The Paris Bourse began the session lower on Tuesday morning, with investors concerned by the sharp rise in bond yields, which often trigger correction movements on equity markets. The CAC40 index is trading at around 7945 points, down 1.2% below the important 8000-point support level.

The deterioration in bond markets worsened sharply yesterday in reaction to US retail sales figures that came in above expectations.

This solid statistic, added to other better-than-expected indicators, further distances the prospect of a forthcoming Fed rate cut, the main driver of the market rally since the beginning of the year.

The yield on 10-year Treasuries, a barometer of market sentiment on the health of the US economy, hit an almost five-month high of over 4.65% on Monday.

The contagion effect has spread to Europe, where the yield on the 10-year German Bund, the benchmark for the eurozone, is hovering around 2.44%, raising fears of tighter financial conditions.

Against this backdrop, investors fear that high yields will prevent equities from responding positively to the current corporate earnings season.

Financial giants Morgan Stanley and Bank of America are due to publish their first-quarter accounts mid-day on Wall Street, as is healthcare group Johnson & Johnson.

On the Old Continent, Ericsson this morning reported higher profits for the first three months of the year, despite a contraction in sales over the period.

According to Berenberg's strategists, the current economic uncertainties militate in favor of a "pause" in the equity markets, leading them to favor safer assets such as gold, energy and defensive stocks.

The CBOE index, which measures the volatility of the S&P 500 and is often referred to as the "fear index", ended last night at 19.2, its highest level since last November.

Apart from corporate results, market operators were also informed of the ZEW index of business sentiment in Germany and the trade balance in Europe. In April, the index reached a level not seen for two years, suggesting that Europe's leading economy is on the way out of its rut. It rose to 42.9 this month, after 31.7 in March, the highest since March 2022.

The eurozone's seasonally-adjusted trade balance narrowed to +17.9 billion euros in February, from +27.1 billion the previous month, as exports fell by 2% while imports rose by 4.2%, according to Eurostat.

The good news is that China's gross domestic product (GDP) grew by 5.3% year-on-year in the first quarter of 2024, according to data released on Tuesday by the State Bureau of Statistics (BES).

But Commerzbank's economists point out that activity slowed somewhat in March, suggesting that the recovery seen at the start of the year thanks to fiscal support and public investment may be running out of steam.

'The government must therefore continue with its spending plan for this year', deduces the German bank.

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