(News Bulletin 247) – The Paris Stock Exchange is starting the month of August on the wrong foot. The CAC 40 closed this first session in sharp decline, while the market digests a new salvo of results as well as the monetary decisions of the central banks of England and the United States.

The Paris Stock Exchange has printed a very heavy trend in this first session of August. Down 0.8% at mid-session, the CAC 40 accelerated downward in the afternoon and ended its course with a sharp drop of 2.14% at 7,370.45 points, not far from its lowest points of the day (7,358.09 points).

This is the second biggest drop of the year for the CAC 40, after that of June 14 (-2.66%).

The Parisian market has caught its breath, after having chained two bullish sessions and ending July in the green with a gain of 0.70% over the month. Operators did not appreciate the latest wave of corporate results, particularly from Société Générale whose quarterly delivery has caused some teeth to grind.

But for Christopher Dembik, investment strategy advisor at Pictet AM, the poor reception given to company results does not explain this difficult session on the Paris Stock Exchange.

“Today’s correction is not linked to corporate results but is certainly caused by technical factors, with algorithms at play. This is fueled by profit-taking after two sessions in the green, without however being sharply up,” explains the market specialist.

“The few market participants still present are doubtful about the health of all sectors of activity. There is still a risk of significant volatility on the market, both downward and upward, until mid-August. At that time, Nvidia will publish its results, which could reassure the market if they are good. We will also come out of this period of results during which share buybacks decrease compared to usual, by 30% on average,” adds the specialist.

Unemployment claims on the rise

It was mainly the statistics published in the afternoon in the United States that weighed down the trend. Weekly unemployment claims rose by 14,000 to 249,000 new claims, which is higher than the consensus (236,000).

But it was above all a sharp deterioration in manufacturing activity that undermined investor morale. The ISM index contracted to 46.8 points against 48.8 points expected by the consensus and after 48.5 points in June. The threshold of 50 separates a contraction from an expansion of activity.

On Wall Street, the indices that had opened in the green, returned to the downside and fell between 0.5% and 0.8% at the close of the European markets. Operators are taking note of the signs of the deterioration of the American economy but also want to rejoice in the results of Meta which revealed growth and prospects above expectations. The share price of the parent company of Facebook and Instagram gained more than 7%.

It is worth noting that the Bank of England made its first rate cut since 2020, by 0.25 percentage points to bring them down to 5%. On Wednesday, the US central bank, for its part, unsurprisingly, left its rates unchanged. But the comments of the institution and its president, Jerome Powell, seem to have given credibility to the scenario of a rate cut in September.

“Jerome Powell indicates that a rate cut in September is ‘on the table’ and it would now take very bad inflation figures to prevent this,” notes Bastien Drut, head of strategy and economic studies at CPR AM.

“The Fed does not want an explicit pre-commitment but is preparing to lower its key rate. The meeting in Jackson Hole on August 22-24 will provide more clear signals regarding action in September,” emphasizes Thuy Vân Pham, economist at Groupama Asset Management.

Societe Generale, bright red

The publication of Société Générale made teeth grind (-9%), the retail bank in France having disappointed again. The company also lowered its projection of net interest margins in France for 2024. On the contrary, Crédit Agricole SA gained 0.6% after having delivered solid accounts in the second quarter.

Outside the CAC 40, Worldline collapsed (-15.3%) after lowering its targets for 2024, citing uncertainties over consumption in Europe.

Eurobio Scientific jumped 34.9%, driven by a proposed public takeover bid (OPA) by a consortium, which should result in the in vitro diagnostics specialist being delisted.

On other markets, the euro fell 0.3% against the dollar to $1.0788. Oil turned lower on fears of a recession in the US economy. The October contract on North Sea Brent fell 0.5% to $80.41 a barrel, while the September contract on WTI listed in New York fell 0.8% to $77.28 a barrel.