CAC 40: Trump galvanizes Wall Street, Europe is worried

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Please note first of all that despite the public holiday of this Monday (November 11, armistice 1918), the Paris Stock Exchange is open, under usual opening and trading conditions. Volumes below average are however mechanically expected, due to the absence of a fringe of operators.

On Friday, the CAC ended at weekly lows a week marked by intense volatility in the wake of the election of Donald Trump as President of the United States. If the news euphorized Wall Street, the main European indices looked gloomy like, over the whole week, the DAX (-0.21%) and especially the CAC 40 (-0.95%) . Against the backdrop of the warming of the American 10-year bond, questions were intense, on the commercial, customs, fiscal, monetary and geopolitical fronts.

“For Europe, the return of Donald Trump to the White House represents considerable commercial and geopolitical uncertainty, which will have a negative impact on growth in Europe,” warns Dr. Felix Schmidt – senior economist and Dr. Holger Schmieding – head economist at Berenberg. “We expect Trump to initially impose only selective, one-off tariffs, while threatening China and Europe with a further escalation in the trade war if they do not make concessions. This approach would be comparable to the one he took in 2017-2020.”

In terms of statistics, operators also noted a greater than expected improvement in American consumer sentiment in November. Measured by the University of Michigan, the index measuring this consumer confidence jumped to 73 points in preliminary data, against 71 points expected and after 70.5 points last month.

“Economic data in the United States remains strong while the Fed continues its rate cuts, to the delight of a large number of investors – red wave and green wave dominate the week,” summarizes Florian Ielpo, head of macroeconomic research at Lombard Odier Investment Managers.

The Fed just finished a meeting of its Monetary Policy Committee last week. The Federal Reserve led by J Powell unsurprisingly decided to lower the yields on its Fed Funds by 25 basis points.

“Trump’s potentially expansionary economic policy could encourage the Fed to adopt an even more restrictive posture to counter inflation,” adds Andrea Tueni, Head of Sales Trading at the Saxo Banque France office. Because if inflation expectations are to be revised upwards, it is the anticipation of the shape of the rate trajectory which is mechanically modified.

As for other values, luxury, a highly strategic sector on the Paris Stock Exchange, was heavily penalized, like Hermès (-4.13%), LVMH (-3.33%), or Kering (- 7.96%), after the “cautious” comments from the management of Swiss Richemont, to say the least. JCDecaux plunged 12% after delivering disappointing outlook for the fourth quarter. Euronext limited its decline to 0.45% after having delivered its medium-term objectives, notably aiming for an increase in its Ebitda by 2027 lower than expectations, according to Jefferies.

On the other side of the Atlantic, the main equity indices ended a good week with a session in the green, like the Dow Jones (+0.59% to 43,988 points) and the Nasdaq Composite ( +0.09% to 19,286 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, appreciated by 0.38% to 5,995 points, a hair’s breadth from the symbolic 6,000 points.

An update on other risky asset classes: around 8 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to 1,0700$. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around 70,20$.

On the macroeconomic agenda this Monday, no cutting statistics will be able to shift prices. The agenda is getting denser tomorrow with the German ZEW and the interventions of numerous Fed executives.

KEY GRAPHIC ELEMENTS

The 7,465/7500 points gave way on Wednesday 30/10, on gap, in thick volumes, and in conditions of notable volatility. The short-term bearish message is thus mechanically validated. The next identifiable level is 7,340 points.

Note that Friday’s session will have “saved” the appearance of the weekly candle, but that the new floor of 7,340 points is weakened. The ultra-volatile session of Wednesday November 6 will have further weakened this level, which was hit very precisely.

Caution, therefore, in a market environment dominated by nervousness. On the scale of the upcoming session alone, the start of a pullback on the 7,645 points is envisaged.