Market: Investors believe the stock market has fallen too much, the CAC 40 recovers more than 5%

(BFM Bourse) – After falling more than 10% last week and nearly 20% since its peak in early January, the Paris market is looking to recover this Wednesday, despite the escalation of sanctions and the many uncertainties that still exist.

Will hold, won’t hold? After 5 consecutive declines and the worst weekly performance (-10.2%) since March 2020, the CAC 40 is starting to rise again – very vigorously – this Wednesday morning. After opening close to 3%, the flagship index of the Paris Bourse further increased its initial gains significantly and posted a 4.62% recovery to 6,238.47 points shortly before 11 a.m., in another spectacular trading volume, already almost 2 billion euros.

“The Paris market should attempt a technical recovery this morning, despite the fact that the Biden administration has banned US imports of Russian energy and the many uncertainties surrounding the Ukrainian file, the continued rise in the price of the barrel of oil and the fact that the rating agency Fitch announced that a default on Russian government bonds was imminent,” sums up John Plassard, deputy director of investments at Mirabaud.

In other words, some investors, who believe that stock markets have fallen too much since the war in Ukraine started and peaked in January last year, have started buying back shares, believing they are buying cheaply and in the hope prices will rise. recover in the medium term. At the end of this Tuesday, at 5,962.96 points, the lowest since March 25, 2021, the tricolor rating flagship index had indeed fallen 12.05% since the end of February 23, the date of the launch of the Russian invasion, and 19.2% since its all-time high on January 3.

The day before, the CAC 40 ended the session with a decline of 0.32%, a false semblance of stability while the market is extremely volatile, with spectacular “intraday” moves – about 4% on Tuesday and 6% on Monday, between the low point and high point of the day. There is no specific news this morning, but risk appetite has returned slightly with a 6% drop in volatility on European indices, a rebound in the euro and other more pronounced cryptocurrencies with also a relative easing in the prices of certain commodities (gas and oil),” noted Alexandre Baradez, head of market analysis for IG.

Strong recovery of sanctioned stocks since the start of the war

Paris investors are therefore deciding en masse to return to the most sanctioned, even butchered values, as certain flagships off the French coast have given up more than a third of their value in the past two weeks. This is particularly the case with Société Générale, Alstom or Renault, who recovered by 7.7%, 8.3% and 8% respectively this Wednesday shortly before 10am.

In fact, the list has completely reversed from the trend of recent weeks, with the rare stocks that have largely benefited from the geopolitical situation (particularly the weapons and energy sectors) were the only ones in the red on Wednesday. We are thinking in particular of Thales (-1.5%) and Dassault Aviation (-2.6%), but also various oil services stocks, such as the refining specialist Esso (-3.4%), which is involved in prospecting Schlumberger (- 3%) or the equipment manufacturer Vallourec (-2%).

In the other direction, other notable upturns should be highlighted, starting with those of Faurecia (+11.2%) and Valeo (+9.2%), which – like the entire automotive sector – suffered strongly for several weeks – Stellantis ( +7.6%) and Michelin (+7.4%) also benefit. Investors are also massively returning to buy the banking sub-fund (+8.9% for BNP Paribas, +6.7% for Crédit Agricole), as well as other neglected stocks (+8.2% for Veolia, +7.9% for URW).

The maintenance and hygiene services specialist Elis also achieved 8.7% despite the presentation of annual results without any particular surprise, and even below Midcap Partners’ expectations for net profit. The group nevertheless announced targets that are considered relatively ambitious for 2022, in particular in terms of revenue growth, which are expected to be between 13 and 15%.

Oil Consolidates After the Embargo

On the oil side, the prices of the major references are consolidating this Wednesday morning after their frenzied rise in recent days, culminating in the embargo imposed on Tuesday by the United States and the United Kingdom against Russian oil and gas. In the wake of the White House announcement, Ukrainian President Volodymyr Zelensky said he was “grateful to the United States and the leadership” of Joe Biden for this “slap to the heart of Putin’s war machine” — and prices soared. over $130, levels not seen since 2008. While gas prices on their side are reaching heights never seen before, Economy Minister Bruno Le Maire estimated on Wednesday that the current energy crisis is “comparable in intensity and brutality to the 1973 oil shock”. However, at around 11:25 a.m., prices of global crude oil benchmarks Brent and WTI stalled, with the former trading at $126.5 (-0.8% from the previous day) while the second was trading at $122. 3 (-1.3%).

In the Forex, or foreign exchange market, the single currency sharply accentuates its recovery that began the day before, gaining 0.73% against the dollar, at $1.0985.

Quentin Soubranne – ©2022 BFM Bourse