Cac 40: With inflation accelerating in Germany, the CAC 40 is bending under the rise in bond rates

Cac 40: With inflation accelerating in Germany, the CAC 40 is bending under the rise in bond rates
Cac 40: With inflation accelerating in Germany, the CAC 40 is bending under the rise in bond rates

(BFM Bourse) – The Parisian index ended sharply down near 7,900 points this Wednesday evening, while inflation started to rise again in May in Germany, and investors are somewhat doubtful of the rate cuts of the American Federal Reserve.

Another session of sharp decline on the Paris Stock Exchange, which is buckling under investors’ still stubborn doubts about the intentions of central banks regarding their monetary policy.

The CAC 40 makes its return below 8,000 points, losing 1.52% to 7,935.03 points this Wednesday evening, not far from its session lows at 7,926.42 points reached around 3:30 p.m. The Parisian index thus recorded its second largest decline of the year.

This climate of distrust is fueled by tensions on bond rates. A little earlier in the afternoon, investors were caught cold by the latest inflation figures in Germany for the month of May. The German consumer price index, calculated according to European standards, jumped more than expected, to 2.8%, against a consensus of 2.7% and after 2.4% in April.

Overheating of bond rates

Yield rates on European debts rose to November highs after the release of these figures. This statistic indeed raises fears of a similar dynamic for the entire euro zone on Friday. The yield on the 10-year debt security in Germany increases to 2.67% when that of the French debt of the same maturity tends to 3.153%.

“In Europe, investors’ fear of persistent inflationary pressures ahead of this week’s data has also fueled the ‘higher for longer’ stance regarding the European Central Bank’s key rates,” notes Pierre Veyret, technical analyst at Activtrades.

In the United States, the trend is no exception with an American 10-year which is currently moving at 4.573% against 4.557% Tuesday evening and 4.47% Friday.

The latest statistics published across the Atlantic demonstrate the robustness of the American economy. On Tuesday, investors took note of the morale of American investors, measured by the Conference Board index, which turned out to be better than expected. These are all indications which support the thesis that the American Federal Reserve (Fed) will not be in a hurry to lower its key rates.

According to the CME Group’s FedWatch tool, investors now only expect one rate cut this year from the Fed, compared to two previously.

Above all, Neel Kashkari, the president of the Minneapolis Fed, upset investors on Tuesday. “Kashkari’s latest comment (…) declaring that additional rate increases have not been completely ruled out, has considerably reduced investors’ appetite for risk,” analyzes Pierre Veyret.

It is with excitement that investors will learn on Friday of crucial statistics on inflation for both the euro zone and the United States.

Renault and Michelin defy the prevailing gloom

On the value side, Renault took the lead in the CAC 40 at the close for the second consecutive session. The title of the Diamond brand gained 3.2%, thanks to an increase in the buy recommendation from Goldman Sachs.

Michelin limited its gains to 0.3% after already gaining 1.4% the day before. The tire specialist held a day dedicated to investors on Tuesday afternoon which reassured the market. Oddo BHF notes that the group has announced a more pragmatic strategy in terms of acquisitions “which should satisfy everyone”. Furthermore, all of the objectives for 2026 delivered by the group are “overall higher than expectations”, continues the broker.

On the small and mid-cap side, LDC gained 1% after announcing Tuesday evening that it had entered into exclusive negotiations to buy the entire Pierre Martinet group.

On other markets, the euro fell 0.4% to 1.0810 dollars. Oil is falling again after its recent increase. The July contract on Brent from the North Sea lost 0.7% to 83.37 dollars per barrel, while that of the same expiry on WTI listed in New York returned 0.8% to 79.23 dollars per barrel.

Sabrina Sadgui – ©2024 BFM Bourse

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