of 1.3%, settling around 7,530 points, and must work hard to maintain support at 7,350 by 5:35 PM. This goal is achievable, requiring just a 0.25% rebound within half an hour, especially with a potential easing of rates amid a risk-off sentiment dominating the equity sector. Meanwhile, the Euro-Stoxx50 is also struggling by dropping 1.4% below 4,830 points, which is a critical medium-term support level to defend.
It appears that financial markets are currently missing the final opportunity for growth, as the previous day saw the Nasdaq reach an all-time high of 18,785. However, this index fell by 2.4% the next day, landing around 18,160, while the S&P 500 retreated by 1.5%, now hovering near the support level of 5,700 with the next target being 5,640. A concerning sign emerging is the formation of ‘break gaps’ in these two major indices, something the Dow Jones rarely experiences due to its calculation method.
On the bright side, there were no unexpected surprises from US indices. The closely monitored Personal Consumption Expenditures (PCE) inflation gauge, watched by the Federal Reserve, decreased by 0.2 points from August, now standing at 2.1% in raw data but remaining stable at 2.7% when the volatile energy and food sectors are excluded.
The Commerce Department also reported that American household spending increased by 0.5% in September compared to the previous month, and incomes grew by 0.3%. These figures align with expectations, supporting a resilient consumption trend often referred to as the ‘wealth effect’ supported by Wall Street.
Additionally, the Labor Department indicated a minor decrease of 12,000 initial unemployment claims in the US, dropping to 216,000 last week. The four-week moving average, deemed a better indicator of the overall trend, stood at 236,500 for the week ending October 26, showing a slight decline of 2,250 from the prior week, a minor change that fails to explain Wall Street’s downward trend.
The pressure on Wall Street appears to stem from bond market dynamics, with yields climbing by 2.3 points on the US 10-year bond to 4.287% (after hitting 4.33% during the session), a rise of 1 point on the 2-year bond to 4.165% (the highest since August 1), and the 30-year bond surpassing 4.500%.
The day also saw the release of preliminary inflation estimates for the closing month, first for France and then, more crucially, for the Eurozone. According to a provisional estimate by Insee, consumer prices in France are expected to increase by 1.2% in October 2024, slightly up from 1.1% in September. Meanwhile, Eurozone inflation is projected at 2% for October 2024, rising from 1.7% the previous month, as quickly reported by Eurostat, the statistical office of the European Union.
“Due to a weak comparative base, the inflation rate is set to recover. It had dropped to 1.7% year-on-year in September and could trend back towards 2%. Conversely, core inflation is expected to continue to erode,” noted Oddo BHF regarding the Eurozone.
The French OATs have deteriorated by 1.5 points to 3.130% (compared to 3.180% around 3 PM), German Bunds climbed by 1.5 points to 2.39%, and Italian BTPs surged by 3.5 points to 3.662%. The Euro to Dollar exchange rate remains steady around 1.0860, while oil prices rebounded by 0.3% to approximately $73.30 in London.
Beyond these indicators, Thursday’s session was once again highlighted by corporate announcements, including Société Générale, which reported a remarkable 4.6-fold increase in net group income for the third quarter.
Other significant companies releasing their quarterly performance since last night include TotalEnergies (-3%), BNP Paribas (-5%), counterbalanced by Société Générale’s +10.5%, along with Airbus, AXA, STMicroelectronics, TF1, Ubisoft, Imerys, and Spie (-6.5%).