The flagship index of the Paris Stock Exchange, the CAC 40, crossed the symbolic threshold of 8,000 points during the session this Thursday, March 7, for the first time in its history, propelled like all world stock markets by the performance of businesses and the decline in inflation.
The CAC 40 rose 0.66% to 8,003.36 points at the start of the afternoon shortly after reaching a historic high during the session at 8,007.66 points. For four and a half months, the Parisian index has experienced a meteoric jump, more than 18% compared to its low point during the session of October 23. This movement took place in two stages: a first phase at the end of 2023, with the decline in interest rates on the debt market, and a second phase between the end of January and mid-February with the results of businesses. For 10 days, the Parisian market remained stuck just below 8,000 points and it was finally the meeting of the European Central Bank on Thursday which allowed it to cross the threshold, with the hope of a more flexible monetary policy thanks to to progress on the inflation front.
The Parisian market is not the only one to have a string of records: from New York to Tokyo via Frankfurt, Amsterdam and Copenhagen, many indices have reached their historic peak in 2024.
If the French economy remains fragile, the flagships of the CAC 40 display iron health: before Vivendi’s results on Thursday after the close, they are approaching 146 billion euros in cumulative net profits in 2023, according to a count carried out by AFP. Many groups, particularly among the heavyweights of the CAC 40, have done better than expected, and stock market performances are affected: since January 1, among the 10 companies that count the most in the calculation of the CAC 40, Hermès has jumped by around 18%, Schneider Electric by 15%, LVMH by 13% and Airbus 13%. “The results season has reinforced market expectations,” comments Raphaël Thuin, director of capital market strategies at Tikehau Capital.
Internationally, the trend is the same, starting with the technology sector. Nvidia, the group most at the forefront of artificial intelligence, has become the third largest company in the world, and the economic prospects of artificial intelligence have benefited a number of sectors. “Investors of all stripes are beginning to understand that Nvidia is not a speculative bubble, that we are only at the beginning of the takeoff runway,” comments Stephen Innes, analyst at SPI AM.
Rate cut
Added to these performances is also the hope of seeing Central Banks ease their pressure on the economy by lowering their interest rates. Between July 2022 and September 2023, the European Central Bank (Fed) raised its key interest rate to its highest since its creation in 1999, with the aim of cooling the economy to regain control of the trajectory of the ‘inflation.
The pace of price increases in the euro zone has been divided by three since the peak in October 2022 (+10.6%) and the ECB now sees this rate within its target of 2% in 2025. The change in tone of central banks at the end of 2023, with the American central bank which had mentioned for the first reductions in key interest rates, had triggered the first phase of increase in the indices at the end of 2023. But in 2024, the inflation is moving more hesitantly and central bankers on both sides of the Atlantic have tried on several occasions to calm the impatience of the markets, which initially imagined a first rate cut from this meeting. The forecasts have since been pushed back and it is not until June that investors expect such a movement.