For France’s blue-chip Cac 40 index, a summer rally seems to be fading.
From trading well above 5,600 in periods of July, it was down 0.44% this morning at 5,469.02.
This was, however, an improvement on the level seen a month ago, on August 5th, the index stood at 5,241.55.
President pumps cash into the system
Looking at the chart, it would seem that summer ended somewhat early for the Cac 40, with a fairly steep decline setting in after August 1st, when the index traded at 5,557.41.
In part, this may have been caused by the annual August holiday migration that will have taken a proportion of banks and brokers out of circulation. But while this could explain a drift in stock values it is unlikely to tell the full story about what has been a notable drop.
Some may also be puzzled that the index is down when official figures on August 29th showed the French economy grew at a higher-than-expected rate in the second quarter of this year, in sharp contrast to fellow euro-zone economies such as Germany and Italy.
Reuters reported that President Emmanuel Macron has pumped extra cash into the economy in the form of tax breaks and inducements for companies to pay bonuses to their workers. The agency added: “So far the extra cash has not translated into higher consumer spending, although it is helping to keep household confidence at elevated levels.”
On a three-month perspective, the index would appear to have gone pretty much nowhere. It stood at 5,241.46 on 3 June, almost identical to its level a month ago. It is a similar story on the 12-month view, with the Cac 40 at 5,413.80 on 3 September.
“Risks have risen”
But this would be to miss the July rally, during which it reached its highest point over the last 12 months of 5,620.73 on 4 July.
Other spikes in the month were seen on 16 July, at 5,614.38, and on 26 July, at 5,610.05. But after the 1 August, it dropped to a recent low of 5,234.65 on 6 August.
The Cac 40, in contrast to the international FTSE 100 Index across the Channel, is dominated by French firms and contains much of the cream of the country’s businesses. From financial services there are insurer AXA and banks BNP Paribas and Societe Generale. Carmakers Peugeot and Renault are featured, as is energy group Total.
Industrial gases group Air Liquide is listed, as is the hotel company Accord. Meanwhile, Airbus and Dassault represent aircraft manufacture, while food group Danone and luxury products company LVMH are also listed.
Michelin, one of the world’s largest tyre manufacturers, is a constituent.
The most recent Article IV health check from the International Monetary Fund (IMF) painted a mixed picture for the French economy. It said: “Activity remained resilient relative to peers, and the labour market continued to improve. The fiscal deficit declined modestly, but public debt reached an all-time high.”
The IMF added: “The government’s structural reform agenda is being put in place and growth is expected to gradually return to its potential level over the medium run. However, risks have risen, related to a disorderly Brexit, trade tensions, and a softening of activity in the euro area, but also to a slowdown in the domestic reform momentum.”