(News Bulletin 247) – Russia’s invasion of Ukraine on February 24, 2022 threw a chill on the financial markets. Since the outbreak of the conflict, how has the CAC 40 behaved?

Author in 2021 of its best annual performance since 1999, the flagship index of the Parisian market had started the year 2022 on a high note. For its first session of 2022, the CAC 40 had reached a new historic peak in session (since fallen) at 7,245.66 points.

In the first days of January, the CAC 40 continued to explore unprecedented levels, helped in this sense by the optimism of operators regarding the evolution of the health situation, synonymous with a rapid economic recovery.

But from the end of this first month of the year, the markets heard the sounds of boots coming from the East of the European continent. On Monday January 24, the CAC 40 then ended with a fall of 3.97% to 6,787.79 points, a low since December 2, 2021 (-1.25%).

A complicated month of March 2022 for the CAC 40

A month later, on February 24, 2022, tensions escalated with the Russian offensive against Ukraine by land, air and sea in what is the largest attack by one state against another in Europe since the Second World War. The CAC 40 closed on a fall of 3.83% to 6,521.05 points, its lowest level since October 12, 2021.

But the biggest falls in the Parisian index of the year occur in the first days of March. The determination displayed by the Russian regime to continue the offensive in Ukraine, regardless of the sanctions brandished by the international community, led to massive sales on March 1 (-3.94%) and Friday March 4 (-4.97%) Over the whole of this dark week, the barometer of the Paris Stock Exchange had then plunged by 10.23%, its worst weekly performance since March 2020 – period of appearance of the first restrictions linked to Covid.

A staggered end-of-year rally… at the start of 2023

In addition to these geopolitical risks, market operators have had to deal with galloping inflation, the tightening of the monetary policies of the major power stations and, indirectly, the surge in interest rates. The uncertainties caused by the maintenance and then the end of the zero-Covid policy in China have sown the markets. Over the whole of 2022, the CAC 40 thus lost 9.5% to achieve its worst annual performance since 2018, when it had dropped nearly 11% (10.95%).

The CAC 40 struggled to take off again after the outbreak of the conflict and it also struggled to stay permanently above 6,000 points until the fall. However, the trend reversed from mid-October, as the reopening of the Chinese economy gradually took shape, the market took the measure of monetary tightening by the major central banks and gas prices in Europe have come down. Despite a difficult month of December, the CAC 40 actually recovered around 9% in the second half of 2022.

But the best was yet to come. The CAC 40, like the other European markets, will experience a powerful upward movement from the first days of 2023 which has not really run out of steam since, thus shifting the traditional Santa Claus rally by a few weeks.

The markets were buoyed by the reopening of the Chinese economy, less bad economic conditions than expected in Europe and more moderate rate hike expectations from the major central banks.

The CAC 40 thus started 2023 with an impressive jump of 9.4% in January to achieve the best first month of the year in its history. This performance made it possible to erase the air pocket of the Parisian market in the 2022 financial year.

A new record reached on February 16

And a completely improbable scenario just a year ago, the Paris star index dropped its previous historic highs in session, which dated back to January 2022. Buoyed by excellent corporate results, the CAC 40 found the energy enough to set a new record of 7,387.29 points on Thursday February 16. Since these stock market peaks, the Parisian index has taken a slight breather under operators’ fears about the next steps in central banks’ monetary policies. This small break in the Parisian star index, although interrupted this Thursday evening, does not prevent it from posting to date, an increase of 13.03% since January 1st.

“In the stock markets, the conflict no longer plays a role, despite the immeasurable suffering of soldiers and civilians on both sides. Indeed, the problem of a possible collapse in the supply of raw materials in Europe has been largely solved,” commented asset manager DWS.

The Ukrainian episode is therefore just one more crisis on the list of the CAC 40 index, which overcame the internet bubble of 2000, withstood the subprime crisis and then recovered from the coronavirus pandemic…