CAC40: A strong 'NFP' depresses W-Street, US rates at their zenith

(CercleFinance.com) - The Paris Bourse abruptly reversed course at 2.
30 p.m. with the publication of a much stronger-than-expected 'NFP' (30,000 more jobs than the consensus forecast of +256,000, against a backdrop of unemployment unexpectedly falling to 4.1%).
The CAC40 fell back from 7,510 (+0.2%) to 7.450 (-0.5%) and the Euro-Stoxx50 fell back 0.8%, below the symbolic 5,000Pts threshold, to 4,975.

On Wall Street, US indices plunged into the red (-0.5% initially, -1.3% after 1 hour of trading, the day after a public holiday), while the situation on the bond front became increasingly tense, with T-Bonds yields soaring +7Pts to 4.751%.... the '30 yr' (+3.5Pts to 4.9500%) hitting the symbolic 5.000% mark (4.999%) at around 2.45pm.

Yields fell back a little following the release at 4pm of US household confidence figures: the monthly survey by the University of Michigan showed a worse-than-expected deterioration in sentiment in January.

Its confidence index fell to 73.2 from 74 last month, while economists and analysts were forecasting a more limited decline to 73.9.

While the component of consumers' assessment of their current situation improved to 77.9 from 75.1 the previous month, the outlook component fell to 70.2, after 73.3 in December.

The UMich explains this deterioration by their concerns about price trends, with inflation expectations over a 12-month horizon standing at +3.3% compared with +2.8% last month.

Overall, the strength of the 'NFP' is the predominant indication, and the Dollar took advantage of this to set a new annual record (109.7 on the '$ Index') against a Euro which fell back -0.8% to a new multi-year low of $1.0215.
The Euro recovered a little, but still dropped -0.5% towards $1.050, while the Pound (-0.6%) continued its tumble towards $1.2230.
The US economy generated 256,000 non-farm jobs in December (after +227,000 in November), according to the Labor Department, a number significantly higher than economists' expectations, which were generally in the order of 170,000 (in line with the figures published in November).000 (in line with the figures published by ADP on Wednesday).

The unemployment rate fell by 0.1 points to 4.1%, where stability at 4.2% was anticipated, while the labor force participation rate held steady at 62.5%, and average hourly earnings rose by 3.9% year-on-year.
In addition, non-farm payrolls for the previous two months were revised, from +36,000 to 43,000 for October and from 227,000 to 212,000 for November, for a total revision balance of -8,000 for these two months (status quo in reality).

This morning, the markets had taken note of several statistics concerning France. In November 2024, French household spending on goods rebounded by 0.3% in volume over one month (after -0.3% in October, revised from an initial estimate of -0.4%), according to Insee.

On the other hand, in November 2024, production in France increased slightly over one month in manufacturing (+0.2%, after -0.1% in October) as in total industry (+0.2% after -0.3%), according to Insee.

European bond markets are feeling the shock of US T-Bonds, with Bunds stretching +3pts to 2.5561%, and our OATs +2.5pts to 3.412% (i.e. 85pts spread, with no notable change).

Furthermore, the news of the last few hours does not encourage much risk-taking, whether it be Donald Trump's very offensive speech on trade issues or the surge in UK bond yields.

After a particularly favorable 2024 vintage, especially for US equities, the risk of a stock market correction has increased at the start of 2025, warns Goldman Sachs.

According to the US bank, the probability of a stock market decline of at least 10% within three months and over 20% within 12 months is now close to 30%, whereas it was still relatively low in Q4 2024.

For the week as a whole, the CAC is currently up by just over 2%, after three out of four sessions in the green.

On the bond market, the crisis situation persists in the UK, even though the yield on ten-year Gilts is back to 4.90% after peaking at 4.98% yesterday, not far from the critical 5% threshold.

However, the rate at which the country is incurring debt remains at its highest level since the 2008 financial crisis.

The oil market is heading for a third consecutive week of gains, buoyed by rising demand despite fears of an economic slowdown and uncertainties over interest rate trends.

Brent crude is up +3% to $79.5, while WTI is up +3.3% near $76 a barrel (after testing $77 during the session)... not good for inflationary expectations either.

In French company news, Unibail-Rodamco-Westfield announced on Friday that it had sold a 25% stake in its Centrum Cerny Most shopping center in Prague to Upvest and RSJ Investments.

Engie announces the extension of its flagship wind farm project on the shores of the Gulf of Suez, in Ras Ghareb, Egypt, currently under construction, which will bring the total capacity of this wind farm from 500 MW to 650 MW.



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