The CAC 40 index has risen in the last five straight weeks and is hoverng at its highest level since June 3 last year despite the rising tariff risks. It soared to a high of €8,000 on Friday, up by over 13% from its lowest point in December and and by 120% from its 2020 lows. So, what next for the blue-chip index?
Why the CAC 40 index is rising
The CAC 40 index has jumped as investors rotate back to European stocks. For example, the DAX index has soared to a record high this year, a trend that may continue.
Similarly, the FTSE MIB index has jumped to €37,055, up by 160% from its lowest point in 2020. The IBEX 35 index, which tracks the biggest companies in Spain, has soared to €12,800, while the broader Stoxx 600 index has moved to €543.
These indices are soaring as investors rotate from the low-yieldng European bonds to the stock market because of the dovish European Central Bank (ECB). The ECB has slashed interest rates five times, slashing the official cash rate to 3%.
This, in turn, has pushed bond yields lower, with the ten-year yield moving to 3% from the year-to-date high of 3.50%. The 30-year yield has dropped to 3.6% from a high of 4%. This has made French stocks more attractive since the average dividend yield is about 3%.
The CAC 40 index has also been boosted by the recent Chinese economic data, which revealed that the economy was doing well. A report showed that China’s GDP expanded by 5.4% in the fourth quarter and hit the 5% target.
China is an important market for French companies, which do a lot of business there. Some of the most notable firms with large Chinese operations are the likes of LVMH, Pernod Rickard, and Kering.
Top gainers French stocks
Societe Generale is the best-performing company in the CAC 40 index as it jumped by over 32% this year and by 62% in the last 12 months. This growth happened as the second-biggest bank in France published strong financial results. Its annual revenue soared by 6.7% to €26.7 billion, helped by higher net interest income. The firm paid over €1.7 billion in dividends.
Dassault Systemes stock price has soared by 18% this year, making it the second-best-performer in the CAC 40 index. It has done well as its business continued doing well. Its software revenue rose by 9% in the fourth quarter, bringing its annual revenue figure to €6.21 billion. It expects that its revenue will grow by between 6% and 7% this year.
BNB Paribas, the biggest bank in France, has also jumped by over 16% this year, making it the the-best-performing stock in the index. Like Societe Generale, the company has done well, helped by the rising net interest income and higher distributions.
The other top-performing companies in the CAC 40 index this year are Safran, Thales, Credit Agricole, TotalEnergies, Capgemini, and Sanofi. On the other hand, the top laggards in the index are firms like ST Microelectronics, Pernod Ricard, Edenred, and Stellantis.
CAC 40 index analysis
CAC index chart by TradingView
The daily chart shows that the CAC 40 index has been in a strong bull run in the past few months. It recently crossed the important resistance level at €7,800, its highest swing in September last year. This was a notable level since it was the neckline of the slanted double-bottom pattern.
Most importantly, the index has formed a golden cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. Therefore, the stock will likely keep rising as bulls target the all-time high of €8,255, up by 3.5% from the current level.
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