The French benchmark index, the CAC 40, concluded a volatile but historically significant trading week by consolidating just below record territory. After surging to a fresh all-time high of 8,642.23 on Thursday driven by a wave of optimistic corporate earnings and global AI sentiment, the index saw a technical pullback on Friday, closing at 8,580.75. The market’s slight retreat reflects typical profit-taking after a relentless run that has seen the index rise for five of the past six months, underscoring continued investor confidence in the Eurozone’s second-largest economy despite lingering geopolitical headwinds.

Record Highs Driven by Corporate Strength

The defining narrative of the week was the market’s decisive break into uncharted territory. Bullish sentiment was fueled by robust full-year results from key constituents, particularly Schneider Electric and AXA, which helped lift the index to a record closing high of 8,620.93 on Thursday. This momentum was further amplified by the “AI trade” continuing to reverberate globally, lifting tech-adjacent stocks and industrial plays. The index posted its largest three-day point gain since mid-February, signaling that institutional appetite for French equities remains elevated despite valuation concerns.

Luxury Sector Weights on Friday’s Close

While the broader trend remained positive, Friday’s session highlighted a sector rotation that capped the week’s gains. The index shed 40.18 points (-0.47%) in the final session, primarily dragged down by the heavyweight luxury sector. EssilorLuxottica tumbled over 5% following mixed guidance, while LVMH and Kering faced selling pressure as investors reassessed the durability of consumer demand in key Asian markets. In contrast, defensive plays and financials showed resilience; Sanofi gained 1.5% and Pernod Ricard rose over 3%, limiting the index’s downside and preventing a deeper correction.

Macroeconomic Backdrop: Cooling Inflation

Supporting the bullish case for equities was the release of favorable macroeconomic data suggesting the French economy is navigating a “soft landing.” GDP growth for Q4 2025 was confirmed at a modest 0.2%, avoiding stagnation, while February’s inflation data accelerated slightly to 1% but remained well within the European Central Bank’s comfort zone. This stable economic environment has emboldened investors to maintain exposure to risk assets, betting that the ECB will continue its accommodative monetary policy stance into the second quarter of 2026.

Outlook:
Looking ahead to the first week of March, the CAC 40 faces a critical test at the 8,600 resistance level. Investors should monitor whether the index can reclaim its Thursday highs or if further consolidation is needed to digest February’s rapid 5.6% advance. Key risks include potential volatility from ongoing US-Iran geopolitical talks and upcoming Eurozone retail sales data. A sustained break above 8,650 could open the door to 8,800, while a failure to hold the 8,550 support level may trigger a deeper pullback toward the 50-day moving average.