Records in Europe, company results and US inflation reassure

Records in Europe, company results and US inflation reassure
Records in Europe, company results and US inflation reassure

PARIS (Reuters) – European stock markets ended on Wednesday at record levels, driven by strong quarterly company publications and signs of slowing inflation in the United States.

In Paris, the CAC 40 ended with a gain of 0.17% to 8,239.99 points, with a session high of 8,253.1 points, very close to its historic peak of May 10, at 8,259.19 points. The British Footsie gained 0.21% after registering a record at 8,474.41 points. The German Dax advanced 0.85%, after reaching an unprecedented high of 18,892.92 points.

The EuroStoxx 50 index increased by 0.40% and the FTSEurofirst 300 by 0.56%. The Stoxx 600 gained 0.60% with a session record of 525.2 points.

At the close in Europe, the Dow Jones rose 0.61%, very close to the symbolic threshold of 40,000 points. The Standard & Poor’s 500, which recorded a record at 5,293.15 points, increased by 0.85%, while the Nasdaq, which also rose to the unprecedented level of 16,679.803 points, gained 1.02%.

The American equity markets are benefiting from a sharp easing in the bond market, after the publication of the consumer price index (CPI) in the United States. The CPI index increased less quickly than expected in April, by 0.3% over one month. Over one year, it increased by 3.4%, after a gain of 3.5% in March. Excluding volatile items, the CPI index also slowed to 0.3% month-on-month and 3.6% year-on-year.

In addition, retail sales in the United States stagnated month-on-month in April, a sign that consumer spending is losing momentum, raising hopes for effective transmission of the monetary policy of the American Federal Reserve (Fed).

“The market was waiting for confirmation that the resurgence of inflation in the first quarter was not going to continue in the second quarter. It got it with these figures,” notes Marvin Loh, macroeconomic strategist at State Street.

After the release of the CPI, Fed policy rate futures showed that the probability of a September borrowing cost cut increased from 69% to 73%.

In the euro zone, traders now see the European Central Bank (ECB) lowering its rates by 73 basis points this year compared to a reduction of 71 points before the statistic.

Strong corporate results in Europe also contributed to the good performance of the indices: among the Stoxx 600 companies that have already published their results for the first quarter, 60.7% exceeded expectations, against a historical average of 54% , according to LSEG data as of Tuesday.

VALUES IN EUROPE

Carrefour fell 4.07%, penalized by the lowering of JPMorgan’s recommendation to “underweight” from “neutral”.

Trigano fell by 6.79%, with analysts judging the motorhome manufacturer’s cash generation “disappointing”.

CGG soared 19.63% after a 30% jump in turnover from its activities in the first quarter.

Burberry fell 7.27% as the luxury group reported a 34% drop in annual operating profit.

British credit data specialist Experian rose 8.127% on the back of optimistic forecasts for 2025, based on increased demand and reduced spending.

Merck KGaA rose 4.77% after better-than-expected adjusted profit.

Commerzbank gained 5.13% as the bank recorded its highest quarterly profit in 10 years, above expectations.

ABN Amro declined 6.11% due to a drop in its capital ratio in the first quarter, overshadowing a better-than-expected net profit.

The Finnish biofuels group Neste plunged 14.88%, at the bottom of the Stoxx 600, after lowering its margin outlook for 2024 on renewable products.

TODAY’S INDICATORS

Manufacturing activity in the New York region recorded a steeper-than-expected decline in May, with the Empire State index rising to ???-15.6 from ???-14.3?? in April.

The euro zone economy grew by 0.3% in the first quarter, growth in line with expectations, shows Eurostat’s second estimate of gross domestic product (GDP).

Inflation in France was confirmed at 0.6% over one month in April and at 2.4% over one year.

CHANGES

The dollar logically declines (-0.52%) against a basket of reference currencies after the publication of the American CPI. The greenback fell to a one-month low of 104.41 points.

The euro advanced 0.37%, to $1.0858, while the pound sterling traded at $1.2654 (+0.52%).

RATE

The yield on ten-year US Treasury bonds, which fell 8.2 basis points to 4.3653%, fell to a five-week low during the session.

That of the German Bund of the same maturity lost 11.7 points at the close, to 2.424%.

That of the ten-year British Gilt is at its lowest since April 10, at 4.067%, a decline of ten points during the session.

OIL

The oil market is volatile after data from the International Energy Agency (IEA) showed a drop in crude demand this year by 140,000 barrels per day (bpd), to 1.1 million bpd. The depreciation of the dollar and the prospect of a reduction in key rates in the United States, however, counterbalance this forecast.

Around 4:00 p.m. GMT, Brent nibbles 0.04% to $82.41 per barrel and American light crude (West Texas Intermediate, WTI) 0.12% to $78.11 after falling to an 11-week low during the session .

(Written by Claude Chendjou, edited by Bertrand Boucey)

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