(News Bulletin 247) – The Parisian index ended slightly lower this Friday, October 17, resisting fears caused by the difficulties of two regional American banks. This is thanks in particular to the 13% jump in Essilorluxottica this Friday. The week was marked by the surge of LVMH and the rejection of motions of censure against the government.

After a little scare in the morning, the CAC 40 ended the week quietly. The Parisian index showed an anecdotal drop of 0.18% this Friday, October 17, to 8,174.20 points, after losing more than 1.3% at the start of the session.

The CAC 40 also closely touched its record during the session, hitting a peak of 8,224.56 points, a stone’s throw from its historic mark (8,259.19 points).

Over the week as a whole, the index made good progress, gaining 3.24%. The Paris index was helped by a semblance of political stability in France. First on Wednesday when Prime Minister Sébastien Lecornu agreed to suspend the 2023 pension reform to avoid censorship.

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“Even though this might seem negative from a debt sustainability perspective, markets were reassured as it was seen as increasing the chances that Lecornu would remain prime minister and that a snap legislative election would be avoided,” Deutsche Bank explained.

Then Thursday, when this same Lecornu government survived (barely) two motions of censure in the National Assembly.

“The Lecornu government survived the vote of no confidence, trading budgetary discipline for short-term peace – a solution far from ideal, but sufficient for markets hungry for stability,” judges Stephen Innes of Spi AM.

LVMH drives the entire CAC 40

But the biggest notable event of the week remains, certainly, the publication of LVMH’s third quarter activity, which was welcomed on the stock market on Wednesday, with the stock climbing 12.22%.

The number one luxury company took analysts’ expectations by surprise by returning to growth (on a comparable basis) in the third quarter. Above all, its fashion and leather goods division, the most followed, fell by 2% over the period, half as much as expected by the research offices.

The company with some 80 houses pulled in its wake other luxury stocks, the flagship compartment of the Paris Stock Exchange and the CAC 40, thereby propelling the Parisian index (1.99% on Wednesday).

“Investors will be hoping that LVMH, and potentially the entire luxury sector, has turned a corner in foreign currency sales growth over two years, thanks to a more robust mainland China,” commented Deutsche Bank.

Essilorluxottica as a shock absorber

To return to this Friday’s session. Like all global markets, the Parisian market was weighed down by the setbacks of two regional banks in the United States, which revived fears of a potential crisis for this type of establishment across the Atlantic.

Based in Salt Lake City, Zions Bancorp lost 13.1% on Wall Street Thursday evening after writing down $50 million on a loan taken out by its subsidiary California Bank & Trust, while Western Alliance, based in Phoenix, admitted to being exposed to a borrower who had failed to provide promised guarantees, explained John Plassard of Cité Gestion.

“While a seemingly isolated story involving two banks each with a market capitalization of less than $10 billion, the event inevitably prompted comparisons to the regional banking stress that followed the collapse of SVB (Silicon Valley Bank) in March 2023 and raised broader questions about potential credit quality issues after a long period of high rates and expansion private credit”, explains Deutsche Bank.

These fears caused a decline in European banks. The French were not spared, Société Générale lost 5.1%, BNP Paribas 34% and Crédit Agricole SA 2.5%.

However, the CAC 40 held up well compared to the DAX 40 in Frankfurt (-1.8%), or the FTSE Mib in Milan (-1.4%).

This is partly due to the fact that the banking sector has a much lower weight in the calculation of the Parisian index than for others, such as those of the Milan and Madrid stock exchanges.

On the other hand, the CAC 40 was supported by the jump (+13%) of the optical group Essilorluxottica which also became the fifth highest market capitalization of the index this Friday. The company reported thunderous third-quarter activity thanks to the boom in its AI glasses. Which pushed Bank of America to raise its purchase advice.

The CAC 40 may also have been buoyed by the fact that Donald Trump confirmed that he would meet Chinese President Xi Jinping in two weeks in Seoul, fueling hopes of a resolution of the trade conflict between Washington and Beijing.

Among other notable stock market reactions, defense groups were little shaken by the resumption of discussions between Donald Trump and Putin on the subject of Ukraine. Thales fell 3.3% and Dassault Aviation lost 1.5%.

The Virbac veterinary laboratory gained 7.2% after publishing an acceleration in its growth in the third quarter and raising its revenue growth target for 2025.

On other markets, the euro fell 0.2% against the dollar to 1.16664 dollars. Oil is also falling. The December North Sea Brent contract lost 0.2% to $60.93 per barrel while the November New York WTI contract lost 0.3% to $57.31 per barrel.