The Paris Stock Exchange ends in the green, investors anticipate rate cuts
The Paris Stock Exchange ended in the green on Friday November 22, with poor economic indicators in the euro zone fueling expectations of greater than expected rate cuts from the ECB.
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The flagship index of the Paris Stock Exchange, the CAC 40, climbed 0.58%, or 41.69 points to 7,255.01 points. The day before, it had gained 0.21% to 7,213.32 points at the end of a hesitant session.
The start of the day was marked “by bad PMI indices with the unpleasant surprise of the contraction in the euro zone“, comments Alexandre Baradez, head of market analysis at IG France.
Private sector activity in the euro zone contracted in November, to 48.1, compared to 50 in October, according to the Flash PMI index published Friday November 22 by S&P Global. It thus fell to its lowest level in 10 months, and disappointed the expectations of economists.
A number above the 50 mark signals growth in activity, while a number below reflects a contraction.
“Eurozone data increased the likelihood of further rate cuts from the European Central Bank (ECB) next year“, underlines Kathleen Brooks, analyst at XTB.
“Bad news becomes good news to accelerate rate cuts” and relieve the economy, explains Mr. Baradez.
The trend also reversed on the main European stock exchanges after an intervention by German Finance Minister Jörg Kukies, saying that Germany must improve on “skilled labor potential, debureaucratization, tax incentives for investment and research, and energy prices“.
This has “pleased the markets“, who had “need to hear (…) a German official talk about investment‘”, insists Alexandre Baradez.
The financiers are sulking
Expectations of an easing of the rate environment in Europe weighed on French banks.
“When rates fall in Europe, banks are less well oriented on the stock market because this reduces their possibility of margin on loans“, explains Alexandre Baradez.
At the close, Société Générale lost 2.59% to 25.95 euros, BNP Paribas lost 2.23% to 56.92 euros and Crédit Agricole 1.66% to 13.05 euros.
Unibail in good shape
Conversely, forecasts of falling rates in Europe supported listed property values.
“To finance real estate projects of any kind, it is better to have low credit rates. A easing rate environment is therefore positive for the real estate sector“, continues Mr. Baradez.
The share of Unibail-Rodamco-Westfield ended up 3.14% at 77.56 euros, the strongest increase in the CAC 40 during the session.
AFP/VNA/CVN
**Beyond the immediate impact of interest rates, what broader economic factors, such as inflation, energy prices, and political stability, could potentially shape the long-term performance of both the banking and property sectors in the Paris Stock Exchange?**
## World Today News: Paris Stock Exchange in the Green - A Tale of Two Sectors
Welcome to World Today News! Today we’re diving into the performance of the Paris Stock Exchange, exploring the factors driving its positive close and the contrasting fortunes of different sectors.
To help us understand this complex picture, we’re joined by two esteemed guests:
* **Ms. Elena Economides**, Chief Market Strategist at Pantheon Capital Management, renowned for her insights into European financial markets.
* **Mr. David Laurent**, Professor of Economics at Sorbonne University, specializing in international finance and monetary policy.
**Let’s begin with the big picture. The Paris Stock Exchange finished in the green on Friday, defying initial fears. Ms. Economides, what prompted this positive turn?**
**(Elena responds)** – Discuss the impact of the PMI index, mentioning the contraction in eurozone activity but also the positive spin investors put on it regarding potential ECB rate cuts.
**Mr. Laurent, how significant is this potential for rate cuts in the context of the broader European economic landscape? Do you foresee a sustained trend of easier monetary policy in the coming year, and what are the potential implications for the eurozone economy?**
**(David responds)** – Expand on the significance of the ECB’s future decisions, highlighting potential risks and benefits of rate cuts. Speak about the broader economic context in Europe (inflation, growth prospects).
**Now, let’s delve into the contrasting fortunes of different sectors. Ms. Economides, the article highlights the divergent performance of banks and property stocks. Can you explain why these sectors reacted so differently to the prospect of rate cuts?**
**(Elena responds)**
– Explain the logic behind banks being negatively impacted by low-interest rate environments (reduced profit margins on loans), contrasting it with the positive outlook for property stocks due to cheaper borrowing for real estate development.
**Mr. Laurent, do you agree with this analysis? Are there any other factors that might be influencing these sectorial trends? What are your long-term predictions for these sectors within the Paris Stock Exchange?**
**(David responds)** – Discuss potential other factors impacting these sectors, considering broader economic trends, government policies, and the global context.
**We’ve covered a lot today. To wrap up, looking ahead, what are the key takeaways for investors navigating the current climate? What key factors should they watch?**
**(Interviewer concludes):** Thank you both for your insightful analysis. This complex situation highlights the interconnectedness of global factors and the importance of understanding the nuances driving different sectors within the market. To our viewers, we encourage you to stay informed and engage with the ongoing discussion surrounding the future of the European economy.
