(News Bulletin 247) – The main financial markets in the Euro Zone ended Tuesday’s session down sharply, with fears of an onset of recession having risen by a notch after the publication of more than worrying activity barometer indicators. The CAC 40 will have lost 2.68% to 5,794 points, breaking a fragile support at 5,860 points in a rising level of participation. Since the start of the year, the barometer of the Paris market has fallen by 19%.
The services PMI in final data for the month of June came out at 53 points, barely above the first estimates, leaving a margin now tenuous with the 50 points which separate, by construction, an expansion from a contraction of the sector considered. . We therefore have the “composite” data (industry included), which comes out at 52.0 (54.8 in May), the lowest for 16 months.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence comments on the latest figures from the PMI survey: “The sharp slowdown in activity growth observed in June in the euro zone increases the risk of a contraction in the region’s economy in the third quarter June’s PMI is in line with a quarterly GDP increase of just 0.2%, the survey’s forward-looking indicators such as the new orders and sales indices outlook for activity, which is also trending downwards and thus presaging a decline in activity in the coming months.The manufacturing sector has already tipped into contraction territory, with production having fallen for the first two years in June, while activity in the services sector suffered a marked slowdown against a backdrop of soaring inflation and a consequent increase in the cost of living.
“The latest PMI data therefore underline a sharp increase in the risks of economic contraction in the euro zone even as inflationary pressures are easing but remain very marked”, he summarizes.
In a context of mistrust vis-à-vis companies exposed to the economic situation, the advertising sector was particularly affected in Paris, such as JCDecaux, which lost 8.66% to 14.88 euros after a study of Goldman Sachs slashing earnings forecast. Seller, the design office further reduces its objective on the title. Goldman Sachs also downgrades its opinion on Publicis to neutral (-5.05%).
Oil stocks also lost ground in the wake of the oil price correction as signs of the economy slowing increased. TotalEnergies dropped 6.42% to 49.065 euros while Technip Energies lost 3.8% and Vallourec more than 10%.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session (the first of the week concerning them) in dispersed order, the Dow Jones dropping 0.42% to 30,967 points, and the Nasdaq Composite gaining 1.75% to 11,322 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, climbed 0.16% to 3,831 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 $1.0260. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $99.9.
To follow in priority on the statistical agenda this Wednesday, the new job offers (JOLTS) at 4 p.m., the PMI ISM Services at 4 p.m. also, as well as the Minutes of the Fed at 8 p.m. On this last point, ECOFI analysts and strategists summarize the situation with the following aphorism: “It is not good to be a central banker this summer!” The Minutes, the traditional minutes of the Fed’s last FOMC meeting, will be studied closely. As a reminder, following the last meeting of the Monetary Policy Committee, the Fed Funds were raised by 75 basis points, a scenario which had been (very partially) digested by the market.
KEY GRAPHIC ELEMENTS
The picture (the backdrop in any case) is dark.
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 week 23, then of the first session of week 24, 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 technical rebound that began during the week (W25) remains anecdotal at this stage in view of the transaction volumes accompanying it and in view of the initial losses. It came to an early halt, and the resumption of selling pressures, on gaps, on breach of the symbolic threshold (6,000 points), and in high volumes, augurs a continuation of clearances.
Tuesday 05 July the traced candle combines disturbing characteristics, its structure with an elongated body without a wick, materializing a mobilization of the sales camp throughout the session, all in relatively rich volumes, and on breaking the technical threshold.
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 6000.00 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.
