(News Bulletin 247) – The renewed geopolitical tensions have put pressure on all European markets, including the Paris Stock Exchange. With the notable exception of defense, most sectors suffered on Tuesday.

At the rate things are going, the CAC 40 risks sinking below the 7,000 point mark in the coming weeks. This Tuesday, the flagship index of the Paris market in any case fell by 0.67% to 7229.64 points.

The CAC 40, however, clearly limited its decline at the end of the session with the relatively good behavior of Wall Street (the S&P 500 gained 0.2%).

Like other European markets, the Paris Stock Exchange was penalized by the renewed tensions over the conflict between Ukraine and Russia.

Russian President Vladimir Putin signed a decree on Tuesday expanding the possibilities of using nuclear weapons. This decision was made after, according to the Russian military, Ukraine launched six tactical missiles into Russian territory. Five were destroyed and the last was damaged by Russian anti-aircraft defense. AFP confirmed the strike with a Ukrainian official on condition of anonymity.

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Thales and ADP have survived

Russia’s more offensive tone comes two days after the Biden administration gave Ukraine a boost, allowing it to strike Russian soil with US long-range missiles.

Investors therefore fear an escalation of the conflict between Ukraine and Russia. “This is the only real reason for the market to fall this Tuesday: the growing tensions around Russia,” observes Alexandre Baradez, market analyst at IG France.

This renewed geopolitical tension has led to several market reactions. Sovereign bond yields are falling (and therefore the value of these securities is increasing), with investors fleeing somewhat into risk-free assets. The rate on the American bond fell by 4 basis points to 4.381%, that of the same maturity for Germany eased by 3.3 basis points to 2.34%.

On the equities side, 31 of the 40 CAC 40 stocks finished in the red, with autos (Stellantis lost 2%) and luxury (Kering and LVMH dropped around 2%) in the tough. Thales, a defense company, survived +(1.7%).

Outside of the CAC 40, automotive equipment manufacturers, stocks sensitive to geopolitical risk, fell again. Valeo lost 4.2%, Forvia lost 3.6% and OPmobility lost 6.9%. The former Plastic Omnium was, in addition, weighed down by Bernstein who initiated his advice on value at “underperformance”, equivalent to “sell” in his terminology.

Conversely, ADP gained 3.3%, the largest increase in the SBF 120, helped by Stifel which went from “hold” to “buy” on the stock this Tuesday.

On other markets, the euro lost 0.1% against the dollar at 1.0588 dollars. Oil changes little. The January contract on North Sea Brent fell 0.3% to $73.07 per barrel while the December contract on WTI listed in New York also lost 0.3% to $68.94 per barrel.