(News Bulletin 247) – The Parisian index reached a new high this Tuesday, reaching 7582.47 points at the end of the morning.

Almost eight months later, the CAC 40 broke a new session record this Tuesday. The Parisian index reached 7582.47 points at 10:55 a.m.

The previous session record for the CAC 40 was 7,581.26 points on April 24, 2023. The closing record was 7,477 points on April 21.

The recent upward movement of the Paris Stock Exchange (as of all world markets) was fueled by the clear decline in inflation in the United States and the euro zone. This has led the market to speculate on the end of key rate hikes from the major central banks, the US Federal Reserve (Fed) and the European Central Bank (ECB) and even on a number of cuts in 2024.

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Soft landing?

“In recent weeks, big changes in tone have been observed among ‘hawkish’ members (who advocate a restrictive monetary policy) with accommodating statements. At the ECB, Isabel Schnabel said she was surprised by the extent of the decline of inflation and even quoted Keynes “when facts change, I change my mind”. On the side of the Fed, Christopher Waller, a heavyweight who campaigned for significant rate increases in 2022 and 2023, spoke of rate cuts, not to save the economy but because monetary policy rules, such as the Taylor rule, which is used as a tool by central banks, would impose it,” explains Bastien Drut of CPR AM.

“The end of the year is approaching, and risk-taking remains very present on the markets. Conviction remains strong on a soft landing, particularly in the United States, which would preserve growth while central banks aggressively relax their policy monetary”, underlines Sebastian Paris Horvitz, of LBPAM.

However, it is reasonable to wonder whether the recent rise in the stock markets was not caused by too hasty speculation on rate cuts.

Currently, according to the CME Group’s FedWatch tool, investors are counting on key rate cuts from the US Federal Reserve ranging from 100 to 125 basis points next year, or 1% to 1.25%. And for the ECB, expectations seem even greater. For example, Deutsche Bank changed its forecast, expecting 150 basis points of declines in 2024, compared to 100 basis points previously.

“Market expectations are ambitious,” judges Alexandre Baradez, head of market analyst at IG France