CAC 40: an earnings season to forget inflation

(CercleFinance.com) - The Paris Bourse is set to rally on Friday morning as it awaits the start of the US earnings season, which kicks off at a time when equity markets are experiencing a bout of volatility.


At around 8:15 a.m., the 'future' contract - for delivery at the end of April - on the CAC 40 index is trading at 8072 points, up 45 points, heralding a rather favorable start to the session.

Recently preoccupied by the reawakening of US inflation, investors will have the opportunity to return to fundamentals today with the opening of the first-quarter earnings season.

As usual, the major US banking groups JPMorgan Chase, Citi and Wells Fargo will kick off the season at lunchtime.

These publications will not only give an indication of the health of the financial sector, but will also provide valuable food for thought on the economic situation in the USA, where the latest indicators have been solid.

After the spectacular start to the year on the world's stock markets, these results will above all provide an indication of whether the high valuations of US equities are justified.

According to FactSet data, the earnings of companies listed on the S&P 500 should have risen by an average of 3.2% year-on-year, their third consecutive quarter of growth.

But the price-earnings ratio (P/E) of the S&P 500 index currently stands at 20.5x, well above its long-term average of 17.7x.

Yesterday, the Nasdaq gained nearly 1.7% on the back of a sharp rebound by the 'Magnificent Seven', in the hope that their quarterly performances will benefit from the hype currently surrounding AI.

According to analysts, however, it will take solid results - and not just from the tech giants - to lift stock indices out of their current trading range.

If an improvement in corporate accounts does materialize, stocks should benefit, as this would justify a rise in share prices on the basis of unchanged valuation ratios.

According to César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management, "Positive announcements would encourage a recovery in equities".

"A rise in all sectors would reinforce our optimism regarding US equities", emphasizes the strategist.

However, the opening of the earnings season will not make investors completely forget the unknown factor of inflation, and they will be closely scrutinizing the price indices due to be published in the morning in France, Germany and Spain.

The indicator agenda also includes US import price figures, as well as the University of Michigan's consumer confidence index.

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