The Paris stock exchange is inching up by about 0.3% this morning, hovering around the 8,000-point mark. The market is buoyed by Capgemini (+3.1%) and Stellantis (+2.6%), but held back by defense stocks such as Thales (-1.8%) and Safran (-1.4%), as a tentative peace plan appears to be taking shape regarding the Ukraine situation under the auspices of the United States.
Like other European markets, Paris suffered from a sharp spike in volatility last week--a renewed aversion to risk largely triggered by turbulence on Wall Street. There, even Nvidia's strong results failed to dispel concerns about the potential overvaluation of major U.S. tech stocks.
Unexpectedly, the November settlement--a period that should have kicked off the traditional year-end rally--brought a sudden halt to a six-month upward streak, with indices abruptly returning to their early September levels.
Amid worries about the high valuations of AI specialists and the heavy concentration underlying New York's rally, investors have recently opted to offload their shares, as evidenced by a string of underperformances in recent weeks: the Dow Jones and S&P 500 are down 2%, while the Nasdaq has fallen 2.7%.
Some observers see the market pullback as an overreaction by investors who have yet to grasp the extent to which AI will transform the economy in the coming years. Others believe investors are simply "exhausted" after a nearly uninterrupted rise since "Liberation Day," and are looking to lock in profits as the fiscal year draws to a close.
While this time of year is typically bullish, the markets' recent trajectory is casting doubt on the likelihood of a Santa Claus rally in 2025.
Since the market reversal, the S&P 500's annual gain has shrunk to about 11%, compared to nearly 19% at the end of October. In Paris, the CAC is now up 9.5% for the year, down from a more impressive 14% just ten days ago.
After more than six months of almost uninterrupted gains, volatility seems to have firmly returned to the markets and could become the norm through year-end--unless, perhaps, the slew of U.S. economic data expected this week, following the reopening of federal agencies, restores a sense of normalcy by depicting a robust American economy with better-controlled inflation.
Retail sales and producer price data for September will be released tomorrow, followed by third-quarter GDP growth figures and the PCE index--the Federal Reserve's preferred inflation gauge--the next day.
"It's true that a Fed rate cut in December would strengthen our growth and cyclical stock positioning, paving the way for a spectacular year-end," Citi strategists noted last Friday.
In the bond market, the 10-year French OAT stands at 3.44%, while the equivalent German Bund yields 2.68%.
In London, Brent crude is down 0.8%, trading near 62 USD a barrel. The euro remains stable against the dollar, around 1.15 USD.
In corporate news, Thales has announced a strategic partnership with CNN MCO, a unit of Equans France, and CS Group, a Sopra Steria subsidiary, to modernize three amphibious helicopter carriers for the French Navy.
Airbus reports it has been awarded a contract by Oman's national satellite operator, Space Communication Technologies (SCT), for OmanSat-1--a next-generation OneSat telecommunications satellite--along with its associated system.
Casino has unveiled a plan to adapt and strengthen its financial structure, aiming to complete this work by the end of the second quarter of 2026, as well as financial targets for its "Renewal 2030" plan.
Finally, Euronext has announced the launch of the "European Aerospace and Defence Growth Hub," bringing together 15 companies from France, Hungary, Italy, and the Netherlands to support the sector's supply chain.
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