(News Bulletin 247) – The Parisian index rose sharply at mid-session this Thursday, with the market appreciating the relatively accommodating tone of the American Federal Reserve. Hoping that the ECB does not play spoilsport.

For the moment, it’s a little early Christmas on the stock markets. Thanks to announcements from the American Federal Reserve (Fed), all equity markets are progressing and the CAC 40 is no exception. The Parisian index advanced 1.3% to 7,631.58 points at mid-session this Thursday after crossing 7,600 points for the first time and breaking a session record at 7,653.99 points around 9:30 a.m. The closing record of 7,577 points has every chance of also being broken this Thursday.

Like all world stock markets, the Parisian market is supported by the outcome of the meeting of the American Federal Reserve (Fed) on Wednesday evening.

The Fed, as investors expected, kept its key rates unchanged and its president, Jerome Powell, refused to declare victory in the fight against inflation during his press conference. He also did not rule out the possibility of a further increase in key rates, if economic data justified it, according to Bloomberg.

The central banker nevertheless acknowledged that Fed members had discussed rate cuts.

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Towards rate cuts

Above all, the market was delighted with the “dot plots”, or the economic and monetary projections of the members of the Fed. According to this document, the central bank members’ median projection for 2024 key rates stands at 4.6%, which implies a total of 75 basis points (0.75%) of rate cuts per year. next (or three cuts of 25 basis points). According to Bloomberg, economists did not expect as much.

“Fed projections indicated 75 basis points (bps) of reductions in 2024, a significant “dovish” surprise that suits the market (…) The market reaction to this development in Fed policy makes sense: the prospect of more, and potentially earlier, rate cuts leads to lower short- and long-term interest rates, which should drive up valuations and share prices,” explains Joshua Jammer , analyst at ClearBridge Investments.

“Higher key rates for longer, that’s what the Fed’s position has been in recent months. This is no longer the case. Jerome Powell and his colleagues have started to discuss the conditions for lowering interest rates. “The question is therefore no longer whether monetary policy will be relaxed but when and at what speed”, explains Bruno Cavalier of Oddo BHF.

“On the date, the projections of the FOMC (the monetary policy committee of the Fed) only give points at the end of the year without saying anything about the intra-annual profile. On the speed, the median scenario is a reduction in rates of 75 basis points in 2024. The market, quick to overreact, expects double, with a first gesture in March. This seems a little aggressive if the American economy remains on a soft landing trajectory. “, he adds.

Vivendi and Air France-KLM at the party

It remains to be seen whether the European Central Bank (ECB), which will announce its decision on its rates at 2:15 p.m. before the press conference of its president Christine Lagarde at 2:45 p.m., will change the situation or accentuate it. Here again the market will be watching the tone of the central banker to detect clues on the evolution of the ECB’s key rates next year.

On the value side, cyclical and/or indebted groups (like Forvia which takes 8.8% or Clariane which takes 10.7%) are at the party, real estate companies in particular, with Altarea which takes 8.8% or Covivio which stands at 7%.

Air France-KLM gains 8.2% after revealing its ambitions for 2028 as part of an investors day. Vivendi takes 8% while the group studies a potential split into three listed companies.

On other markets, the euro gained 0.4% against the dollar to 1.0923 dollars. Oil is growing. The February contract on North Sea Brent rose 1.9% to $75.70 per barrel while the January contract on WTI listed in New York rose 1.9% to $70.82 per barrel. .