The rise in political and economic uncertainty in Europe, particularly due to the rise of the far right in the European elections, has caused a negative reaction on European financial markets. The CAC40 was particularly affected following the dissolution of the French National Assembly and the announcement of new elections by President Emmanuel Macron. This announcement led to a significant fall in the index, which lost 6.3% in one week.
This fall is compared to two other notable declines over the past four years: a loss of 10.2% during the week of February 28, 2022, caused by Russia’s invasion of Ukraine and the surge in oil prices. energy, as well as a fall of 6.4% during the week of October 26, 2020, which followed the announcement of a second confinement linked to Covid-19.
In France, certain sectors were particularly affected: the banking sector suffered from a deterioration in economic and financial conditions, with a fall of 12% in one week. Concessions and collective services also suffered a drop of 11%, due to the impact of centralizing policies, whether left or far right. Uncertainty is expected to continue on the market until the announcement of the results of the first round of the early legislative elections, scheduled for the end of the month.
At the same time, with the ECB having reduced its rates by 0.25%, the future direction of the Fed’s rates remains uncertain in the face of a strong job market and stubborn inflation in the United States. The resistance of the US economy suggests a status quo from the Fed on interest rates, with possible market volatility during the summer while awaiting new catalysts.
Bank of America’s latest monthly survey of global asset managers shows that professionals are in “strong buy” mode. Global sentiment has not been this bullish since November 2021, and the appeal of US stocks is not weakening. The share of managers who fear a hard landing in the global economy fell to 5%, compared to 11% the previous month and 26% a year earlier. Investing in American tech giants has become one of the most saturated bets, supported by 69% of managers for more than a year.
Thus, Nvidia became the world’s largest capitalization. Two years ago, this advent would have been considered unthinkable. Nvidia, Microsoft and Apple are each worth around $3.3 trillion. To illustrate, the value of each of these companies is greater than the combined market capitalizations of Paris and London. On the other hand, the biggest risk currently identified is a rise in inflation, although this has fallen sharply compared to previous months. It should be noted that the survey was carried out from June 7 to 13 and therefore did not fully take into account the European political disorder.
The CAC 40 set a new absolute record on May 10 at 8,259 points, before experiencing sharp declines.
Over one month, among its components, STMicroelectronics gained 4.42%, Michelin 3.9%, Renault 2.36% and Schneider Electric 0.74%. Conversely, Engie fell by 15.7%, Société Générale by 14.6%, Vinci by 12.4%, BNP Paribas by 12% and Bouygues by 11.8%.
Graphically, the trend is now downward as long as the index remains below 7,864 points, a threshold which coincides with the 20-day moving average.
The area of 7,466 points, constituting the lower limit of a gap opened on January 26, will have to curb the selling pressure. Otherwise, we could see more pronounced profit taking, likely to quickly bring the index back towards the level of 7,300/7,200 points.
