by Claude Chendjou

PARIS (Reuters) – European stock markets closed on Friday with slight variations and Wall Street was trending in the green at mid-session, the Christmas rally in the stock markets being reinforced by a new indicator showing the slowing of inflationary pressures in the States -United.

In Paris, the CAC 40 finished practically stable (-0.03%) at 7,568.82 points. The German Dax advanced 0.11%. The British Footsie nibbled 0.04% in a shortened session while the London Stock Exchange will be closed Monday and Tuesday for the Christmas holidays. The other European places will reopen from Tuesday.

The EuroStoxx 50 index fell by 0.07% but the FTSEurofirst 300 and the Stoxx 600 each gained 0.13%.

Over the week as a whole, the CAC 40 lost 0.37%, while the Stoxx 600 increased by 0.20%, the latter index heading towards a second consecutive month in the green.

At the time of closing in Europe, the Dow Jones rose 0.1%, the Standard & Poor’s 500 0.28% and the Nasdaq 0.29%.

The three indices could experience an eighth consecutive week in the green, with in particular the S&P-500 which could record its best weekly performance since 2017, while the Nasdaq and the Dow Jones are aiming for their strongest weekly increase since 2019.

The Christmas rally in stock markets is fueled by announcements from the Fed, which decided last week to keep its rates unchanged, while its president Jerome Powell suggested that the cost of credit should fall next year.

Friday’s publication of the PCE price indicator in the United States, the Fed’s preferred measure of inflation, reinforced this outlook since prices fell in November for the first time in more than three and a half years, allowing inflation to return below 3% at an annual rate.

“This confirms the hypothesis of a rate cut from March,” commented David Russell, market strategist at TradeStation.

“This data shows us that the inflationary turning point occurred some time ago and that as we move into the future, base effects will continue to be felt,” he added.

According to the CME Group’s FedWatch barometer, financial markets expect a 82.5% probability of a cut of at least 25 basis points in Fed rates in March. They forecast that borrowing costs will be cut by 125 basis points by September 2024.

VALUES

Stocks linked to video games suffered in reaction to the announcement of restrictions in China in the sector: in the wake of the plunge of the Chinese digital giant Tencent (-12.35%), including the Dutch group Prosus (-13. 23%) is the largest shareholder, Ubisoft fell by 1.33%.

The new technologies index in Europe fell by 0.75%.

European sports equipment manufacturers and distributors like Adidas (-5.29%), Puma (-7.18%), JD Sports (-5.145%) stumbled after Nike (-10.71) lowered its forecast %).

The European index of personal and household consumption goods dropped 0.65%.

On the upside, however, the energy segment (+0.39%) and basic resources (+0.61%) offered support to the Stoxx 600.

Nexity, for its part, soared by 10.94% thanks to discussions to sell its services activities to individuals.

TODAY’S INDICATORS

American household morale improved in December more than expected in the first estimate, to 69.7, according to the final results of the monthly survey from the University of Michigan.

Retail sales in the United Kingdom grew (+1.3%) month-on-month in November more strongly than expected, while the country’s gross domestic product (GDP) fell by 0.1 % in the third quarter of 2023 compared to the previous quarter.

The household confidence index in France rose to 89 points in December, exceeding estimates, according to the INSEE monthly economic survey.

EXCHANGES The dollar fell 0.2% against a basket of international currencies, to a five-month low, after the publication of the PCE price index in the United States. The greenback has lost more than 2% over the last two weeks at this stage and is heading towards a decline of just under 2% for the year as a whole.

The euro is trading at $1.101 (+0.02%), the highest since August.

The pound sterling stands at 1.2714 dollars (+0.2%) after contrasting indicators in the United Kingdom.

RATE

The ten-year German Bund yield ended up around a basis point, at 1.972%, but remains below 2%, while the two-year yield lost 3.7 points to 2.422%. The German ten-year is expected to record its biggest fall since 2008 over the November-December period.

In the United States, the yield on ten-year Treasury bonds rose by a little more than one basis point, to 3.908% compared to a peak of more than 5% reached in October.

OIL

Oil prices are heading towards a weekly gain of almost 4% due to the persistence of tensions in the Red Sea: Brent advances by 0.01% to 79.40 dollars per barrel and American light crude (West Texas Intermediate , WTI) by 0.2% to 74.04 dollars.

METALS

Gold rose 0.43% to $2,054.2871 per ounce, to a nearly three-week high amid depreciation of the dollar and bond yields amid expectations of a Fed rate cut.

(Written by Claude Chendjou, edited by Bertrand Boucey)

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