Paris Stock Exchange is witnessing a significant rise, with the CAC 40 index surpassing 7,500 points following Donald Trump’s victory in the U.S. presidential election. Investor confidence has surged, leading to gains in luxury and aerospace sectors. However, concerns about inflation and potential trade tensions persist. The U.S. Treasury yields are climbing, benefiting the dollar but causing oil prices to drop due to its dollar denomination. Notably, Crédit Agricole has seen a sharp decline after poor quarterly results.
Paris Stock Exchange Soars Amid Trump Victory
The Paris Stock Exchange is experiencing a remarkable surge this Wednesday afternoon, following the official announcement of a Republican candidate’s victory in the U.S. presidential election. The CAC 40 index has bounced back above the 7,500 mark, signaling renewed investor confidence.
Market uncertainty was brief, as the news of Donald Trump’s comeback as the leader of the world’s largest economy reverberates throughout global financial markets. CNN reports that Trump has secured 276 electoral votes, easily surpassing the 270 needed for a win, while Kamala Harris trails with 219 electoral votes.
Market Reactions and Economic Implications
At midday today, the CAC 40 has risen by 1.30%, reaching 7,501.95 points, with an impressive peak gain of over 2% earlier in the session. Commenting on the situation, Gordon Shannon, a portfolio manager at TwentyFour Asset Management/Vontobel, notes, “Currently, the markets mimic the pattern seen in 2016 after Trump’s victory, with stock prices rebounding and long-term U.S. Treasury bonds being sold off in anticipation of budget expansions.”
Trump’s economic agenda is expected to be inflationary, leading to increased bond yields. The yield on the 10-year U.S. Treasury note has jumped by 15.4 basis points to 4.444%, up from 4.287% the previous day. This rise in U.S. rates benefits the dollar, which has caused the euro to drop 1.7% to 1.0749 against the greenback.
However, concerns linger regarding potential trade tensions as Trump aims to raise tariffs. According to market analysts, “The focus will likely shift to the inflationary impacts of increased tariffs and reduced immigration. Although the U.S. Federal Reserve has yet to comment, its response to these policies will be essential for future asset price trends.”
On Thursday evening, the Fed is set to reveal its monetary policy after a two-day meeting, with investors anticipating a 25 basis point cut in key interest rates. Alexandre Baradez, head of market analysis at IG France, cautions that a “sell the news” scenario could unfold in the upcoming days, a typical market behavior when significant events have been anticipated.
In the stock market, shares are on the rise following the Republican candidate’s success. The luxury sector is poised for growth, with LVMH, Hermès, and Kering recording gains of 1.6%, 2%, and 3.1%, respectively. Essilorluxottica, often linked to luxury, also sees a 3.2% increase.
Aerospace and defense companies are benefitting as well, bolstered by the prospect of increased European military spending, with Dassault Aviation and Thales rising by 2.8% and 1.8%, respectively. Vallourec stands out with a 5.5% jump, driven by expectations surrounding Trump’s energy policies aimed at boosting oil drilling.
Conversely, Crédit Agricole has faced a significant setback, with its shares dropping 5.7% following disappointing quarterly results, marking the largest decline in the CAC 40.
In the commodities market, oil prices have again retreated, impacted by a strengthening dollar, which is significant as oil is traded in dollars. The January contract for North Sea Brent has decreased by 1.5% to $74.43 per barrel, while the December contract for WTI in New York has also dropped by 1.5% to $70.89.