It's a start to the year with a bang for the European stock markets: far from the daily concerns linked to inflation or the doubts that weigh on the global economic recovery, the financial markets have shown unfailing optimism in recent weeks.

Example at the Paris Stock Exchange, where the flagship index of the CAC 40 recorded Thursday, February 16 a new record at 7,387.29 points.

Same dynamic on the side of London where the FTSE 100 exceeded, the day before, for the first time in its history, the bar of 8,000 points.

“European equities have not had a more favorable start to the year since the turn of the century,” summarizes the newspaper Les Échos.

Despite a climate of uncertainty linked to the war in Ukraine, investors seem reassured by the resilience of the major groups which recorded historic results in 2022, such as those of TotalEnergies (36 billion euros in profits) or those of the sector luxury led by LVMH (14 billion euros).

In Paris, the CAC 40 is pulled up by the performance of the arms manufacturer Thales, whose business has been boosted by the war in Ukraine.

But the improvement is almost general: the value of the car manufacturer Renault has thus increased by 36% since the beginning of the year, as has that of BNP Paribas (22.5%).

A euro zone holding up better than expected

This good health of the financial markets resembles in many respects a "phew" of relief after the fear of a recession in the euro zone.

"There were serious concerns about the availability of raw materials, in particular gas. Since then, they have eased, even if the fear of a recession has not completely disappeared," says Denis Ferrand, Managing Director from the economic analysis institute Rexecode.

The risks of electricity shortages have indeed been avoided and the price of natural gas fell in mid-February to its lowest level since August 2021. Despite the energy shock, the European economy is holding up.

The European Commission has even revised upwards its growth forecast for the euro zone in 2023.

Other good news from the start of the year: inflation is finally starting to ease.

The EU thus forecasts a rise in consumer prices of 6.4% in 2023 then 2.8% in 2024, against a historic inflation rate of 9.2% on average last year.

"The financial markets are realizing that the monetary policy conducted by central banks and in particular by the European Central Bank (ECB) aimed at combating inflation by raising interest rates is effective", analyzes Stéphanie Villers, economic adviser at PwC France.

"We have the impression that most of the increase in key rates has passed and some players are now anticipating a drop in 2024. This anticipation contributes to this improvement on the stock markets, which are returning to their previous level at the start of 2022", specifies Denis Ferrand, who recalls, however, that the Stock Exchange does not reflect the entire economy, but only the companies listed there.

Waiting for China

Finally, the long-awaited restart of the Chinese economy after the end of the "zero Covid" policy, which placed the country under a glass for almost three years, is also helping to put a smile on the face of investors at the start of 2023. "The calamitous policy of 'zero Covid' has finally been lifted and this gives hope for a recovery. China should thus contribute to a quarter of global growth", specifies Stéphanie Villers.

This anticipation of a vigorous recovery in Chinese consumption above all benefits "the four luxury stocks within the CAC 40 (LVMH, Kering, Hermès and L'Oréal), which represent 35% of the index", notes Denis Ferrand. .

>> To see: In China, the anger of the "zero Covid" generation

Without being totally disconnected from the real economy, the insolent health of the European stock markets nevertheless arouses a certain skepticism among experts who consider the economic outlook still too uncertain while the economy of the euro zone is idling.

As the ECB points out, "the risks weighing on the outlook for economic growth have become more balanced" but the war in Ukraine "remains a significant downside risk to the economy and could once again lead to higher oil prices. energy and food".

"The anticipation of the financial markets is based on tangible facts but a new external shock could again create tensions and deflate this upturn", recalls Stéphanie Villers.

"No risk does not exist."

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