The CAC 40 index jumped to a record high on Thursday as investors cheered the strong performance of LVMH, the biggest European company. The index, which is made up of the biggest European company, jumped to a high of €7,453, which was about 32% above the lowest level in December.
LVMH stock price surges
The main catalyst for the CAC 40 index was the latest LVMH earnings. The company, which is the biggest luxury group in the world, said that its organic sales jumped by 18%, helped by strong demand from China. Analysts were expecting the sales to grow by ~10%. In a statement, the company said that it was still optimistic about its Chinese business this year.
Watch here: https://www.youtube.com/embed/wo6-B1fNNMI?feature=oembed
Most importantly, despite the rising recession fears, the company’s business grew in all regions. In Japan, sales jumped by 34% while in Europe, sales soared by 24%. In a note to Bloomberg, an analyst from HSBC said:
“Clearly China is booming and we don’t expect that to fade away any time soon.If the US consumer doesn’t bounce back very strongly, we still have very very strong prospects from Europe that has been stronger for longer and also China.”
These results helped push other luxury brands higher. Hermes stock price jumped by more than 3% as investors anticipated more sales in China. Kering stock price has soared by 2%.
The same is true for other companies with exposure to China have done well. EssilorLuxottica, the parent company of Ray-Ban, stock rose by 2% because of its big exposure to China. Other firms like L’Oreal also jumped.
As I wrote in this article, it seems like French luxury groups have become the next tech. Most of these firms have outperformed American tech giants and their PE multiples are higher.
CAC 40 forecast
CAC chart by TradingView
The daily chart shows that the CAC 40 index has been in a strong bullish trend in the past few months. And this week, it moved above the important resistance level at 7,394, the highest point in March. By do doing, it invalidated the double-top pattern that I wrote about here.
Therefore, the index will likely continue rising as buyers target the next key resistance level at 7,450. A move below the support at 7,394 will invalidate the bullish view.
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