(News Bulletin 247) – The Paris Stock Exchange remains anchored in a downward trend, weighed down by the rise in bond yields and the sharp decline in its luxury sector. The CAC 40 lost 0.85% towards 7100 points.

The Paris Stock Exchange fails to recover after correcting by 2.6% last week. Down 0.6% at mid-session, the CAC 40 increased its delay to end down 0.85% at 7123.88 points.

The markets are still feeling the blow, still stunned by the clear increase in bond yields. The 10-year American bond rate is at 4.52%, the highest since November 2007 compared to 4.44% on Friday evening. The interest rate on the 10-year German debt is rising to 2.795% after reaching its highest since July 2011 at 2.809% around 3:00 p.m. Its French equivalent with the same maturity reached 3.33% after a peak at 3.36% in the afternoon.

These tensions on the bond market always echo the firmness of central bankers on their monetary policy. At the end of last week, the American Federal Reserve expressed its desire to maintain its rates at high levels.

On the other side of the Atlantic, it’s the same reasoning. European Central Bank President Christine Lagarde said “interest rates will be set at sufficiently restrictive levels for as long as necessary” during a speech to the European Parliament’s Economic and Monetary Affairs Committee. Isabel Schnabel, member of the board of governors of the European Central Bank, for her part indicated on Monday that “the inflation problem is not yet resolved”.

“Markets are still digesting the message from central banks – higher rates for longer – and rising oil prices. US rates remain near the highest in more than 15 years, which they reached after the Fed meeting last week. (…) This weighs on stocks and supports the dollar (the Eurostoxx and the Euro-dollar are at their lowest since March), leading to a tightening of financial conditions”, deciphers Xavier Chapard of LBPAM.

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Luxury is losing its footing

The decline in the Parisian market is amplified by the firestorm which shook the luxury sector, with the collapse of the Chinese real estate giant Evergrande which found itself unable to borrow on the markets. A sign that China, one of the world’s leading luxury markets, is still experiencing economic difficulties.

Hermès lost 3.4%, LVMH lost 2.6% but it was Kering which suffered the biggest drop in the CAC 40 (-4.5%), further penalized by a lowering of the recommendation to ” underperformance” by Bank of America. The American design office expresses doubts about Kering’s ability to turn around its Gucci brand.

Excluding the CAC 40, Klépierre fell 3% while Royal Bank of Canada moved to “underperformance” on the stock.

Valneva ultimately ended down 1.7% despite the announcement of a vaccine sales contract with the American army.

On other markets, the euro fell 0.6% against the dollar to 1.0592 dollars. Oil is sluggish after its recent records. The November North Sea Brent contract fell 0.4% to $91.58 per barrel, while that of the same maturity on WTI listed in New York lost 0.5% to $89.55.