"The French CAC Index components look extremely oversold. Is there any reason why the French markets have taken such a heavy hit? Some of these leading shares are down to 2008 levels!"

Eoin Treacy's view Thank you for this question which others may also find of interest. The CAC 40 currently yields 5.03%, has a P/E of 9.02 and a Price/Book of 1.03. It has not been among the better performing European indices over the last two years at least in part because its many utility-like companies have failed to rally significantly. These shares are currently weighing on the Index's performance but have contributed to its attractive yield.

The Index is oversold in the short-term and retested the 3000 level this morning. A short covering rally appears to be underway but such has been the technical deterioration sustained over the last two weeks that some additional base formation development will be required to suggest that a meaningful low has been reached.

The best performing sectors in France have been luxury goods and chemicals. Neither of these sectors has been immune from selling pressure. LVMH for example has pulled back sharply to test the lower side of its 9-month range. It found at least temporary support today but additional support building appears likely before a sustained move to new high ground can be justified. Air Liquide has been prone to sharp pullbacks over the last two years but this one is larger and comes after a marked loss of momentum. A sustained move back above the 200-day MA, currently near €95 would be required to question potential for some additional lower to lateral ranging.

Total Fina (6.89%), France Telecom (10.96%) and Veolia Environnement (11.86%) are three examples of companies with strong cash flows and utility-like qualities. I do not expect them to lead in terms of price appreciation but on a total return basis they could be capable of holding their own provided their dividends are sustained.