CAC40: the initial euphoria subsides, W-Street less dashing

(CercleFinance.com) – The Parisian index has erased all its gains and has fallen into negative territory (-0.1%) but is trying to stay above 6,300.

It’s a rather unexpected little setback after a promising start to the session and cascading new records with a CAC ‘PX1’ at 6.350 and a CAC40 ‘GR’ at 17.750Pts (absolute record).

The Euro-Stoxx50 retreats more frankly (-0.4%) after having again failed to cross the 4,020 and falls back under the 4,000.

On Wall Street, past the initial records, with an opening in ‘gap’ upwards, the euphoria subsides: the Nasdaq (14.211 at the highest) loses 1% on its highs of the day (at 14.070) and keeps an advance symbolic of + 0.3%.

The S & P500 which had climbed to around 4,220 falls back below 4,200 (to 4,195), the Dow Jones only grabs about fifteen points (to 33,840).

The tension of long rates (+ 6Pts, beyond 1.68%) begins to weigh, following more ‘tense’ inflation figures than expected.

This session promised to be the busiest of the results season (Caterpillar and Comcast pulverize the consensus) but also leading statistics.

It started with the very first estimate of the GDP of the United States which grew 4.3% in ‘Q4’ 2020 to 6.4% in the first quarter of 2021 at an annualized rate (figure in line with expectations … but the range was wide and many investors were hoping for + 7%, we will see during the second estimate).

But what is not in line is the ‘gross’ inflation rate which jumps to + 3.5% (instead of the expected 2%) while the ‘core’ rate (excluding volatile variables) stands at + 2.4% (in line with expectations … but well above the target rate of 2%).

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Growth – and inflation – is supported by both household consumption spending, fixed investment and government spending.

Weekly claims for unemployment benefits fell by -13,000 ‘just’ the week of April 19 in the United States, according to the Department of Labor, to 553,000: the lowest level recorded since March 2020 … most of this favorable picture comes from a spectacular drop from -185,000 the previous week.

Finally, the number of people receiving regular benefits increased by 9,000 the week of April 12, to 3,660,000.

Finally, Wall Street accuses the blow after a disappointment at the level of housing purchase promises with only + 1.9% against 5.4% expected.

The excellent results published last night by the American giants eclipse the spectacular inflation figures, however, propelled the S & P500 towards a 33rd annual record (beyond 4.200Pts):

Facebook (+ 6%) indeed announced Wednesday evening a quasi-doubling of its net profit in the first quarter, that is to say 3.3 dollars of profit per title against 2.6 dollars expected … but Apple remains frozen at around $ 134 after have unveiled a turnover of $ 89.6 billion, against a consensus of $ 77 billion, boosted by demand for the iPhone 12 and sales of services.

Its profit per share stands at $ 1.40, against an estimate of just one dollar. The Cupertino group has planned to raise its dividend accordingly, but the most spectacular announcement is that the share buyback plan will be increased to $ 90 billion.

For its part, the press conference of Jerome Powell, the president of the Fed, did not bring anything new yesterday. As expected, the Federal Reserve will continue its quantitative easing (QE) program to keep long-term interest rates very low, despite encouraging signs of recovery.

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In Europe, German inflation stood at + 2% in April, which is the upper limit of estimates.

On the bond market, US T-Bonds are up + 6Pts to 1.68%, our OATs are up + 4.5Pts at 0.065%, as are Bunds at -0.183%.

Despite a robust GDP, the Dollar fell back below 1.2100 / E.

On the securities side, Total (+ 1.5%) published adjusted net income group share up 69% to three billion dollars, or 1.10 dollars per share, EPS significantly higher than the average estimate of analysts .

STMicroelectronics (+ 1.2% vs. 4.5% this afternoon) announces net income up 89.6% year-on-year, to $ 364 million, and an operating margin that improved by 420 points base, at 14.6%.

Airbus Group (+ 1%) disclosed a consolidated net profit of 362 million euros, against a net loss of 481 million a year earlier, as well as a consolidated adjusted EBIT up 147% to 694 million.

Finally, Suez reported this morning an operating result (EBIT) of 340 million euros, showing organic growth of 39% compared to the first quarter of 2020. The quarterly turnover stands at -over 4.2 billion euros.

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