Published on Dec 18, 2023 at 4:21 pm
The Paris Stock Exchange is lacking momentum at the beginning of this week, the last one before the Christmas holidays. The trend is toward profit-taking after a stock market rally that began in November with the prospect of central banks “pivoting” next year, gradually moving away from their restrictive policy and starting to decrease interest rates.
After five consecutive weeks of gains, which allowed it to rise by 7.6% and reach a historic peak, the Cac 40 drops by 0.37% to 7,568.6 points around 4 pm.
A Japanese steel giant takes over U.S. Steel
The Stoxx index associated with the basic resources sector reports the highest increase (+1.15%) and ArcelorMittal climbs more than 4%, thanks to the combination of two steel heavyweights. Emblematic of the industrialization of the United States, U.S. Steel will be acquired by the Japanese competitor Nippon Steel for 14.9 billion dollars, including debt, which will create the second largest steel group in the world and the first outside of China. On Wall Street, U.S. Steel shares soar by 26.4%.
The Nasdaq, Dow Jones, and S&P 500 indices gain from 0.1% to 0.3% after logging their seventh consecutive week in the green last Friday, boosted by the Federal Reserve’s verdict on Wednesday. The Fed currently anticipates three rate cuts in 2024, but the market is more optimistic, predicting 5 or even 6 cuts. Several members of the U.S. central bank have warned that the financial markets are getting carried away in predicting rate cuts as early as March. “The next step is not about when to cut rates, even though this is the market’s position. It’s about how long monetary policy needs to remain restrictive. The markets have moved straight to quick normalization, which I do not anticipate,” said Loretta Mester, head of the Cleveland Fed and a voting member of the committee next year, in an interview with the Financial Times.
Before the Christmas truce, investors will be particularly attentive to the publication on Friday of the PCE index of personal consumption expenditures in the United States, with a slight slowdown expected. “If the data are in line with expectations, this would mean that the annualized inflation over six months will be slightly above the Fed’s target, allowing the doves at the Fed to remain in control. Nevertheless, this lull in inflation can be attributed to the drop in oil prices. Even though the central scenario foresees limited potential for an increase in oil prices, any reversal of the dynamics could limit the prospects for rate cuts,” noted Ipek Ozkardeskaya, an analyst at Swissquote in her note this morning.
Oil prices rise with tensions in the Red Sea
Oil prices are indeed rising sharply this Monday. Several global shipping giants, including Maersk and CMA CGM, and the oil major BP have announced in recent days the suspension of their vessels’ passage through the Red Sea, a major trade route, due to the increasing attacks in the area by Houthi rebels. The rebels have warned that they will target ships sailing off the coast of Yemen with links to Israel, in response to the war between the Jewish state and Hamas in the Gaza Strip. This new escalation of tensions mechanically raises the price of crude, with Brent rising by 3.6% to $79.3 per barrel. In Paris, TotalEnergies gains 1.4%.
Kering drops by 2.25% to 408.4 euros as Morgan Stanley analysts have lowered their target price from 435 to 400 euros. Sanofi, upgraded by Intron Health to “buy,” gains 0.82%.
McPhy climbs 12.7%. The manufacturer of low-carbon hydrogen production and distribution equipment has announced that it has won a major contract with HMS Oil and Gas GmbH Division, based in Berlin, for the supply and commissioning of four McLyzer 3200-30 with a total capacity of 64 megawatts.
In London, telecom operator Vodafone has been offered a merger of their Italian operations by Iliad. Its stock rises by 5%, leading the FTSE 100.
