The CAC 40 index remained on edge as the euro crashed to near parity and French government bond yields rallied. The index, which tracks the biggest blue-chip companies in France, was trading at €7,400, where it has remained in the past few days. It is down by 10% from its 2024 highs. So, will the CAC 40 index rebound as the euro falls and France bond yields rise?
France bond yields are rising as the euro falls
The CAC 40 index has continued to consolidate as the French and US bond yields keep soaring. Data shows that the 10-year French yield rose to 3.486% this week from the year-to-date low of 2.85% and the pandemic low of minus 0.41%.
The 30-year yield has also risen to near 4%. This trend mirrors what is happening in other countries as the bond rout accelerates. In Germany, the ten-year yield has risen to 2.58%, while in Italy and Spain, that yield is up to 3.82% and 3.30%, respectively.
The French bond yields have continued rising because of the ongoing budget and politics have led to volatility in the country. Last year, Michel Barnier’s government collapsed after proposing some budget cuts. The finance minister has hinted that the budget deficit will be in the range of 5% and 5.50% this year.
Rising bond yields have an impact on the stock market as many investors move from the equity market to bonds. Indeed, data shows that more people in France are now investing in money market funds.
The CAC 40 index has also wavered as the EUR/USD has continued falling this year. It has dropped to 1.0200, its lowest level since November 2022 and is nearing the parity level of 1.000.
French companies react differently to the falling euro. Some, like large exporters like LVMH and Renault since it makes their products affordable to their international customers.
The euro has crashed and the French bond yields have risen as investors watch the next actions by the European Central Bank (ECB). The bank has already delivered four interest rate cuts, and analysts anticipate more this year.
Top gainers and laggards in the CAC index
Most companies in the CAC 40 index have been in the red this year so far. The best-performer in the index is Vivendi, which will go through a four-way split, including the London-listing of Canal+. Havas will be listed Amsterda, while Louis Hachette Group will list in Paris.
The second-best performer is Engie, a leading energy company involved in industries like wind and solar energy, biogas, green hydrogen, and hydropower. Its stock has jumped by 3.78% this year.
The other top-performers in the CAC 40 index are Safran, Legrand, and TotalEnergies, whose shares have risen by over 2%. On the other hand, the top laggards in the fund are Stellantis, Publicis Groupe, Kering, Michelin, and Pernod Ricard.
CAC 40 index analysis
CAC 40 index chart | Source: TradingView
The weekly chart shows that the CAC 40 index has remained on edge in the past few days. It has remained about 10% below the highest point in 2024. The index has moved slightly below the 50-week and 25-week Exponential Moving Averages (EMA).
Most importantly, the index has formed a symmetrical triangle chart pattern, which is nearing their confluence levels. That is a sign that the index may be about to have a big move in the coming days. A big drop may see it move to the psychological point at €7,000, while a breakout will see it retest the key point at €8,000.
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