Stock Market: CAC40 Gains Momentum Amid Hopes for End of US Government Shutdown

The US government shutdown finally disrupts market status quo

After several days of deadlock, negotiations in Washington seem to be reaching a resolution. A small group of eight Democratic senators has reportedly agreed to join the Republicans in voting on a budget bill, providing them with the necessary majority to break the stalemate. This prospect of political calm across the Atlantic acts as a true antidote for the European markets, which had suffered throughout the previous week due to the lack of US economic indicators and the resulting widespread uncertainty.

The macroeconomic consequences of the shutdown have already strained the accounts: each week of budget paralysis weighs approximately 0.2 percentage points on US growth on an annualized basis. With more than forty days of interruption, analysts are now predicting an impact of over one point on fourth-quarter growth. This economic scar makes the return to administrative normalcy all the more valuable, even though financial repercussions will persist in the data released in the coming weeks.

The rebound observed in Paris this Monday mainly reflects relief: investors are emerging from the informational deadlock that paralyzed them. The market can finally anticipate the resumption of statistical releases and a gradual return to some form of visibility on the US economic health. It is this reduction in uncertainty, more than any specific economic fundamentals, that is driving European indices upward.

The financial sector leads the pack

The rebound of the CAC 40 is primarily driven by a decidedly invigorated financial sector. Société Générale leads the charge with a 3.92% increase, closely followed by BNP Paribas, up 2.83%, while Crédit Agricole gains a more modest 1.21%. These three French banking giants benefit from a dual dynamic: the reduction of political uncertainty in the US, which rekindles risk appetite, and the hope that the end of the government shutdown will allow the Federal Reserve to return to a more transparent strategy regarding interest rates.

The luxury sector continues its impressive upswing with LVMH rising by 1.86%, Kering showing a performance of 2.52%, and Hermès doing well with a 1.85% increase. These three fashion and accessibility titans reflect renewed investor appetite for cyclical stocks once uncertainty is lifted. The rebound also extends to names like Edenred, up by 3.54%, confirming that peripheral stocks of the CAC fully benefit from the shift in sentiment.

Accor's stock increases by 3.23%, Capgemini by 2.72%, and Dassault Systèmes by 2.40%, forming a cohort of growth and service stocks that profit from the renewed engine of confidence. Even more traditional stocks like Pernod Ricard (2.28%) and Renault (1.82%) are showing respectable gains. These increases reflect less a fundamental change in valuations and more a simple portfolio reallocation following the resolution of a stalemate situation.

Energy and Certain Defensive Stocks Are Losing Momentum

While the majority of the French market celebrates its resurgence, a few sectors remain lagging. The energy segment continues to face pressure, with Engie experiencing a slight decline of 0.47%, Orange losing 0.25%, and Danone remaining nearly stable with a decrease of 0.05%. These three stocks highlight a distinct reality: as investors, reassured by the US political situation, flock to cyclical and growth assets, defensive stocks offering stable yields are gradually seeing capital shift away.

The hesitance on Orange and the stagnation of Danone reflect a preference for growth dynamics and for sectors that lost investors during the decline the previous week. Engie, in particular, suffers from the anticipated normalization of interest rate policy, an environment less favorable to short-duration, high-yield stocks.

These declines, however, are contained compared to the gains in the rest of the market, suggesting that the redirection of funds is not abrupt but rather a gradual reallocation. Other energy transition stocks like Veolia see modest growth of 0.21%, confirming the market's relative indifference to this segment once the US political urgency is resolved. Air Liquide, often a quality safe haven, advances just 0.19%, underscoring that even prestigious defensive stocks struggle to outperform in a general atmosphere where risk finds renewed interest.