The Paris Bourse ended the day up 0.93% at 7376 points, helped by a rebound in the luxury goods sector, with LVMH up 2.5%, L'Oréal up 2% and Kering up 1.8%, in the wake of the ECB's 10th rate hike, which looks set to be its last.

The Parisian index had even peaked at 7435 points (+1.7%) in the early afternoon, before ceding part of its gains in the second half of the day.

In this session known as the "4 Witches", volumes are logically high, with nearly 8.7 billion euros traded since the opening.

While the equity markets were in the green, the previous day's bond gains were wiped out, with OATs rising from 3.12% to 3.212% (+9pts), Bunds tightening from 2.595% to 2.67% and T-Bonds reaching 4.32%.

With bond markets set to end the week close to their lows for the current year, the message is hard to interpret: is this simply a return to risk-on at the expense of safety?

"The eurozone economy is already weakening sufficiently to make a further rise in inflation highly unlikely," says Martin Moryson, Chief European Economist at DWS.

Some strategists even go so far as to consider that the risks are now tilted towards further cuts in key rates than the market currently expects.

We think that the rate cut will only come in the second half of 2024, and later than the market expected, but we also think that once the easing cycle begins, the rate cut will probably be faster and deeper than previously anticipated", predicts Sebastian Vismara, senior economist and strategist at BNY Mellon IM.

The markets will now focus their attention on the Federal Reserve, which is due to hold its monetary policy meeting next Tuesday and Wednesday.

In the opinion of analysts, the recent rise in oil prices observed since the end of the summer (with Brent above $93 a barrel and WTI at $90) is likely to push the Fed to maintain its restrictive approach.

The many signs of resilience in the US economy, confirmed yesterday by much better-than-expected retail sales, could also push the Federal Reserve to continue on the path of monetary tightening.

Today's figures also point in this direction: manufacturing activity in the New York area rebounded by +21 points to +1.9 according to the Fed's September Empire State Manufacturing survey.

The survey reveals a slight drop in employment levels, while the pace of sales price increases accelerated.

On the inflation front, US import prices rose by 0.5% in August, following a 0.1% increase in July (a figure revised by the Labor Department, which points out that excluding fuel, import prices fell by 0.1% in August, as in the previous month).

For their part, export prices rose by 1.3% in August, after +0.5% the previous month (revised figure), but over the last 12 months, US import prices have fallen by 3% on a gross basis (-0.8% excluding petroleum products), and export prices have contracted by 5.5% (-5.3% excluding agricultural products).

In addition, US industrial production rose by 0.4% in August (+0.7% in July), including a 0.1% rise in manufacturing output proper, held back by a 5% fall in the automotive sector (watch out for the strikes starting at Ford this weekend).

The Federal Reserve adds that the capacity utilization rate in US industry improved by 0.2 points to 79.7% in August, a level in line with its long-term average (1972-2022).

Finally, US consumer confidence worsened in August, according to preliminary figures from the University of Michigan's monthly survey published this Friday.

This confidence index came in at 67.7 last month, compared with 69.5 in July, while economists were expecting an index averaging around 69.2.

While the expectations component improved slightly to 66.3 from 65.5 the previous month, the current situation sub-index fell sharply to 69.8 from 75.7 in July.

There were also figures from the Eurozone: the zone's trade balance stood at +2.9 bnE in July 2023, down sharply on the previous month (+8.6 bnE), according to Eurostat's seasonally adjusted data.

This sharp month-on-month deterioration in the trade surplus reflects both a 0.7% increase in eurozone imports and a 1.7% contraction in exports.

For the EU as a whole, the trade balance fell from +8.1 billion in June to +1 billion the following month, as exports fell by 2.2%, while imports rose by 1.2%.

On the FOREX, the dollar confirmed the previous day's gains against the euro, falling by just -0.1% to $1.0660/E (after a low of $1.6035/E).

In news from French companies, TotalEnergies announces that it has signed a memorandum of understanding with Petrobras and Casa dos Ventos Holding, to assess the prospects for joint projects in renewable energies and low-carbon hydrogen in Brazil.

Virtual prototyping software publisher Esi Group reports net income for the first half of 2023 down 59.2% to 5.7 million euros, with adjusted EBIT margin stable at 30.9% of sales.

Lastly, Vinci Construction Grands Projets announces that it has been selected to design and build a 180,000 m3 liquefied natural gas tank in the Netherlands. The work, worth 160 million euros, is scheduled for completion by the second half of 2026.


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