Fundamental Comment

CAC 40 leads gains as France launches €100bn stimulus

CAC 40 leads gains as France launches €100bn stimulus

The French CAC 40 index led gains among European shares on Thursday, as France launched a 100-billion-euro stimulus package to jolt its economy out of recession, thereby raising hopes that governments will continue to inject money.

The CAC index climbed 1.72 percent to 5,118.06 points, marking the highest level since mid-July.

The Euro STOXX 600 added 1.10 percent to 375.42, hovering near its highest level in two months recorded at 380.

Germany’s DAX 30 index soared 1.5 percent to 13,442.06, and U.K. FTSE 100 surged 0.8 percent to 5,987.87.

The stimulus package encompasses wage subsidies, tax cuts for businesses and funding for environmental projects, while aims at boosting investment and creating jobs.

France’s package improved the sentiment and raised hopes that large economies would continue to stimulate their economies amid the uncertainty surrounding economic outlook as Covod-19 cases increase across the continent.

Data released today showed that the French economy really needs stimulus, as the PMI business activity measure dropped to 51.5 in August from 57.3 in July.

In the euro area, the Service PMI slipped to 50.5 last month from 54.7 in July.

“Service sector companies across the eurozone saw growth of business activity grind almost to a halt in August, fueling worries that the post-lockdown rebound has started to fade amid ongoing social distancing restrictions linked to COVID-19,” said Chris Williamson, chief business economist at IHS Markit.

Also, there is some optimism that a Covid-19 vaccine could be released soon, as U.S. CDC told health officials that the vaccine could arrive in November.

European equities got another support from the drop in the euro, which slipped for a third consecutive session versus the dollar on anticipations that the European Central Bank could announce new stimulus soon.

The euro meanwhile is trading slightly lower at 1.1832 after finding some support near the session’s bottom at 1.1788.

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