(News Bulletin 247) – Worried by the prospect of a forced tightening of monetary policies on both sides of the Atlantic, against a backdrop of very high chronic inflation, the Paris market suffered strong sell-offs on Monday, in volumes nurtured and rising. The CAC 40 index, which for the third consecutive time opened in a bearish gap, lost 2.67% while managing to preserve the highly symbolic threshold of 6,000 points. Threshold which will be the issue of the week as a new Fed monetary policy meeting approaches.
Fed which will have to react to the latest inflation figures (+8.6% at an annual rate), published on Friday. Inflation that remains “stubbornly” high, according to César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management. “With tighter financial conditions already impacting the mortgage market and with consumer confidence plummeting, the Fed is certainly aware of the risk of tipping the United States into recession. small steps or accelerating its tightening under pressure from political authorities calling for a vigorous fight against inflation, the situation is delicate overall for the various assets, which justifies a cautious and defensive approach to portfolio management.
As a reminder on Thursday, the European Central Bank completed a key meeting of its Board of Governors. If the powerful Frankfurt Monetary Institution has so far not touched the cost of money itself, it has ratified the end of its program to buy back assets on the markets. The institution’s president explicitly announced a 25 basis point (0.25 percentage point) increase in its interest rates in July, which will mark the first rate hike since May 2011, but also signaled that it could give a new turn of the screw in September and if necessary even more strongly, a priori by 0.5 points (50 bps).
“Will the European Central Bank execute this whole program?” wonder the strategists of ECOFI? “The period is delicate for all of the world’s monetary authorities, engaged in a balancing act: cutting inflation expectations while preventing the economy from falling into a lasting recession. The monetary policy errors of the past are in all heads. A lasting rise in rates would have disastrous effects on over-indebted States, on companies seeking financing and on households already affected by inflation.”
Side values, Valneva (-25.26% to 7.81 euros) fell to the lowest for more than a year and a half while the giant order of the European Union seems on the verge of definitively disappearing. On the eve of the presentation of its new strategic plan, where the group should announce the spin-off of its IT services division, as revealed by BFM Business, Atos plunged nearly 11%. Elior shows the biggest drop in the SBF 120 on Monday (-18.31%), penalized by an analyst downgrade. The market doubts the capacity of the collective catering specialist to raise the bar in a highly inflationary context and rising rates.
On the other side of the Atlantic, the main equity indices fell, the Dow Jones losing 2.79% to 30,516 points and the Nasdaq Composite falling 4.68% to 10,809 points. The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers, dropped 3.88% to 3,749 points.
A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0440. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $121.60.
To follow as a priority on the statistical agenda this Tuesday, the ZEW index of confidence in the German economy at 11:00 a.m., the NFIB index of small American companies at 12:00 p.m. and the producer price index in the United States at 2:30 p.m.
KEY GRAPHIC ELEMENTS
The sell signals have multiplied since the combination of “evening star” candles (May 27, 30 and 31). The openings successively in bearish gap of the last two sessions of the week, then of the first session of the following week, were accompanied by a continuous mobilization of the selling side during the session and closing on the low points of the session. All in sharply rising volumes. The momentum of participation will have followed that of the clearings, even as the CAC will have re-entered the lower part at a bearish slant that retains its resistance attributes. The picture is dark.
FORECAST
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 is trading below the resistance at 6600.00 points.
Hourly data chart
Chart in daily data
©2022 News Bulletin 247
I am currently a news writer for News Bulletin247 where I mostly cover sports news. I have always been interested in writing and it is something I am very passionate about. In my spare time, I enjoy reading and spending time with my family and friends.
