(News Bulletin 247) – The Paris Stock Exchange ended sharply up 1.2% despite the European Central Bank raising its key rates to a historic level. But the markets interpret this increase as the last one after the ECB press release.

Without direction, the Paris Stock Exchange has regained color after the latest announcements from the European Central Bank (ECB). The latter has certainly raised its key rates for the tenth consecutive time, but the market believes that this monetary tightening will indeed be the last.

An announcement that caused a sensation. The CAC 40, which was moving around balance before the ECB press release, ended sharply up 1.19%, back on 7300 points at 7308.67 points after a peak at +1.40% a few minutes before fence. The Parisian star index returns to its levels of two weeks ago.

The ECB therefore increased its key rates by 0.25 percentage points to bring them to 4%, i.e. their highest since the creation of the euro and the ECB in 1999. The institution based in Frankfurt also raised its inflation forecasts for 2023 to 5.6% then to 3.2% in 2024. Before hoping for a drop to 2.1% in 2025, getting closer to the medium-term objective of the ECB set at 2%.

Now that the ECB has (again) raised its rates to a historic level, the markets are interpreting the press release in favor of a pause in ECB rates. Because the latter implicitly indicates that further increases are unlikely.

“Based on its current assessment, the Governing Council considers that the ECB’s key interest rates have reached levels which, if maintained for a sufficiently long period, will contribute significantly to the return of inflation to the level as soon as possible. of the objective”, explains the central bank in its press release.

On the bond market side, the ten-year German Bund rate, the benchmark for the euro zone, fell to 2.613%, while its French counterpart of the same maturity fell to 3.112% after this supposed end of the restrictive monetary policy of the ECB.

On the currency market, the euro lost another 0.7% to 1.0661 dollars for these same reasons.

Like the market, Alstom is recovering

On the value side, Alstom gained 4.6% and made up for its losses from the day before. On Wednesday, the stock suffered from a rating from Barclays which began monitoring the stock at “underweight”, the equivalent of selling at the British bank. The establishment is concerned about the railway equipment manufacturer’s cash generation, its debt, a slowdown in orders and even a downgrade from Moody’s.

Pernod Ricard limits its decline to 0.3% and Rémy Cointreau to 1.46% while Barclays went from “overweight” to “underweight” on the two stocks. The demographic decline in China is bad news for Pernod and Rémy Cointreau, according to the financial intermediary.

Bouygues (+2.5%) on the other hand benefited from an increase in recommendation from Exane BNP Paribas to “outperform” from “neutral”.

On the smaller stocks side, Esker lost 3.3% after lowering its profitability target for 2023 due to inflation.

Oil contracts are progressing. The November North Sea Brent contract gained 1.6% to $93.38 per barrel while the October contract for WTI listed in New York advanced 1.5% to $89.87 per barrel.