CAC 40 crashes but should fall more in the coming weeks

US, WASHINGTON (ORDO NEWS) — After advancing 3.68% on Thursday, the CAC 40 took off by 5.1% on Friday, March 20. It thus goes back slightly above 4,000 points, to 4,048.80 points exactly, reports Business Insider.

The flagship index of the Paris Stock Exchange observes a clear rebound after a fall of 5.75% on Monday, then again of 5.94% on Wednesday due to fears linked to the coronavirus pandemic. But it is still far from erasing its losses recorded since mid-February. The CAC 40 was displayed above 6000 points.

The rise in prices this weekend – the Dax on the Frankfurt Stock Exchange also climbed 3.70% – can be explained in particular by the measures taken by the central banks.

The European Central Bank (ECB) announced Wednesday evening a vast asset repurchase program, amounting to 750 billion euros, which is in addition to the 120 billion already announced on March 12. A measure to buy even more debt from governments and businesses, and inject liquidity into the economy.

Negative data flow and tensions on the dollar

“Some good news is making investors think it’s time to add to their portfolios,” said Christopher Dembik, chief economist at Saxo Bank. “But that remains a fragile and short-term optimism. It is still an extremely erratic market,” he adds.

According to him, stock prices should dip further in the coming weeks. Uncertainty is likely to persist over the outcome of the current health crisis. And its economic consequences are still poorly quantified.

“The recession is over, but the flow of negative macroeconomic data is ahead of us,” warns the economist.

In addition, “dollar liquidity problems persist,” he said. Having become a safe haven, the dollar is highly coveted by investors, which increases its value against the euro.

Several central banks, including the US Federal Reserve (Fed), the European Central Bank, the Bank of Japan and the Bank of England, have also announced this Friday a coordinated action to facilitate access to dollars.

“To improve the efficiency of the currency exchange agreements in providing financing in US dollars, these central banks have agreed to increase the frequency of operations to maturity from seven days from weekly to daily,” they said in a press release. This measure is due to take effect on Monday 23 March and will last “at least until the end of April”.


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