Paris Stock Exchange shows mixed results with a slight gain of 0.39, while US indices decline following PMIs release. The DAX40 index dips slightly but has achieved 16 all-time highs recently. Investors face uncertainty from economic signals and upcoming German elections. Concerns linger over US protectionist policies and their impact on growth. American consumer confidence has decreased, and PMI indices indicate slowing activity. The bond market sees reduced yields, and commodities like oil and gold are experiencing price adjustments.
Paris Stock Exchange Experiences Mixed Trends
The Paris Stock Exchange’s gains have started to wane, showing a slight increase of +0.39, bringing the index to 8,154, as trading on Wall Street resumed with a heavy tone.
US indices have seen a notable downturn following the release of the PMIs, with the Nasdaq down by -0.7%, the S&P 500 falling by -0.6%, and the Dow Jones dropping by -0.9%, continuing its downward trend from Thursday’s closing.
The CAC/Px1 ‘February’ contract concluded at 4 PM, reflecting a +5.7% rise for the February expiration. However, the overall weekly performance indicates a decrease of approximately -0.4%.
DAX40 Index and Economic Outlook
The DAX40 index experienced a minor decline of -0.2% on Friday, yet it has set a remarkable 16 all-time records since the last ‘three witches’ day on January 17, achieving an 8% gain over the past month.
This bullish sentiment in the German stock market stands out, especially with the uncertainty surrounding the upcoming German elections this weekend.
A wave of profit-taking is beginning to surface following a robust upward trend at the beginning of the year, which had positioned the CAC just thirty points shy of its all-time high from last year.
Investors are caught between optimism for a potential peace agreement in Ukraine and solid corporate earnings on one side, and economic uncertainties—marked by mixed signals from the US and ongoing customs duties issues—on the other.
Concerns regarding the implications of US protectionist policies on growth and inflation have eased recently, but they are not entirely absent.
Analysts warn of a political ‘statu quo’ scenario, suggesting that Germany’s largest economy requires genuine reforms to spur growth. Lowie Debou, a manager at DPAM, emphasizes that the market’s hope lies in the next German government reforming the debt brake rule established during the global financial crisis in 2009 to promote financial stability.
This rule currently restricts the German government’s additional structural spending to just 0.35% of GDP, a limit many believe is inadequate to address the country’s escalating investment needs.
Furthermore, the anticipation surrounding the upcoming results from a prominent American AI chip manufacturer, expected next Wednesday, may also contribute to cautious market positioning.
According to S&P Global, growth in the American private sector has notably slowed in February, with the ‘composite PMI’ index dropping to 50.4 from 52.7 in January. This index is perilously close to the 50 threshold that delineates expansion from contraction.
Production growth is faltering, hiring is on the decline, and both optimism and costs are escalating, as summarized by S&P Global. The report highlights widespread concerns among companies regarding the impact of federal policies, including spending cuts, tariffs, and geopolitical shifts.
Moreover, American consumer confidence has significantly waned in February, as indicated by preliminary results from the University of Michigan’s monthly survey, which revealed a drop in the confidence index to 64 from 71.7 in January. This decline has affected all demographic groups, as noted in UMich’s statement.
The sub-index assessing consumers’ perceptions of their current situations fell to 65.7 from 75.1, while the outlook sub-index decreased to 64 from 69. Year-on-year inflation expectations have also risen to 4.3%, up from 3.3% the previous month, marking the highest level since November 2023.
Investors were also updated on the ‘flash’ PMI activity indices for Europe this morning. The HCOB flash composite PMI index for France dipped below the neutral mark of 50 in February, indicating a significant slowdown in overall activity within the eurozone’s second-largest economy.
Meanwhile, the HCOB flash composite PMI for the eurozone remained steady at 50.2, suggesting continued, albeit marginal, growth for the month.
Due to the escalating risk aversion over the last 48 hours, a slight improvement is observed in the bond market, leading to a reduction in yields across both sides of the Atlantic. In the US, the yield on ten-year Treasuries decreased by -4 points to 4.4600% following disappointing economic indicators that call for further monetary support. Bunds and OATs also experienced a drop of -6.5 and -5 basis points, respectively.
As American rates decline, the dollar struggles to maintain its upward trend, allowing the euro to approach the 1.05 mark against the greenback, although it fell 0.3% to 1.0465 this Friday.
Following four consecutive days of gains, the oil market is seeing a retreat after the announcement of a decline in US crude stocks. Brent crude has decreased by 0.3%, trading below $76.3 per barrel, while West Texas Intermediate (WTI) crude has also fallen 0.3%, now below $72.3.
Gold has stabilized, gaining 0.3% to reach $2,945 an ounce after its recent highs, which brought it within $30 of the psychological threshold of $3,000. It has seen a weekly increase of 1.3% and an impressive rise of nearly 11.5% since the beginning of the year.