The Paris stock exchange is extending the rally that began earlier this week (+1.3% on both Monday and Tuesday), gaining nearly 1% this morning to hover around 8,230 points, driven by strong performances from Publicis (+3.2%), Legrand (+2.2%), and BNP Paribas (+2%).
The latest progress in the United States toward ending the government shutdown allowed the Paris market to break the downward trend that had been in place since October 27. However, the upcoming agenda may prove too light to sustain this recovery.
After a recent pause in the months-long rally, investors are left wondering whether the market is experiencing a crisis of confidence or simply a brief moment of hesitation within a fundamentally bullish trend.
"Ending the shutdown is generally positive for equity markets, as it unlocks funds distributed by the U.S. Treasury, boosts consumption among recipients of the Supplemental Nutrition Assistance Program (SNAP), and reduces flight disruptions," Jefferies analysts remind us.
The imminent reopening of U.S. federal agencies will also allow investors to finally access economic indicators to gauge the strength of growth, though these statistics could spark a new bout of volatility.
Some professionals expect the Department of Labor to release the September U.S. employment report as early as this Friday, a report that could not be published at the start of October.
Should the data confirm recent difficulties in the U.S. labor market, it would support expectations of another Fed rate cut next month. Conversely, stronger figures could challenge the positive scenario underpinning the recent equity market rally.
One of the main concerns is whether valuations of U.S. tech giants--especially those linked to AI--have reached unsustainable levels. That's why yesterday's announcement of Japanese conglomerate SoftBank selling its entire stake in Nvidia put investors on alert. The chipmaker's shares dropped nearly 3% last night following the news.
The key question now is whether buyers still have the firepower to keep pushing forward. While Wall Street's lofty levels may trigger profit-taking, such dips have consistently prompted "buy the dip" activity--an effect that could be amplified by the historically strong final months of the year.
The counterargument is that much of the positive news is already priced in, and buyers may be unable to push stocks much higher.
Recently, bullish investors have shown signs of fatigue, and given current levels and technical supports, it wouldn't be unrealistic to think they might close out positions earlier than expected this year to lock in recent gains.
On the data front, after two consecutive months of acceleration, price increases in Germany moderated somewhat in October, mainly due to falling energy prices, according to final figures released Wednesday by the federal statistics office Destatis.
The consumer price index calculated according to German standards rose by 0.3% month-on-month and by 2.3% year-on-year, as initially estimated.
In the bond market, 10-year Bund yields are at 2.67% (+1 bp), while the equivalent OAT is stable at 3.42%, for a spread of 75 basis points.
In London, Brent crude is down 0.8% at $64.6 per barrel, as U.S. oil inventory data is expected this afternoon. The euro remains broadly stable against the dollar, at around $1.155.
In French corporate news, LVMH announced that its watch division has taken a minority stake in Swiss manufacturer La Joux-Perret, a "recognized player in the design and production of some of the world's most sophisticated watch movements."
TotalEnergies has signed a 15-year power purchase agreement (PPA) to supply Google with a total of 1.5 TWh of certified renewable electricity from the "Montpelier" solar plant in the U.S. state of Ohio.
Spie announced it has signed an agreement to acquire 89% of Berlin-based PIK, a company employing around 170 people and operating mainly in northern and eastern Germany.
Finally, Imerys has launched a cash tender offer for its EUR600 million bonds bearing interest at 1.5%, maturing on January 15, 2027, and issued on January 17, 2017.
