This week saw a notable rally in the stock market, with the CAC40 index approaching 8,000 and gaining 1%. The luxury sector thrived, led by Kering and L’Oréal, while Burberry soared 15% following strong results. However, Wall Street exhibited cautious trading, with mixed performances across indices. Despite an uptick in European stocks, concerns about market volatility persist. Notable corporate updates include Ericsson and Stef reporting revenue growth, while the euro strengthened against the dollar.
Market Overview: A Week of Gains
This week has been a remarkable one for the stock market, characterized by a clean sweep of gains, marking the ninth consecutive session of increases. The CAC40 index edged closer to the 8,000 mark, up by 1%, and has surged nearly 8% since the start of the year. The luxury sector has once again proven to be a driving force, with notable performances from key players: Kering (+5%), L’Oréal (+3%), LVMH (+1.5%), and Hermès (+2.3%), which achieved an all-time high at €2,700. This momentum was further fueled by Burberry’s impressive 15% rise in London, following better-than-expected financial results that delighted investors.
Global Economic Sentiment and Corporate Performance
Despite a slightly cautious start in Wall Street’s trading, which tempered the initial excitement, the CAC40 recorded a weekly gain of 3%. The Nasdaq saw a slight dip of over 0.2%, while the Russell 2000 fell by 0.6%, indicating a reduced appetite for risk. Conversely, the Dow Jones managed a modest gain of 0.2%. The Euro-Stoxx50 reached a significant milestone this morning, hitting 5,260 points, reflecting a 0.2% increase. European stocks, having underperformed American counterparts for years, are now regaining favor, largely attributed to their attractive valuations.
Investment strategist Christopher Dembik from Pictet AM noted, “European stocks are substantially undervalued compared to American stocks, with a 40% discount between the STOXX Europe 600 and the S&P 500.” The resurgence is further bolstered by preliminary PMI HOCB indices, which indicate a slight uptick in activity within the private sector, although still below the critical threshold of 50. Market strategist Michael Brown from Pepperstone highlighted the stagnation in the eurozone economy and the UK’s struggles with stagflation, while the American economy continues to outperform.
However, caution remains prevalent among investors. Many are wary of entering large positions due to potential market volatility, particularly with the unpredictability of American trade policy and its implications for the ongoing recovery. As one analyst pointed out, “A single tweet from a key figure could trigger a market downturn at any moment.”
In the bond market, conditions appear somewhat heavy, with T-Bonds at 4.657% (+2 points), Bunds at 2.563% (+5%), and OATs at 3.325% (+3 points). The euro has shown signs of recovery, appreciating by 0.8% against the dollar, trading at $1.05. In commodity news, Brent crude oil prices increased by 0.8%, reaching $78.5 per barrel.
Looking ahead, the U.S. economic calendar remains relatively subdued, with key indicators such as existing home sales and the Michigan consumer confidence index on the docket. Investors will also be keeping a close eye on earnings reports from American Express and Verizon, expected to be released during lunchtime.
In European corporate updates, Ericsson has announced a solid finish for 2024, reporting a 2% revenue increase in the fourth quarter and net profits rising to 4.9 billion Swedish crowns, up from 3.4 billion the previous year. Meanwhile, French company Stef reported an annual revenue of €4.8 billion for 2024, reflecting an 8.1% increase, including nearly €1.26 billion for the fourth quarter, marking an 8.8% rise.
GL events also had a positive day, seeing a 3% increase after announcing fourth-quarter revenues of €431 million for 2024, surpassing expectations set by Oddo BHF.