Inflation does not slow down the Paris Stock Exchange, quite the contrary. After a record during the session, the CAC 40 signed a new closing record on Tuesday, at 7,390.28 points (+0.89% over the session), at the end of an extended Easter weekend and on background of renewed appetite for risk after the banking shock in March. The last record for the star index of the Paris Bourse dates back to January 2022, with 7,376.37 points.
Earlier in the day, the CAC 40 index reached 7403.67 points around 3:45 p.m., beating its previous all-time high in the March 6 session (7401.15 points). In the meantime, it had been severely shaken by the crisis which hit the banks, even falling below the 6,800 point threshold on March 20. The CAC 40 then recovered nearly 9%. Since the start of the year, the index has gained more than 14%.
Among the companies in the index, bank stocks have not recouped the losses they suffered on the sidelines of the bankruptcy of the American bank Silicon Valley Bank and the takeover in extremis of Credit Suisse by its Swiss rival. UBS. The Societe Generale share thus remains nearly 20% below its level at the start of March, that of BNP Paribas remaining down 10% and that of Crédit Agricole 5%.
What future for key rates?
The banking crisis, if it has caused a wind of panic to blow through the markets, is making central banks more sensitive to the economic risks of their monetary policy, investors hope. They now believe that they will raise their key rates a little less than expected, the main tool for fighting inflation by raising the cost of credit in the economy.
If the European Central Bank (ECB) is rigid and still plans to raise its key rates, investors believe that it is very likely that the American central bank (Fed) will carry out a final hike in its rates in May, before leaving them around 5%.
The latest statistics showing a slowdown in economic activity and a drop in job creation in the United States reinforce this hypothesis. “The March inflation data due this week will no doubt help to better weigh the possibility of a change of course as soon as” the next meeting of the Fed’s monetary policy committee, according to economist Véronique Riches Flores, of the firm Riches Flores.
Slowing inflation
Inflation is slowing in the euro zone and the United States, thanks in particular to the fall in energy prices for several months, but it still remains very high, well above the 2% target of the Fed and the ECB. Inflation “remains high and uncertainty about its evolution has increased”, requiring “a robust strategy for the period to come”, declared at the end of March the President of the ECB, Christine Lagarde.
The risk of recession in the euro zone this year has receded a little, estimates the International Monetary Fund (IMF) in its spring economic forecast published on Tuesday.