(BFM Bourse) – The Paris Bourse posted its best closing performance since March 2022, fueled by the recovery in Wall Street. Investors are also betting on more accommodative central banks, led by the Fed following a slowdown in manufacturing activity in the United States and less-than-expected aggressive action by the Bank of Australia on their interest rates.
The versatility of the markets is beyond question. A few days ago on the edge of the abyss, world stock markets rallied in unison, fueled by hopes of a change in central bank monetary policy. The CAC 40 lands strong by 4.24%, back over the 6000 points to 6039.69 points.
The Paris Star Index on Tuesday night posted its largest increase since March 9, 2022 (+7.13%), marking a third session of progress. On Monday, the Paris Star Index was up 0.55% at the end of a particularly volatile session and 1.51% on Friday. Returning to where it was on September 22nd, the Paris bourse is limiting its annual losses to less than 16% from even more than 20% at the end of last week.
On Wall Street, the major indices continued the recovery that began on Monday. As European markets closed, the Dow Jones was up 2.3%, the S&P 500 was up 3%, while the Nadsaq was up 3.4% on the day after ample gains of over 2%.
Investors have regained risk appetite despite a US manufacturing indicator showing signs of slowing. Paradoxically, this bad statistic was a source of hope. US manufacturing growth fell to the lowest level since May 2020, raising hopes of a pause in the US Federal Reserve’s monetary tightening.
“The US data showed early signs of success in the current Fed tightening cycle ‘to curb activity to fight inflation’ and may suggest that the Monetary Committee may not need to continue on its trajectory of abrupt interest rate hikes” , notes Stephen Innes, manager at Spi AM, quoted by AFP.
Further relaxation on the bond market
The Australian central bank, for its part, has limited its turning the screw. It raised interest rates by just 0.25 percentage points on Tuesday, instead of 0.50 points expected by analysts. A stance that further fuels investor hopes for a more accommodating Fed going forward.
On the bond front, bond yields continue to fall with the US 10-year bond yielding up 3.60% from 3.82% on Friday. Its German counterpart, the same-maturity Bund, remains below 1.90% from nearly 2.10% late last week.
On the currency side, the greenback lost strength against all major currencies, weighed down by the return of risk appetite and market expectations of more limited rate hikes by the Fed. The euro fell to $0.99 at $0.9940 for the first time since September 21st. The pound, meanwhile, rallied 0.63% to post its sixth straight rise to $1.1395.
On the business side, Atos landed at 8.1%, the project to break up the IT services group is progressing faster than expected, BFM Business revealed. The other technology stocks are not left out, OVH Cloud, which recovered by 11%, STMicroelectronics, CapGemini or Dassault Systèmes made gains between 4.2% and 5.6% on Tuesday.
M6 fell 10.84% on its side. The Bertelsmann Group is not selling its stake in the private broadcaster, citing excessive risks and legal uncertainties as the reason for doing so.
Sabrina Sadgui – ©2022 BFM Stock Exchange