A Wave of Optimism Sweeps European Markets: CAC 40 Nears 8,130 Points

The CAC 40 is set to notch a third consecutive week of declines (albeit a slight dip), a streak not seen since mid-April 2025.

Meanwhile, the Eurostoxx 50 advanced 0.78% to 5,928.10 points. The DAX gained 0.85% thanks to strong annual results from Adidas.

In the United States, however, American indices are in retreat. As of 5:45pm, the Dow Jones was down 0.84%.

The major news across the Atlantic this Friday is the announcement of Jerome Powell’s successor as Fed Chair, with his term set to expire in May. Donald Trump will appoint Kevin Warsh. His name had been circulating insistently for several months and was anticipated by most analysts.

On Wednesday, the Fed’s decision, followed by Chairman Jerome Powell’s remarks, were the highlights in the U.S. The American central bank kept its key rates unchanged. They remain in the range of 3.50% to 3.75%, after three consecutive cuts in as many meetings during 2025.

Under scrutiny from President Donald Trump, the Fed Chair justified his decision by stating that “the current level of rates is appropriate to balance U.S. growth and inflation.”

At a press conference, Powell once again insisted that he would not be intimidated by the American president, with whom relations have become increasingly strained. Powell firmly defended the institution’s independence and reiterated that monetary policy decisions should not be dictated by political motivations or electoral cycles.

“Both the Fed’s statement and Jerome Powell’s press conference show that the Fed is more confident about economic prospects and the resilience of the labor market at the start of 2026, which reduces the need for precautionary rate cuts now that rates are close to a neutral level,” notes Xavier Chapard, strategist at LBPAM.

“That said, the Fed is also more confident about inflation prospects and remains willing to cut rates a bit further when inflation resumes its decline. Overall, we believe Powell will not cut rates again before the end of his term in May, which will have the advantage of demonstrating his independence from political pressures. Looking ahead, we maintain our scenario of one last Fed rate cut in this cycle, probably during the summer. This will help finish normalizing Fed policy and, hopefully, reduce the pressure on its new chair,” he explains.

Spotlight on the ECB and Bank of England

After the Fed, it will be the ECB’s turn to announce its first decision of 2026 on February 5. “The ECB is expected to again keep its rates unchanged at its next meeting. Given current growth and inflation data and the easing of tariff tensions between the U.S. and Europe, the ECB has no urgency to abandon its strong stance. However, a preventive rate cut by the ECB is possible and justified in our view, and the next meeting in March could be the opportunity to act,” commented Michael Krautzberger, CIO Public Markets at AllianzGI.

Similarly, the Bank of England will announce its first decision for 2026 next Thursday. “We believe the BoE will keep its interest rates unchanged at the upcoming Monetary Policy Committee (MPC) meeting on February 5. It seems likely to us that the vote will remain divided, but the number of votes in favor of a rate cut could fall to just two. The market currently sees virtually no chance of another rate cut after the one observed in December,” said Ranjiv Mann, senior manager at AllianzGI, ahead of the meeting.

“Although the central bank has lowered its interest rates since summer 2024, monetary policy remains somewhat restrictive, which partly explains why UK growth remains sluggish. Further rate cuts during the year will slowly help improve the situation, but a boost in productivity will be needed for the UK to achieve a better balance between growth and inflation,” he also noted.

On the corporate front, Friday was once again marked by numerous earnings releases on both sides of the Atlantic.

Alten and Adidas All Smiles

In Paris, Alten posted by far the biggest gain in the SBF 120, soaring more than 16%. Investors were reassured by the relative improvement in the group’s fourth-quarter activity. This will logically contribute to an improvement in the operating margin, which should exceed 8.1% of revenue in 2025.

In Europe, Adidas (+3.94%) recorded the biggest rise in the DAX 40 thanks to record revenue and profit margins in 2025. Its reassuring performance in a challenging environment will enable it to quickly launch a share buyback program that could reach one billion euros.

Additionally, Swedish appliance maker Electrolux (up nearly 15%) soared on the stock market after reporting fourth-quarter results that exceeded expectations.

Beyond corporate results, it is also worth noting that Carrefour (-0.5%) recorded one of the biggest declines in the CAC 40. The retail giant was penalized by a downgrade from Jefferies, which moved from “buy” to “hold,” with a target price cut from 14.50 to 14 euros.

On the data front, investors digested the latest GDP figures for the eurozone and the EU in the fourth quarter of 2025. GDP increased by 0.3% in both the eurozone and the EU during this period, according to a preliminary estimate from Eurostat, after rising by 0.3% and 0.4% respectively in the third quarter. “Overall, the eurozone showed resilient activity in 2025, despite a wave of tariff shocks and, more broadly, numerous external tensions. These factors nonetheless weighed on growth and, although Donald Trump appears to be ramping up the pressure again at the start of this year, we believe the impact of these risks will be much more contained in 2026,” said Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions.

Next week will see another flurry of earnings reports. In Paris, the banking sector (BNP Paribas, Crédit Agricole, Société Générale), Amundi, and Vinci are among those expected. In the United States, Alphabet, Amazon, Eli Lilly, Pepsico, Pfizer, and Walt Disney will unveil their results.