The Bourse from Paris ended up in 0.34% rise on Wednesday and breaking new records within hours of the US Federal Reserve’s decision to implement a reduction in its bond purchases on the markets.
The CAC 40 (Editor’s note, Continuous Assisted Listing, index created at the end of 1987) finished at 6,950.65 points, thus beating its closing record set the day before (6,927.03 points). In session, he even reached the unprecedented level of 6,955.10 points, exceeding his record of September 4, 2000, at the time of the internet bubble.
“The pace of progress may not be so frantic as the economy is in transition.”, however tempers Benoît Peloille, strategist at Vega IM.
Nevertheless, the euphoria of the Parisian square could well last a few more days, or even reach new heights. A trend linked to two factors: the action of central banks and the performance of the luxury sector.
Support from central banks
Go back. Faced with the arrival of the first wave of Covid-19, the government announces the establishment of strict confinement as of Tuesday, March 17, 2020. The day before this caulking of the French, the CAC 40 experiences a vertiginous drop for reach, at the lowest during the session, 3,632.06 points.
Panic seizes the markets. But the central banks of the main economic powers come to the rescue and decide to open the financial floodgates. Support that amounts to hundreds of billions of dollars every month for more than a year and a half.
Thanks to this influx of liquidity on the equity markets, financial indices are gradually making up for their losses. The increase in savings, a refuge for households, is added to this stocking and is transformed into a saving financial infusion.
The relief of the financial tension then allows a better profitability of the shares to the detriment of that of the bonds, while allowing financing at low rates. Shares are soaring and the French economy is skyrocketing to regain at the end of the summer the level it showed before the pandemic.
For their part, as the worst of the pandemic seems over, investors are flocking to take advantage of the improvement before central banks downsize.
And even if the American Federal Reserve (Fed) announced on Wednesday that it was going to limit its purchases of bonds on the markets from now on, investors anticipated this gradual withdrawal, while betting on the long-term will. the Fed or the ECB (European Central Bank) to limit inflation and the rise in interest rates.
Luxury powers the CAC 40
Specificity of the French market, the luxury sector represents more than a quarter of its financial index. LVMH, L’Oréal and Hermès International weigh more than the industry. However, the results of these companies during the third quarter were spectacular.
According to the figures put forward by France Info, Hermès shares have increased by 59% since the start of the year, 34% for LVMH and 29% for L’Oréal. What to compensate for the decline in traditional values.
A leap that helps support the CAC 40, as technology stocks did at the start of the year. A combined action of these sectors which therefore explains the increase of 24.79% of the index since January, and the fact that the Parisian market is in better health than those of other stock exchanges.
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