Paris Stock Exchange shows signs of recovery, with the CAC40 gaining 0.3% before market close. The tech sector faces challenges, particularly semiconductors, amid market volatility, with Nvidia experiencing significant losses. The Nasdaq sees a slight recovery, while the S&P500 and Dow Jones also rise. Macroeconomic indicators reveal a decline in U.S. durable goods orders, and upcoming Federal Reserve decisions are anticipated. Corporate earnings reports from major companies are closely watched as investors seek positive surprises.
Paris Stock Exchange Shows Signs of Recovery
The Paris Stock Exchange is witnessing a bounce back, gaining 0.3% just an hour before market closure. This marks the CAC40’s 10th increase out of the last 11 trading sessions, while the SBF120, up by 0.4%, is nearing the 6,000-point milestone. The Euro-Stoxx50 is also following suit with a 0.3% rise, propelled by Frankfurt’s impressive 0.7% gain, which is setting the stage for a new closing record, potentially surpassing 21,420, as the DAX40 stands at 21,450 points.
Tech Sector Faces Challenges Amid Market Volatility
In the tech sector, particularly semiconductors, stocks deemed undervalued are seeing some relief in the current cautious atmosphere. The sector has been under pressure, with a notable average decrease of 9% as of Monday evening, leading to a staggering $590 billion loss in market capitalization for Nvidia. This downward trend has affected energy suppliers too, with DeepSeek’s model showing significantly lower energy consumption compared to traditional data centers associated with the ‘Stargate’ initiative.
After experiencing a significant drop of 3.1%, the Nasdaq is recovering slightly with a 1% gain. However, both Nvidia and Broadcom, which initially saw a 2% rise, are struggling to maintain those gains. Meanwhile, the S&P500 is up by 0.6%, and the Dow Jones has increased by 0.5%. The rise of DeepSeek, a conversational AI tool from China that is said to be as effective as ChatGPT but at a fraction of the cost, has caused disruptions in the tech landscape.
Market analysts from Deutsche Bank highlight that as investments in AI are projected to reach $1 trillion in the upcoming years, even the staunchest advocates of AI are beginning to question the necessity of such extensive spending.
The markets are also feeling the pressure, as indicated by the CBOE VIX index, often referred to as the ‘fear gauge,’ which surged 21% to 18 points yesterday, followed by a further increase of 2.5% to 18.50. This heightened volatility is likely to continue as several significant events are on the horizon.
On the macroeconomic front, recent data from the U.S. Department of Commerce reveals that durable goods orders fell by 2.2% in December, following a 2% decline in November. However, when excluding the volatile transportation sector, durable goods orders experienced a slight uptick of 0.3% last month. Notably, deliveries in the U.S. industrial sector rose by 0.9% month-over-month in December, bolstered by a 2.8% increase in the transportation category.
Looking ahead, the Federal Reserve is set to announce its first monetary policy decision of the year, with traders expecting a 97% chance of maintaining current interest rates. Meanwhile, the European Central Bank (ECB) is also anticipated to meet soon, with expectations for a potential 25 basis point reduction in key rates.
This morning, investors received positive news about a rebound in French household confidence for January, as reflected by the Insee synthetic indicator, which rose by three points to 92 but still lags behind the long-term average of 100. However, this uplifting news does little to mitigate the concerns raised by a 3.9% increase in unemployment in France during Q4, particularly affecting the youth demographic.
In the bond market, the yield on ten-year U.S. Treasury bonds is slipping towards 5.577%, while German Bund yields are rising by 3.6 points to reach 2.563%. The OAT remains steady, gaining 1.3 points to 2.2860%, resulting in a spread of 77 points.
Gold prices are hovering near historical highs at around $2,753, and oil prices have risen by 0.3% to $77.7 in London. The Euro is experiencing a notable decline, down 0.6% to 1.0430 against the dollar, buoyed by strong growth expectations in the U.S., suggesting that no rate cuts are likely before June.
As the week progresses, investors will be closely monitoring a slew of corporate earnings reports, hoping for positive surprises from leading tech firms. Anticipation builds as Microsoft, Meta, and Tesla are set to release their results tomorrow evening, followed by Apple on Thursday. Today, the market is also keeping an eye on earnings from Boeing, GM, Starbucks, and SAP, looking for reassurance amidst the fluctuations.
In corporate news, French infrastructure group Getlink reported a revenue of just over 1.61 billion euros for 2024, reflecting a 12% decline at constant exchange rates from the previous year, primarily due to reduced contributions from ElecLink. Additionally, LVMH announced that British designer Stella McCartney would be buying back the minority stake held by the luxury conglomerate in her fashion house after more than five years of collaboration. Lastly, Quadient revealed a partnership with Buzz Bingo, the UK’s largest bingo gaming operator, to deploy its automated lockers in 35 of the 81 clubs nationwide, with plans for further expansions in the future.