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Paris Stock Exchange: Luxury and cosmetics stocks boosted by the prospect of an agreement between the European Union and China

Paris Stock Exchange: Luxury and cosmetics stocks boosted by the prospect of an agreement between the European Union and China

Bourse de Paris

Yesterday, the Paris Stock Exchange finished up sharply at 1.20%, to briefly exceed 5,600 points. On December 29, the CAC 40 advanced by 0.52%, i.e. 28.81 points to 5,617.19 points. New prospects are indeed opening up for investors: while the stimulus plan in the United States has just been ratified and negotiations between the United Kingdom and the European Union are nearing completion, Europe has also paved the way for a reciprocal investment protection agreement between its twenty-seven member countries and China.


Last Thursday, the last half session of the week ended with the CAC 40 declining by 0.10%. A few days later, on December 28, the index gained 66.37 points to 5,588.38, in a very reduced trading volume of 1.8 billion euros. The next day, the threshold of 5,600 points was exceeded, a level that the Paris Stock Exchange had not reached since March. However, this increase remains fragile. “The market is very positive, but there are very few trades”, noted Lara Nguyen, private manager at Fastea Capital.


The causes of this increase, although relative, are diverse. On December 27, Donald Trump ratified a bipartisan aid plan for the American economy of 900 billion dollars. In addition, the agreement on trade relations between the European Union and the United Kingdom from 2021 should be ratified this Tuesday, December 29, after several months of negotiations. The text is expected to be unveiled in the Official Journal of the European Union on December 31 and will be ratified by Parliament in 2021. The closure of these two dossiers gives “a little peace of mind before we get to 2021,” Lara Nguyen told AFP.


In the United Kingdom, the British pharmaceutical group AstraZeneca has developed a vaccine with Oxford University that could be approved in the coming days.  This “winning formula” could be as effective as the one developed by Pfizer-BioNTech and Moderna. The product, which is inexpensive and easy to store, would facilitate a large-scale vaccination campaign and thus good projections for investors.


Another positive signal for investors is that the 27 member countries of the European Union are considering a reciprocal investment protection agreement between Europe and China. The treaty should guarantee respect for the intellectual property of European companies, prohibit forced technology transfers and impose transparency rules on subsidies paid to Chinese state-owned enterprises.


Moreover, Paris had recalled on December 23rd that it could only support such an agreement if the communist regime committed itself to ratifying International Labour Organization (ILO) conventions prohibiting forced labour in particular. However, the Commission in charge of the negotiations announced on December 28 that it had “obtained from China the language requested by the Europeans on Beijing’s compliance with the two ILO conventions on forced labor.”


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Germany – which holds the presidency of this Commission – noted that at the end of the meeting, “no representative had shown a red card to stop the process and that, as a result, the way had been cleared for a political green light”. Subject to Chinese approval, an official announcement from Brussels and Beijing is expected “by the end of the week,” according to diplomats.


All these optimistic prospects have fed investors’ hopes.  Luxury and cosmetics values were notably boosted by the possibility of this intercontinental agreement, ending the session with strong increases on December 28. On that date, Kering rose by 3.38% to 571.40 euros, L’Oréal by 2.25% to 309.10 euros, Hermès by 2.09% to 869.20 euros and LVMH by 1.52% to 504 euros. All of which is enough to end the year on a high note.




Featured Photo : © Paris Stock Exchange

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