The Paris Bourse rallied on Friday morning ahead of the start of the US earnings season, which begins at a time when equity markets are experiencing a bout of volatility. The CAC40 index is trading around 8100 points, up around 1%.

Recently preoccupied by the reawakening of US inflation, investors will have the opportunity to return to fundamentals today with the opening of the first-quarter earnings season.

As usual, the big US banking groups JPMorgan Chase, Citi and Wells Fargo will be kicking things off at lunchtime.

These publications will not only give an indication of the health of the financial sector, but will also provide valuable food for thought regarding the economic situation in the United States, where the latest indicators have been solid.

After the spectacular start to the year on the world's stock markets, these results will above all provide an indication of whether the high valuations of US equities are justified.

According to FactSet data, earnings of companies listed on the S&P 500 are expected to have risen by an average of 3.2% year-on-year, their third consecutive quarter of growth.

But the price-earnings ratio (P/E) of the S&P 500 index currently stands at 20.5x, well above its long-term average of 17.7x.

Yesterday, the Nasdaq gained nearly 1.7% on the back of a sharp rebound by the 'Magnificent Seven', in the hope that their quarterly performances will benefit from the hype currently surrounding AI.

According to analysts, however, it will take solid results - and not just from the tech giants - to lift stock indices out of their current trading ranges.

If an improvement in corporate accounts does indeed materialize, equities should benefit, as this would justify a rise in share prices on the basis of unchanged valuation ratios.

'Positive announcements would favor a rally in equities', believes César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management.

A rise in all sectors would reinforce our optimism about US equities", he stresses.

But the opening of the earnings season will not completely dispel the unknown factor of inflation, and investors are keeping a close eye on the price indices published this morning in France and Germany.

Over one year, consumer prices in France rose by 2.3% in March 2024, following a rate of 3% in February, according to Insee.

German inflation continued to slow in March, helped by a reversal in food and energy prices, show official data published this Friday. The consumer price index (CPI) rose at an annual rate of 2.2% last month, following increases of 2.5% in February and 2.9% in January.

This afternoon's calendar of indicators also includes US import price figures, as well as the University of Michigan's consumer confidence index.

Copyright (c) 2024 All rights reserved.