CAC40: unhoped-for return to equilibrium despite Nasdaq/DeepSeek

(CercleFinance.com) - The Paris Bourse (unchanged at 7,927pts) could - unexpectedly - line up a 10th consecutive session of gains (which would be historic), as the CAC40 completely erased its initial losses (-1%), in anticipation of a -3% drop in the Nasdaq, which was well on track at 15:30, in the wake of tech stocks.

At 4.45pm, the Nasdaq lost -2.6% and the S&P500 -1.6% in the wake of Constellation Energy -22%, Marvell -15%, Broadcom -14%, Nvidia -12.5%, etc.
As a result, Nvidia lost its position as the world's leading "capi" to Apple (+2% on Monday).

The CAC40 continues to be penalized in particular by Schneider Electric (-8.3%) and Legrand (-6%), but this is now offset by a trio made up of Téléperformance, Eurofins, Unibail... and Kering is not far behind with +2.2%.
The Nasdaq's woes have spared our index, which is not exposed to A.I. stocks.

The Parisian index is doing well today, but will face several important tests over the coming days, and caution is called for in the run-up to the quarterly results of the US technology heavyweights and the monetary policy meetings of the major central banks.

Microsoft, the world's second-largest market capitalization behind Nvidia, will publish its accounts on Wednesday evening, at the same time as Tesla and Meta, before Apple does the same on Thursday evening.

The publications of the tech giants will be particularly closely scrutinized as investors question the already stretched valuations of the Nasdaq, which has returned to levels close to its record highs.

The rise of 'Deep Seek', a Chinese-designed A.I. that is very powerful and highly appreciated, is said to have been developed for 100 times less than Chat-GPT, and costs 95% less than the American engine for the subscriber.
It has been developed on servers equipped with 'classic', low-cost chips, unlike Nvidia's 'RTX' and then 'Blackwell' GPUs (at $70,000 per 'dual GPU' unit), which are losing -11% in pre-opening trading.

This week will undoubtedly be the busiest of the earnings season, with 102 components of the S&P 500 index in the USA and 53 companies of the STOXX 600 European index set to unveil their financial performances in the coming days.

The week will also be marked by the Fed's monetary policy meeting on Tuesday and Wednesday, while the European Central Bank (ECB) will follow on Thursday.

No rate changes are expected from the US central bank, but comments from its boss, Jerome Powell, will be closely watched as new President Donald Trump has made it clear that he will ask the institution to lower rates.

While the ECB has more room to maneuver in its monetary easing cycle, markets are wondering whether it will adopt a conciliatory rate that would help bolster the recent market rally.

Bruno Cavalier, Oddo BHF's chief economist, recently reminded us that "in the short term, the ECB is the only party capable of revitalizing the eurozone recovery via the credit cycle".

On the statistics front, new home sales rose for the second month running in December -by 3.6% to 698,000 units: a rise that was accompanied by a rebound in property prices to 427.000, compared with 402,500 the previous month, while the average selling price rose to 513,600 dollars, after 485,000 dollars in November.

At the current rate, it would take 8.5 months to clear the inventory of homes on the market, which reached 494,000 units in December.000 units in December.

In Europe, the business climate in Germany improved more than expected in January, according to the Ifo institute's monthly survey, but this does not mean that Europe's leading economy is out of the woods.

This indicator, calculated from a sample of around 9,000 companies, came in at 85.1 this month, compared with 84.7 in December, whereas analysts were expecting it to remain unchanged.

'Despite the rise in this indicator, the German economy is clearly still struggling', reacted Franziska Palmas, economist at Capital Economics.

The index is still at very low levels compared with those prevailing before the pandemic and is consistent, at first sight, with a marked contraction in GDP", warns the economist.

On the bond front, 10-year T-Bonds eased by -6.7pts to 4.55%, while Bunds of the same maturity eased by 2.5pts to 2.515% and OATs by -2.3pts to 3.2810%, leaving the Bund/OAT spread stabilized at around 78pts.

Finally, Brent crude is down -0.4 in London, at $78 a barrel, while the euro is up 0.2% against the greenback, at $1.0515, after reopening down 0.3% at 1.0460.

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