The Paris Bourse (-1.3%) slightly reduced its decline in larger volumes, with the confirmed break - in the form of a 'gap' - of the annual low of 7,390/7,400.

The CAC40 recovered above 7,300, while Wall Street reduced its sharp decline: the Dow Jones just returned to the green (symbolically), the S&P500 lost only -0.5%, the Nasdaq -1%.
The US indices had initially lost more than 0.8%, in the wake of far too robust US retail sales, ruling out the scenario of a rapid rate cut by the FED.

The consensus, which was over 77% before the weekend, was down to 63% according to the FedWatch barometer on Tuesday evening. It should dip below 50 with the series of stats published at 2.30 p.m. The yield on T-Bonds clearly sets the tone: the 10-year is up +4pts to 4.1070, the 2-year +11pts to 4.33%... which brings it back to its December 21-28 levels.

US retail sales continued to rise solidly in December: the Commerce Department reported a 0.6% increase last month, whereas economists were only expecting a 0.4% rise.

And year-on-year, the rise to the end of December was 5.6%, well above the 5.1% estimated.

In detail, retail sales were buoyed by purchases of automobiles (+1.1%), clothing and accessories (+1.5%), but also by those made in department stores (+3%) over the Christmas period.

Excluding automobiles and fuels, retail sales rose by a further 0.7%, as in November.

Industrial production also came as a surprise: in total contradiction with the New York Fed's Empire State index published on Tuesday (which showed a sharp decline, and was even the lowest since May 2020), the Federal Reserve unveiled an unexpected +0.1% increase, thanks to the resilience of consumer goods manufacturing.

In detail, production of consumer goods rose by 0.2%, while that of raw materials increased by 0.1%.

Production in the mining sector rose by 0.9%, while that of utilities fell by 1%.
The industrial capacity utilization rate stood at 78.6%, unchanged month-on-month.

In Europe, investors took note of consumer prices in the UK and the eurozone.

According to Eurostat, annual inflation in the eurozone stood at 2.9% in December 2023, compared with 2.4% in November (1 year earlier, it was 9.2%).

The UK consumer price index rose by 4% in the 12 months to December 2023, up from 3.9% in November, according to the Office for National Statistics (ONS).

Despite reassuring inflation figures and much less glowing business activity than in the US, the probability of a rate cut in March is now estimated at just 29%, compared with 43% before the weekend: the ECB won't beat the FED to the punch, so we'll have to be more patient.

Our OATs are up +7.5pts to 2.8170%, Bunds +7pts to 2.2840% and Italian BTPs +8.5pts to 3.9050%.

'It was inevitable. The discrepancy between market expectations regarding the extent of rate cuts in 2024 and the rhetoric of central bankers is increasing uncertainty on the stock markets, leading to a downturn in indices", explains Christopher Dembik, Investment Strategy Advisor at Pictet AM.

On the Old Continent, Christine Lagarde, President of the European Central Bank (ECB), spoke on Wednesday at the Davos Economic Forum.

'Unfortunately, those hoping to get a clearer picture from next week's ECB meeting are likely to be disappointed', warns Christopher Dembik

'The institution will certainly blow hot and cold regarding its intentions. It will wait for the Fed to make up its mind and for it to have more statistics on inflation before moving ahead with a timetable, in our opinion", stresses the analyst.

The price of a barrel of Brent crude oil continues to fall, dropping -1.2% to below $77.

The dollar continues to recover (+0.25% overall) against the euro, which fell symmetrically by -0.20% to 1.0855.

This firmness of the greenback is weighing on gold (-0.5%, falling back below $2,020 despite geopolitical tensions) and silver, which is down -1.3%.

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