The Paris Stock Exchange is edging up by around 0.3% this morning, hovering near the 8,000-point mark. The gains are fueled by Capgemini (+3.1%) and Stellantis (+2.6%), but are held back by defense stocks such as Thales (-1.8%) and Safran (-1.4%), as a tentative peace plan appears to be taking shape around the Ukraine issue under the auspices of the United States.
Like other European markets, Paris was hit by a sharp spike in volatility last week, a renewed risk aversion largely triggered by turbulence on Wall Street. There, Nvidia's strong earnings failed to dispel ongoing concerns about the overvaluation of major U.S. tech stocks.
Somewhat unexpectedly, the November market term--which ended last Friday and was expected to kick off the traditional year-end rally--brought an abrupt halt to a six-month bullish streak, with indices suddenly falling back to their early September levels.
Between worries about stretched valuations among AI specialists and the heavy concentration behind New York's upward movement, investors have recently opted to shed their shares, as reflected in the string of underperformances posted by market indices in recent weeks (-2% for the Dow Jones and S&P 500, -2.7% for the Nasdaq).
For some, the market pullback signals 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 an almost uninterrupted run-up 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 raising questions about the likelihood of a "Santa Claus rally" in 2024.
Since the market reversal, the S&P 500's annual gain has narrowed to about 11%, down from nearly 19% since January 1 as of late October. In Paris, the CAC is now up 9.5% for the year, compared to a much more impressive +14% just ten days ago.
After more than six months of nearly uninterrupted gains, volatility has clearly returned to the markets and could remain the norm through year-end--unless, perhaps, a slew of U.S. economic data due this week, with the reopening of federal agencies, restores a sense of normalcy by depicting a robust American economy with more controlled inflation.
Retail sales and producer price figures for September will be released tomorrow, followed the next day by third-quarter growth data and the PCE, the Federal Reserve's preferred inflation gauge.
"It's true that a Fed rate cut in December would strengthen our growth and cyclical positioning, which would justify a spectacular year-end," Citi strategists noted last Friday.
In the bond market, the 10-year French OAT is trading at 3.44%, while the equivalent German Bund stands at 2.68%.
In London, Brent crude is down 0.8%, near $62 a barrel. The euro is stable against the greenback, around $1.15.
In French corporate news, Thales has announced a strategic partnership with CNN MCO (an Equans France entity) and CS Group (a Sopra Steria subsidiary) to modernize three amphibious helicopter carriers (PHA) for 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 telecommunications satellite and its associated system.
Casino has unveiled plans to adapt and strengthen its financial structure, aiming to complete this work by the end of the second quarter of 2026, alongside 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.
