(News Bulletin 247) – The Paris Stock Exchange confirms its rise to 8,000 points this Thursday evening, after an ECB meeting recording a first reduction in key rates in almost five years. The CAC 40 ended up 0.42% at 8,040.12 points.

The Paris Stock Exchange negotiated well the “D-Day” of the markets, namely the first rate cut by the European Central Bank (ECB) in almost five years. The CAC 40 closed this day up 0.40%, and confirmed its rise beyond 8,000 points, to 8,038.90 points.

As expected, the ECB therefore reduced all its key rates by 25 basis points (0.25 percentage points), in view of a slowdown in inflation in the euro zone for several months. This is its first rate cut since 2019.

Management based on economic data

However, the ECB warned that we should not move too quickly and declare victory too soon in the fight against inflation. The institution has also revised its inflation forecasts upwards for 2024 and 2025, compared to the March projections, which will be likely to fuel debate on a possible break in July.

“Despite the rate cut, the ECB does not expect inflation to align with its target over the next two years, which indicates a hawkish (restrictive) turn in its forecasts,” points out Florian Ielpo, head of research. macroeconomic at Lombard Odier Investment Managers in a note entitled “This is not a dovish rate cut” (accommodating).

“The fight [contre l’inflation] is not finished. The level of key rates still reflects a restrictive monetary policy and remains significantly far from neutrality,” notes Alexandre Perricard, Managing Director and head of rate management at Uzès Gestion.

The ECB draws before the Fed

The ECB is not moving forward on a defined timetable and therefore favors a “data-dependent” approach, as noted by Jan Felix Gloeckner Senior Investment Specialist at Insight Investment. “An upward change in inflation forecasts for 2024 and 2025, and concerns about high wage inflation and strong price pressures within the euro area suggest that the path to easing may not not be as simple as some people think,” he judges.

“At the risk of disappointing those who were looking for indications on the pace or scale of the easing cycle, the ECB’s statement makes clear that it is not committing to a particular trajectory, with future decisions to be determined at a meeting per meeting based on data,” he continues.

Quoted by Reuters, Emmanuel Auboyneau, associate manager at Amplegest, expects “one to two other rate cuts from the ECB by the end of the year, compared to one to two cuts in total in the United States. Nothing will happen before September and I think that in July, there will be nothing from the ECB, although we will have to monitor the inflation figures for June and July.”

For the first time in its history, the European Central Bank is emancipating itself from its American counterpart. In the United States, investors are not considering such a move from the Federal Reserve before September. According to the Fed Watch tool, operators now estimate a first rate cut by the American Federal Reserve in September at 67.3%, compared to less than 50% last week.

And it is not the latest weekly unemployment registrations which will contradict these hopes. They increased by barely 8,000 to 229,000 requests last week. This trend will have to be confirmed on Friday, with the official US employment figures for May.

On the value side, Rémy Cointreau, which was well oriented after the publication of its annual results, finally ended down slightly by 0.1%,

Getlink rose 1.9% supported by Barclays which raised its advice to “overweight” on the value. The British bank anticipates a significant recovery in the company’s shuttle business, and less competitive pressure from ferries.

On other markets, the euro gained 0.07% against the dollar to 1.0882 dollars. Oil is rebounding, taking advantage of cheap buybacks after its recent consolidation. The August contract on North Sea Brent gained 1.8% to $79.83 per barrel, while the July contract on WTI listed in New York gained 2% to $75.52 per barrel.