The flagship CAC 40 index finished at 8,219.14 points, its new closing record, after an increase of 0.38%.
The Paris Stock Exchange reached new records during the session and at the close on Friday, in unison with other European markets. They are regaining dynamism with the economic recovery in Europe and the hopes of seeing interest rates fall soon. The flagship CAC 40 index finished at 8,219.14 points, its new closing record, after an increase of 0.38%. During the session it reached a peak of 8259.19 points, exceeding its previous highs of March 28.
The Parisian rating follows in the footsteps of other financial centers in Europe: London pushes back its peaks almost every session since April 23, Frankfurt also established a new record on Thursday, improved on Friday. The Amsterdam Stock Exchange is also at a peak, as is the European Stoxx600 index, while the main Italian, Spanish or Polish indices are close to their 2024 high. And on Wall Street, the three main indices are only ‘a stone’s throw from their record.
Over the week, the CAC 40 rose by 3.29%, its best weekly performance since January, and the progression recorded over the last ten days has erased all the losses of April, a month during which the Parisian stock price increased. was far from its records.
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Rate or late?
The cause, as has often been the case for three years, is inflation. In the United States, prices remain stubbornly on an upward trend, with little sign of change for almost a year (+3.5% in April according to the consumer price index). So much so that investors’ certainty that the American central bank will ease its pressure on the economy in 2024 is now shaken. Interest rates on government bonds skyrocketed in April, going from 2.79% to 3.12% for the French 10-year, a movement which penalizes other financial assets such as stocks.
The month of May partly swept away these doubts: during its last meeting, the American central bank ruled out the scenario of a further increase in its key rates, its main tool for trying to regulate inflation, and confirmed that the next move would be downward. Then US employment data on Friday May 3 and Thursday May 9 showed a cooling of the labor market, which made investors think that“there is progress on the employment aspect of the Federal Reserve’s mandate, which brings us closer to key rate cuts”explains Alexandre Baradez, head of market analysis at IG France.
Another positive factor, oil prices fell significantly (-8.5% on the barrel of Brent from the North Sea) after reaching their highest of the year in April. In Europe, members of the European Central Bank (ECB) consider “plausible” a first cut in key rates in June, if the data confirms the anticipated return of inflation to the 2% target by then. The central banks of Switzerland and Sweden have already taken this step.
Economic recovery
“We are very optimistic about rate cuts, which is very good for stocks”, confirms Florian Ielpo, head of macroeconomic research at Lombard Odier IM. This optimism on the monetary front supports expectations of sustained economic momentum in Europe. “All PMI (activity) indices are re-accelerating”economic players believing that “rate cuts will be good for the economy”underlines Alexandre Baradez, noting an increase in indicators concerning the morale of entrepreneurs and investors.
The United Kingdom even emerged from recession, with its economy growing by 0.6% during the first three months of the year, even more than analysts’ forecasts. The data in China also portends a tremor, which bodes well for leading French companies.
The period for publishing company results was also considered good by analysts, despite initial fears about the economic slowdown. In France, Safran, Schneider Electric, Saint-Gobain, Thales, L’Oréal, Legrand, Michelin and TotalEnergies have recently broken their stock market valuation records or are very close to it.