CAC 40 Falls Below 8,050 Points on Eve of Fed Decision

A Session Driven by External Factors

The mood in Paris is cautious as investors hold their breath ahead of the Federal Reserve meeting, with its outcome anticipated on Wednesday. Money markets are pricing in a strong likelihood of the first rate hike in three years, aimed at countering inflation deemed persistent. Meanwhile, the surge in energy prices is weighing on the morale. A major Saudi pipeline linking the Gulf to the Red Sea has been shut down following a drone attack, and attacks on infrastructure and navigation in the region are increasing. This geopolitical risk premium is fueling the general nervousness.

The decline in Paris is part of a homogeneous European trend. The SBF 120 fell by 0.87% during the session. In Europe, the DAX dropped 0.85% and the STOXX 600 shed 0.82%, while the FTSE 100 limited its decline to 0.64%. On the previous day, at Monday's close on Wall Street, the S&P 500 had lost 0.48%, the Nasdaq 100 0.82%, and the Dow Jones 0.29%.

Dispersion Reveals a Bear Market

The extent of the decline is reflected in the distribution of values. Among the forty components of the CAC 40, only five are advancing, compared to thirty-four in decline and one stable. This clear imbalance indicates an almost generalized sell-off trend. Few sectors are holding up in a context where rising U.S. sovereign yields and increasing oil prices are reshuffling the cards.

Defense and retail hold strong, while tech and luxury fall behind

On the upside, the defense sector takes the lead. Thales posted the best performance on the index with a gain of 2.82% at 236.90 euros. The company announced, alongside Atos and Open, that it had secured two cloud computing contracts from UGAP for four years, related to cloud environments and infrastructure operations. CIC Market Solutions reiterated its buy recommendation, with an unchanged target of 305 euros. Meanwhile, more defensive stocks limited the damage: Eurofins Scientific rose by 0.72%, Carrefour advanced 0.51%, while Safran (+0.16%) and Legrand (+0.08%) remained steady.

Conversely, technology and luxury sectors saw outflows. Dassault Systèmes fell by 3.25% to 20.56 euros, followed by Capgemini, which lost 2.83%. The luxury segment also faced volatility: LVMH dropped by 2.23% to 408.15 euros, as Bernstein lowered its price target from 600 to 520 euros while maintaining its outperform rating. Hermès International declined by 1.77% to 1,389 euros. Publicis rounded out the declines with a 1.88% drop. This overall performance reflects the day's market skepticism towards the most market-sensitive stocks.