The flagship CAC 40 index closed at its highest since January 5, 2022, at 7,390.28 points, after touching an all-time record in session at 7,403.67 points, surpassing that crossed on March 6 (7,401.15 points) before the US and European banking turbulence.

A meteoric rise given that the rating had fallen below the threshold of 6,800 points on March 20, in the midst of a banking shock. The CAC 40 then recovered nearly 9%. Since the beginning of the year, the index has gained more than 14%.

However, the shares of the banks Société Générale, BNP Paribas and Crédit Agricole did not recover the losses they recorded on the sidelines of the bankruptcy of the American bank Silicon Valley Bank and the takeover in extremis of Credit Suisse by its Swiss rival UBS.

But the Paris index, composed mainly of stocks linked to global growth, has been largely propelled by the luxury sector in recent weeks, while the defense and tourism sectors have also contributed to its rebound.

As in the last quarter of 2022, "the market seems at this stage still betting on the reopening of China and a global economy that is stabilizing," said Alexandre Baradez, an analyst at IG France.

"It also seems to have completely evacuated the systemic risk effects of this banking stress" and put aside "the induced effects of this banking stress on credit conditions," adds the expert interviewed by AFP.

The banking crisis, if it has blown a wind of panic on the markets, makes central banks more sensitive to the economic risks of their monetary policy, investors hope.

They now believe that they will raise their key rates a little less than expected, the main tool to fight inflation by increasing the cost of credit in the economy.

If the European Central Bank (ECB) is rigid and still plans to raise its key rates, investors believe it is very likely that the US central bank (Federal Reserve, Fed) will make a final rate hike in May, before leaving them around 5%.

The latest data on the other side of the Atlantic, which show a slowdown in economic activity and a decline in job creation in the United States, reinforce this hypothesis.

Investors "consider that the U.S. Federal Reserve will lower rates by the end of the year, a theme that also carries European indices," Baradez said.

Consumption, the subject of the 2nd quarter

But "beware of excessive optimism," warns the analyst. "The market is downplaying the risk to consumption that must slow down in the United States," while several US data last week showed signs of an economic slowdown, he said.

Against this backdrop, U.S. retail sales will be a test on Friday.

Before that, the results of the French luxury giant LVMH for the first quarter will be scrutinized Wednesday, after the close of the Paris stock market.

US inflation data for March should also give clues on Wednesday on the attitude of the Fed which will hold its next monetary policy meeting on May 2 and 3.

While inflation is slowing in the euro area and the United States, notably thanks to the fall in energy prices for several months, it is still very high, well above the Fed and ECB's 2% target.

Inflation "remains high and uncertainty about its evolution has increased", requiring "a robust strategy for the coming period", said ECB President Christine Lagarde at the end of March.

© 2023 AFP