(News Bulletin 247) – The Paris index gained 2.29% this Thursday, the market welcoming the reductions in key rates by the American Federal Reserve. The Bank of England, for its part, maintained its rates.

Well helped by the American Federal Reserve (Fed), the CAC 40 posted a nice rise this Thursday. The Parisian index gained 2.29% to 7,615.41 points, thus returning above 7,600 points.

The Paris market was buoyed by the Fed’s rate cut on Wednesday evening, which ultimately opted for a reduction of 50 basis points (0.5 percentage points), rather than the 25 basis points anticipated by economists.

However, this decision was not unanimous, as Governor Michelle Bowman voted for a 25 basis point cut. This is the first time since 2005 that a Fed governor has shown dissent.

Moreover, during his press conference, Fed Chairman Jerome Powell warned that this 50 basis point cut should not be considered “the new pace.”

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Hopes for a soft landing

“Jerome Powell refuted the idea that 50 basis points will be the new 25 basis points, noting that the Fed is in no rush to cut rates. Participants’ interest rate projections continue to point to a soft landing and gradual policy normalization,” said Frederik Ducrozet of Pictet AM.

“However, in our view, the September policy committee meeting signals an important ‘dovish’ shift in the Fed’s reaction function. Chairman Powell wants to be more preemptive to ensure a soft landing (for the economy, editor’s note) and his tolerance for further weakness in the labor market seems quite low,” the economist adds.

“Without sounding the alarm, the recent slowdown in the labor market, in the Fed’s own words, has led it to adopt a more balanced approach within its dual mandate. Given the progress made last year on inflation, the Fed had the luxury of being able to make a first significant cut without too much scare in the market,” consider the bond strategists at Janus Henderson.

The “dot plots”, that is to say the economic and monetary projections of the members of the Fed, showed that the central bankers anticipated, at the median level, another 50 basis points of rate cuts this year, when the market, itself, rather counts on 75 basis points.

The Bank of England, which held its monetary policy meeting this Thursday, opted for the status quo on its key rates.

Trigano and Beneteau stand out

The American markets followed the European trend, after opting for caution on Wednesday evening following the Fed’s announcements. After the European close, the S&P 500 gained 1.7% and the Nasdaq Composite advanced 2.7%.

On the value side, the Fed’s rate cuts boosted luxury, with Hermès gaining 4.4% and LVMH 3%.

In the same vein, the motorhome manufacturer Trigano and the pleasure boating specialist Beneteau, shares linked to discretionary goods and therefore sensitive to rates, gained 6.1% and 12.6% respectively.

In other markets, the euro appreciated against the dollar after the Fed’s decision and gained 0.2% against the greenback to $1.1145. Oil climbed. The November contract on North Sea Brent advanced 1.9% to $75.03 per barrel while the October contract on WTI gained 2% to $72.30 per barrel.