France and the United Kingdom make a ‘sprint’ in the race for the stock market leadership. The financial markets of both powers have entered 2023 ready to recover ground after the shadow of the war, inflation and the rise in rates have darkened the parquets. With renewing airs and a somewhat clearer horizon, the stock markets have been recovering their pulse in recent weeks boosted by the improvement in investor sentiment.
This ‘acceleration’ has catapulted the parks of the Old Continent, among which the CAC 40 and the FTSE 100 stand out, whose annual revaluations of 13.35 and 7.5%, respectively, have served them to break resistance and reach maximums historical. The British parquet has chained three consecutive sessions above the 8,000 point barrier, an unprecedented level in its almost four decades in operation. This Monday he has once again broken another record of his own after closing the session at 8,014 points.
Investor sentiment and the composition of the index itself are the factors that come to explain the momentum. In the United Kingdom, the weight of exporting companies, especially raw materials, contribute to this push. The energy crisis, which has made gas and oil more expensive, and the depreciation of the pound has helped companies such as Shell (+8.5%), BP (+17.54%) or Berkeley (+12.24 %) to stand out on the stock market.
However, the rise comes from JD Sports (+42%), IAG (+31%), BT Group (+27%), Burberry (+25%) and the Standard Chartered bank, which are the most They are revalued in the last seven weeks. In fact, only nine of the 100 stocks that make it up have accumulated so far this year, among which the mining company Fresnillo (-10.3%), Glencore (-5.9%), British American Tobacco (-5.9%), -3.5%) and Diageo (-2.22%).
The FTSE 100 was one breath away from exceeding the highs of the end of 2019 (last full year without Covid) in March 2022. The fiscal program proposed by the Government of Liz Truss made it go back slightly for a few weeks. The replacement of Rishi Sunak at the head of Downing Street calmed the waters on the stock market, being the only one of the large markets that closed the year with an advance of 0.9% in local currency (-4.35%) if the currency effect is taken into account) . Glencore, BP and Shell were behind these timid gains.
Although its advance is modest compared to the rest of the reference indices of the Old Continent, the key to this rise lies in the fact that it starts from a more advantageous position. Looking ahead to this year, analysts are even more optimistic and believe that they could reach close to 8,983 points, which would mean ending the year with growth of 12% twelve months ahead. What’s more, only 1% of them recommend selling it, compared to 51% who advise buying. This contrasts with the fact that up to a dozen companies have already exhausted their potential and are trading up to 12% above their target price, as is the case with Burberry, according to the ‘Bloomberg’ consensus.
The luxury sector erases the annual losses of the CAC 40
In France, for its part, the CAC 40 stands as another of the winners of this buying ‘rally’ that prevails among investors. The reference of the Parisian stock market closed the session this Monday at 7,335 points, so it is only 42 points away from its highest peak (7,376 points), reached in May 2022. Of the 40 values that make it up, only Sanofi yields 0.81% so far this year and becomes the ‘red lantern’ of the French market.
The rebound with a French accent is motivated by investors’ commitment to luxury brands. The CAC 40 counts Kering among its list. Dedicated to the manufacture and marketing of products for Gucci, Yves Saint Laurent or Balenciaga, among other firms, this company founded by François Pinault has recorded a rebound of more than 24% so far this year. Only Publicis Groupe (+26.35%), Renault and STMicroelectronics (+37%) are ahead.
Along these lines, LVMH (Loewe, Bvlgari or Christian Dior) has also stood out by almost 20% with market closing data this Tuesday, contributing to the momentum of the gala stock market, while Hermes International accelerates by 18%. The reopening of China, a large consumer of luxury products, contributes to the great attractiveness of these companies for investors. The IG analyst, Diego Morín, also focuses on the aeronautical giant Airbus (+10.6%). “Cyclical companies have started 2023 very well” he points out while noting the great appetite there is in the market for risk.
After being crowned the index that appreciates the most, only behind the FTSE MIB (+16.4%) and with three companies overselling, according to the consensus -Hermes International, Legrand and L’Oreal-, analysts see it even in the level of 8,044 points, almost 10% more than, if it materialized, it would overcome a new barrier.
Green prevails in the parks of the Old Continent, with revaluations that reach double digits in the main European squares. In addition to those mentioned, the German Dax is also less than 3% from its all-time high (15,884 points) and has the capacity to reach 17,828. The Ibex 35 for its part advances 12.8%, which places it at levels prior to the decree of the state of alarm in Spain in March 2020 before the bursting of the real estate bubble, when it reached 16,000 points. Analysts agree that the amount of dividends they distribute acts as a deflator for the Spanish selective.
The key now lies in whether the stock markets will be able to keep up or, on the contrary, deflate their ‘rally’ for fear that the interest rate hikes by central banks will go further than initially discounted. . “The situation in Europe is complex despite the fact that the stock markets reflect the opposite. We must be vigilant and see if they consolidate those levels or register falls again,” concludes Morín.
