The Paris Stock Exchange opened lower, with the CAC 40 index down 0.62% amid investor caution ahead of the Federal Reserve meeting and recent political turmoil in France. Moody’s downgrade of France’s rating to Aa3 raises concerns over political fragmentation impacting budget measures. Meanwhile, Vivendi completed its split into three entities, with mixed market performances, including a significant rise for the Louis Hachette Group and a decline for Canal+. Economic data shows continued contraction in private sector activity in both France and the eurozone.
Paris Stock Exchange Reacts to Global and Local Developments
The Paris Stock Exchange opened lower on Monday, reflecting a cautious mood among investors ahead of the upcoming Federal Reserve meeting and the recent political developments in France. At 09:30, the CAC 40 index registered a decline of 0.62%, settling at 7,363.96 points, which translates to a drop of 45.61 points. This follows a slight decrease of 0.15% on Friday, where the index closed at 7,409.57 points. Investment expert John Plassard from Mirabaud notes that investors are “waiting for the Fed meeting,” emphasizing the need for the central bank to effectively justify the necessity of an aggressive rate cut in light of the latest U.S. inflation statistics.
Market Reactions to Moody’s Downgrade and Economic Indicators
Most analysts anticipate that the Federal Reserve will announce a quarter percentage point rate cut during its final monetary policy meeting of the year. However, recent data indicates a need for caution, as “inflation and producer prices accelerated in the United States” in November. Additionally, investors are keeping a close watch on the political landscape in France following Moody’s decision to downgrade the country’s sovereign rating late Friday to Saturday. This downgrade, moving from Aa2 to Aa3 with a “negative outlook,” arises from concerns about “political fragmentation” that could impede effective budgetary consolidation. Ipek Ozkardeskaya from Swissquote Bank suggests that Prime Minister François Bayrou may face challenges in implementing budget recovery measures due to a divided political class.
On Monday, lawmakers are reviewing a “special law” to ensure state continuity by permitting tax collection and budget spending based on previous allocations. Amid these developments, the ten-year interest rate on French bonds increased to 3.05%, compared to 3.04% on Friday. The gap between French and German benchmark rates widened slightly from 0.78 to around 0.80 points. Furthermore, recent economic data reveals that France’s private sector activity has declined for the fourth consecutive month in December.
In the eurozone, private sector activity also contracted for the second month in a row, albeit at a slower pace, largely due to improvements in the service sector, according to the PMI Flash index from S&P Global. In a related note, retail sales growth in China—a key market for luxury brands—slowed in November, indicating ongoing sluggish consumption despite recent signs of recovery. Consequently, major luxury sector stocks have experienced declines: LVMH was down 0.58% at 635.20 euros, Kering fell 0.76% to 242.20 euros, and Hermès decreased by 0.31% to 2,267.00 euros.
Vivendi’s Strategic Split and Market Performance
Vivendi, the prominent French media and publishing company, officially executed its split on Monday, with three new entities being listed on stock exchanges in London, Amsterdam, and Paris, all under the control of billionaire Vincent Bolloré. The Louis Hachette Group debuted on the Euronext Growth market in Paris, witnessing a remarkable rise of 24.45% to 1.39 euros shortly after its launch. Meanwhile, Havas, listed in Amsterdam, saw an increase of 6.84%. In contrast, Canal+, which debuted in London, experienced a decline of 13.10%. The Vivendi holding company, now significantly stripped of its assets, surged by 33.32% to 2.45 euros in Paris.