The Paris stock exchange has been fluctuating since this morning, but with the Nasdaq kicking off the week at full throttle (+1.8% as semiconductor stocks sizzle), the CAC40 is edging up about 0.3% and reclaiming the 8,000-point mark. The index is buoyed by Capgemini, Société Générale, and L'Oréal (all up 2%), Arcelor (+3%), Edenred (+3.1%), and Stellantis (+3.6%). However, defense stocks such as Thales (-1.8%) and Safran (-1.6%) are acting as a drag, as a tentative peace plan appears to be emerging on the Ukrainian front under the auspices of the United States (Kiev negotiators report "progress" compared to the initial 28-point Trump plan).
In Paris, the CAC is now up 9.5% for the year, a figure that pales in comparison to the +14% seen just ten days ago. The Euro Stoxx50 is rebounding by 0.6%, posting a +13% gain since January 1.
Like other European markets, Paris fell victim to a spike in volatility last week, a renewed risk aversion largely driven by Wall Street's turbulence. Even Nvidia's strong results failed to dispel concerns about the potential overvaluation of major U.S. tech stocks.
Somewhat unexpectedly, the November derivatives expiry--which ended last Friday and should have served as the launchpad for the traditional year-end rally--brought a sudden halt to a six-month bull run, with indices abruptly returning to early September levels.
However, December is off to an enthusiastic start on Wall Street, with the S&P 500 up 1% and the "VIX" volatility index easing by -7.5% to 21.70. This was a somewhat predictable scenario, coming just 48 hours before Thanksgiving and 72 hours before Black Friday--the first being a holiday and the second seeing a half-session with 80% of market participants absent.
Afterwards, the annual "window dressing" season begins, and some are hoping for the traditional "Santa Claus rally"--with Monday potentially marking the kickoff in "buy the dips" mode.
Since the market turnaround, the S&P 500's annual gain has shrunk to around 11%, compared to nearly 19% at the end of October. Driving up prices to boost the "wealth effect" ahead of the weekend's sales is a classic Wall Street move, which suddenly forgets its concerns about stretched AI stock valuations and the heavy concentration behind New York's upward movement.
For some, the recent market pullback reflects an overreaction by investors who have yet to grasp the extent to which AI will revolutionize the economy in the coming years. For others, investors are simply "exhausted" after a nearly uninterrupted rally since "Liberation Day" and are looking to take profits as the year draws to a close.
"The lines could shift" as early as tomorrow with the release of September retail sales and producer price data, ahead of Wednesday's third-quarter GDP figures and, most importantly, the highly anticipated PCE index--the Federal Reserve's preferred inflation gauge.
"A Fed rate cut in December would strengthen our growth and cyclical stock positioning, which would justify a spectacular year-end," Citi strategists noted last Friday.
On the bond market, the 10-year French OAT yield eased by 2 basis points to 3.434%, while the equivalent Bund remained unchanged at 2.698%. Across the Atlantic, the 2035 T-Bond shed 1 symbolic point to 4.052%, the 30-year dropped 1.6 points to 4.689%, and the 2-year yield rose symmetrically by 1 point to 3.524%.
In London, Brent crude slipped 0.2% to around 62.4 USD a barrel, while WTI inched up 0.2% to 57.80 USD.
The euro is stable against the greenback, hovering around 1.15 USD, while gold is up 0.5% at 4,095 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 (PHA) of the French Navy.
Airbus reports it has been awarded a contract by Space Communication Technologies (SCT), Oman's national satellite operator, for OmanSat-1, a next-generation OneSat communications satellite and the associated system.
Casino has unveiled a plan to adapt and strengthen its financial structure, aiming to complete the process by the end of the second quarter of 2026, as well as setting financial targets for its "Renouveau 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.
