The France 40 (or CAC 40) remained range bound in Q3. This was, however, the calm before the storm. The index plunged towards the end of the quarter, recovered slightly heading into Q4 but soon plummeted again. The France 40 declined below 4,565 on October 28. However, the French index made sharp gains during the first couple of weeks of November, mirroring the Europe 50 index. Since then, the France 40 remained calm, maintaining a gradual uptrend to breach the 5,600 resistance level on December 4.

Despite the recovery, French stocks are still trading significantly lower than their pre-pandemic highs. This suggests upside in the first quarter of 2021, although the France 40 index is likely to remain mostly calm.

The annual inflation rate rose to 0.2% in November versus a flat reading in the prior month. The rise in prices was led by a faster rise in the cost of services during the month. The inflation rate is projected to increase to 0.1% in December.

The French economy expanded by 18.7% during the third quarter, delivering its strongest growth on record, as the economy recovered from the covid-19 crisis. The country’s GDP had declined by a record 13.8% in the second quarter. However, the French economy is expected to contract again, by 3.2%, in the fourth quarter due to restrictions in view of the new strain of the coronavirus.

The French manufacturing PMI climbed to 51.1 in December, from a reading of 49.6 in the prior month. The reading signalled expansion in manufacturing activity in December and expectations are pinned for the index to improve to 52 in January.

France’s consumer confidence declined to 90 in November, from 94 in October, to record the weakest reading since December 2018, following the country announcing fresh restrictions to contain the spread of the virus. Consumer confidence remained below the long-term average of 100 since April 2020. However, the index is expected to rise slightly to 91 in December.

France reported its smallest trade gap since March, with the deficit declining to €4.85 billion in October, versus €5.59 billion in September. The country’s exports grew by 3.3% to €38.9 billion in October, which represents around 91% of their average level in 2019. The country’s trade gap is expected to contract further to €4.4 billion in November.

The new trade deal between the EU and UK and Joe Biden taking over as the US President could impact the France 40.

News of growth in the German economy and progress in the rollout of the covid-19 vaccine will increase risk appetite of investors.