CAC 40: The atmosphere is refreshing

(News Bulletin 247) – Third session in a row in the red at the close for the CAC 40, which dropped 0.10% to 7,105 points yesterday. The flagship index is in the midst of definition of the amplitude of a future consolidation pattern. The specter of the return of restrictive measures in the fight against the coronavirus epidemic will have been the trigger. Also across the Atlantic, where the appointment by the executive of J. Powell for his own succession at the head of the Fed – which must be validated by the Chambers – will not have prevented technological stocks from giving way. Yet the market appreciates continuity. This market, of a nameless delicacy, would probably have preferred the designation of Lael Brainard, whose reputation as a dove is well established …

Austria applied the general confinement decided last week on Monday morning. The tone is particularly tough in Germany, where the Minister of Health, Jens Spahn, who did not exclude last week from resorting to confinement decisions, went much further in the elements of language. He summed up in a chilling phrase the health situation in his country, faced with a resurgence of the epidemic: the Germans will be “vaccinated, cured or dead” by the end of winter because of the current outbreak of infections. to Covid-19 in the country, which no longer excludes compulsory vaccination.

Geopolitics also weighs: “the emerging risks of an invasion of Ukraine by Russia worry the authorities in Europe and the United States”, warns Voncent Boy (IG France). ‘The position on this is difficult for European countries because of their dependence on Russian gas, when prices are already very high. An intervention could lead to a halt or decrease in gas deliveries and put a little more pressure on prices. ‘

In terms of statistics, operators took note yesterday at 4:00 pm of two indicators: the consumer confidence index in the Euro Zone, which has widened to -7, more than expected on average by the economists and analysts questioned. In addition, sales of second-hand homes in the United States exceeded expectations, at 6.340 million acts in October.

On the value side, note a rebound in bank stocks which had suffered from the fall in sovereign yields at the end of last week (which on the contrary rose on Monday). Crédit Agricole recovered nearly 2% to 12.722 euros, BNP 1.59% to 58.64 euros and Société Générale (+ 1.42% to 29.25 euros). Without any particular news, it was nevertheless Michelin (+ 2.4%) which posted the best performance of the group of 40 flagship stocks, ahead of Orange (+ 2%) while Vivendi (+ 1.95%) benefited from an offer (accompanied by a significant premium) from the KKR fund for the operator Telecom Italia, of which the French conglomerate is the largest shareholder with nearly a quarter of the capital.

On the other side of the Atlantic, growth stocks, mainly technological ones, suffered the most releases yesterday. The Nasdaq Composite fell 1.26% to 15,854 points, in thick volumes, while the Dow Jones ended on a note of near stability (0.05% to 35,619 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost some 0.32% to 4,682 points.

An update on other risky asset classes: around 8 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to 1,1240$. A barrel of WTI, one of the barometers of risk appetite in financial markets, was trading around 75,80$.

To be followed on the statistical agenda this Tuesday, as a priority, the PMI in flash data for the current month, for the Euro Zone at 10:00 a.m. and the Richmond Fed’s manufacturing index at 4:00 p.m.

Note, for holders of RD positions: the monthly liquidation will take place at the end of the session on Thursday, November 25.

KEY GRAPHIC ELEMENTS

Friday’s technical event does not threaten the underlying bullish bias at this point. The index is in the process of defining the amplitude of a future legitimate consolidation pattern, whose movements that will compose it may be volatile. Entering a choppy and more technical phase is the preferred scenario at this stage. The short-term challenge will be to identify the form of this consolidation as soon as possible.

PREVISION

In view of the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.

This bearish scenario is valid as long as the CAC 40 index quotes below the resistance at 7185.00 points.

Hourly data graph

Daily data graph

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