CAC40: mood worsens following poor US figures

(CercleFinance.com) - The Paris Bourse saw its gains wane (+0.
2 to 8,139) as Wall Street reopened on a note of heaviness.
The downturn in US indices has intensified since the publication of the PMIs: the Nasdaq is down -0.3%, the S&P500 -0.4%, and once again, the Dow Jones seems to be losing its footing with -0.9% (it had already finished sharply lower on Thursday evening).

The CAC/Px1 'February' contract expired at 4pm, validating a +5.7% rise on the February expiry... but the week ended with a loss of -0.4% (approx.).
The DAX40 index (-0.3% on Friday) has broken no fewer than 16 absolute records since the previous '3 Witches' day on January 17, gaining 8% in 1 month.)
This euphoria on the German stock market is all the more worrying in view of the uncertainty surrounding this weekend's German elections.

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 thirty 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 (mixed signals from the United States, rebounding tariffs soap opera), 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.


Analysts fear the scenario of a political 'status quo', at a time when Europe's leading economy needs, in their view, 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 eagerly-awaited results, scheduled for next Wednesday, could also limit position-taking.

In terms of figures, growth in the US private sector slowed markedly in February, according to S&P Global, whose 'composite PMI' index came in at just 50.4 in flash estimates for the current month, compared with 52.7 in January.
The index is getting dangerously close to the 50 threshold that separates expansion and contraction in activity. Production growth falters and hiring declines in February, while optimism falls and costs rise", summarizes S&P Global.

"Businesses report widespread concerns about the impact of federal policies, ranging from spending cuts to tariffs and geopolitical changes", it adds.

In addition, US consumer confidence deteriorated sharply in February, preliminary results from the University of Michigan's monthly survey showed on Friday.

Its confidence index fell to 64.7 this month from 71.7 in January, a decline that spared no social class or age category, the UMich stressed in its release.

The sub-index measuring consumers' assessment of their current situation fell to 65.7 from 75.1 the previous month, while the sub-index relating to the evolution of their outlook declined to 64 from 69.

At 4.3% year-on-year, compared to 3.3% last month, consumers' expectations of inflation over the next year are now at their highest level since November 2023, notes the University of the Midwest.

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

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

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

With risk aversion on the rise again over the past 48 hours, a timid upturn has begun in the bond market, with yields easing on both sides of the Atlantic.

In the US, the yield on 10-year Treasuries eased by -4pts to 4.4600% following yesterday's disappointing indicators, which argue in favor of further monetary support.
Bunds and OATs eased by -6.5 and -5bp respectively to 2.468700% and 3.220% respectively... the OAT/Bund spread eased sharply this week, from 67pts to 75pts today.

With US rates on the decline, the dollar is struggling to maintain its upward trajectory, which has enabled the euro to climb back up to the 1.05 mark against the greenback... but it is losing 0.3% to 1.0465 on Friday.

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

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

Gold consolidated by 0.3% at $2,945 an ounce, following the previous day's record highs, which had sent it to within $30 of the psychological $3,000 threshold: it nevertheless gained 1.3% over the week and almost 11.5% since January 1.

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