France’s HCOB Composite PMI for February came in at 49.9. This was above the forecast of 49.6.
A reading below 50 still points to an overall decline in business activity. The latest result shows activity was closer to stabilisation than expected.
French PMI Near Stabilisation
The French composite PMI data for February has come in at 49.9, which is slightly better than the 49.6 we were forecasting. While this is a positive surprise, we must remember the figure is still below the 50.0 mark that separates economic contraction from expansion. This suggests the downturn is easing but has not yet reversed into growth.
This news could provide a short-term lift for French equities, so we should consider strategies that benefit from a modest upward move. With the CAC 40 index currently trading around 8,150, selling out-of-the-money put spreads could be an effective way to collect premium while expressing a cautiously bullish view. This approach limits risk if the market fails to rally on the news.
Looking back at the persistent economic sluggishness we saw throughout much of 2025, this data point is the most encouraging signal of a potential bottom we’ve seen this year. It aligns with recent Eurostat data showing a slight stabilization in industrial production for January 2026, which was up 0.2% month-over-month. The combined data strengthens the case that the worst of the contraction may be behind us.
The slightly stronger data from France, a core Eurozone economy, could lend some support to the Euro. More importantly, it might reduce pressure on the European Central Bank to consider a rate cut in the second quarter, a possibility that markets had started to price in. We may see short-term interest rate futures adjust to reflect a slightly more hawkish ECB stance.
Implied volatility on CAC 40 options has recently compressed, with the VCAC volatility index dipping to a three-month low of 14.5. This low volatility environment makes buying options relatively cheaper for those who anticipate a bigger market move. Given the PMI is still in contractionary territory, purchasing protective puts on any rally could be a prudent hedge against a false dawn.
