CAC40: remains in the green after PMI indices

(CercleFinance.com) - The Paris Bourse started the session in the green on Friday morning, but the buoyant trend that had dominated since the beginning of the year seems to be running out of steam with the downturn in US equities and the approach of this weekend's German elections.
The CAC40 index advanced by 0.5% to 8162 points.

For the week as a whole, the Paris market is currently heading for a weekly loss of around 0.2%, which could see it end a run of five consecutive weeks of gains.

A small current of profit-taking is beginning to emerge after the strong upward movement at the start of the year, which saw the CAC return on Tuesday to within 30 points of its all-time record set last year.

Investors seem to be caught between hopes of a possible peace agreement in Ukraine and solid corporate results, on the one hand, and economic uncertainties on the other.

Although they have eased in recent days, fears linked to the pernicious effects of US protectionist policies on growth and inflation are far from having completely disappeared.

Investors are desperately looking for a theme or catalyst to latch onto, and meanwhile the markets seem to be losing their way a little," observes Michael Brown, strategist at Pepperstone.

Risk appetite is also waning on Wall Street, where the S&P 500 index finished down 0.5% yesterday after setting new highs on Wednesday.

Investors are also tempted to play it safe two days ahead of Germany's early parliamentary elections, which take place this Sunday.

Analysts fear the scenario of a political 'status quo' at a time when Europe's leading economy needs real reforms to boost growth.

'The markets' greatest hope seems to be that the next German government will finally reform the debt brake rule that was created during the global financial crisis in 2009 to guarantee the country's financial stability', comments Lowie Debou, manager at DPAM.

This rule currently limits the German government's additional structural spending to 0.35% of GDP, a figure that most agree is insufficient to meet Germany's growing investment needs', he points out.

The prospect of the US AI chip giant's much-anticipated results, due next Wednesday, could also limit position-taking.

Meanwhile, investors took note of the 'flash' PMI activity indices for Europe.

France's HCOB composite flash PMI sank below the 50 mark for the month of February without change, highlighting a sharp acceleration in the decline of overall activity in the eurozone's second-largest economy.

The HCOB composite PMI flash index of overall activity in the eurozone held steady at 50.2 in February, highlighting continued growth over the month at a marginal pace.

Also on the agenda today are the Michigan consumer confidence index and US old home sales figures.

Renewed risk aversion has led to a timid improvement in bond yields, with rates easing on both sides of the Atlantic.

In the United States, the yield on 10-year Treasuries is back towards 4.50% following yesterday's disappointing indicators, which argue in favor of further monetary support.

With US yields on the decline, the dollar is struggling to maintain its upward trajectory, allowing the euro to climb back to the 1.05 mark against the greenback.

After four consecutive sessions of gains, the oil market retreated following yesterday's announcement of a drop in US crude inventories.

Brent gave up 0.3% below $76.3 a barrel, while US light crude (West Texas Intermediate, WTI) lost 0.3% to below $72.3.

Gold consolidated by 0.3% at $2,946 an ounce, following the previous day's record highs, which brought it to within $30 of the psychological $3,000 mark.

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