CAC 40 (France 40)
The CAC (CotationAssistée en Continu) 40 is the benchmark French stock market index, representing the 40 most significant companies among the 100 highest market capitalisations listed on the Euronext Paris exchange. It is one of the biggest European stock markets, and hence one of the most important national indices of the pan-European stock exchange group, Euronext.
CAC 40 (France 40) trading hours
The main trading hours for the CAC 40 are between 09:00 – 17:30 (CET)
How to trade the CAC 40 (France 40) CFD?
The CAC 40 is one of the most popular and widely traded indices of the Euronext group, and it has a tendency to be volatile. Like any stock index, the CAC 40 cannot be bought and sold like an equity. Instead, you can trade the CAC 40 index today using contracts for difference (CFDs). Trading the CAC 40 using CFDs allows you to take a long or short position without having to deal with an exchange.
How is the CAC 40 calculated?
The CAC 40 is comprised of 40 of France’s top companies listed on the Euronext Paris exchange. The index is composed and reviewed by Euronext, a European stock exchange.
Constituents of the CAC 40 are reviewed every quarter. Companies are selected based on a combination of two rankings: firstly, the value of their regulated turnover from the previous 12-month period, and finally, their free-float adjusted market capitalisation. The CAC 40 index consists of these 40 highest companies, where the companies ranking from 36 to 45 are placed in a riser-faller buffer zone, with priority given to those companies already in the index. Note that in some cases, companies from other Euronext exchanges, can be granted a place on the CAC 40.
History of the CAC 40
The CAC gets its name from Paris Bourse’s, the historical stock exchange, automation system, the ‘CotationAssistée en Continu’, which translates to ‘Continuous Assisted Quotation’. Launched on 31 December 1987, with a base value of 1000, equivalent to a market cap of 370,437,433,95.70 French francs, the all-time high to date of the index is 6922.33 points. Like many other major indices, this was reached at the peak of the dot-com bubble in September 2000.
How to Invest in CAC 40 Index (France 40)
There are three ways to invest and trade French stocks and the CAC 40 index. Both local and international investors can do any of these three methods:
1. By investing CAC 40 ETFs
You can invest in an Exchange Traded Fund (ETF) that tracks the composition or performance of the CAC 40. Some of the most popular CAC 40 ETFs include Lyxor CAC 40 ETF, Amundi CAC 40 ETF, and HSBC CAC 40 ETF.
2. By CFD Trading
International investors can also take advantage of CFD trading. Online brokers like eToro offer CFD (Contract for Difference) trading. If you don’t live in Europe, using a CFD broker will make it possible for you to trade European stocks just like those listed on CAC 40 or Fra40. There are also numerous ETF available to trade from CFD brokers.
3. By investing the best blue-chip stocks on the Euronext stock exchange
Another method to invest in the CAC 40 index or French stocks is by investing directly on the Euronext stock exchange. You must be eligible to open an account. You can then buy shares of your selected blue-chip company from the CAC 40 index.
What affects the CAC 40 price?
The CAC 40 price is affected by a variety of fundamental and technical drivers linked to the behaviour of the French and European economy, as well as international influences. European Central Bank monetary policy can have a notable impact, as does foreign exchange rates, economic data releases, and even commodity prices.
While such drivers may be expected to move the index in a certain direction, there is no guarantee that the move will play out, so traders should consider how determining factors work together rather than simply isolate any one factor. That said, here are a few of the key things to consider when trading the CAC 40.
Monetary policy and economic releases
When European Central Bank monetary policy is accommodative, interest rates tend to fall and the general money supply and credit opportunities increase. This means corporate debt becomes more attractive to obtain and cheaper to service, creating potential for business growth and often boosting stock prices in turn.
Additionally, economic data releases can have a large influence on trading decisions. Inflation is one measure that can hit stock indices as it can erode profit margins across sectors and also is seen as a potential forebear of longer-term higher interest rates. For example, in May 2021 inflation fears prompted the price of such CAC 40 leaders as LVMH and L’Oreal to cause a drop in the wider index of some 1.3% in a day.
Individual company performance
As mentioned, companies that are weighted the highest in the index are more capable of moving the index than smaller constituents. For example, Total is considerably more capable of causing changes in the CAC 40 price than Renault.
Events such as the Great Recession and the coronavirus pandemic are all capable of hitting market demand in one way or another. For example, the pandemic in 2020 caused a sharp deterioration in manufacturing activity and market demand, seeing the CAC 40 plummet 40% in March 2020 from its record high in February that year.