CAC 40: We are not done with volatility

(News Bulletin 247) – After a violent ebb of 4.75%, due to the fear caused by the appearance of a new variant of the coronavirus to Covid-19, considered worrying by the WHO and named after Omicron, the CAC 40 attempted a timid rebound on Monday, without any conviction, without managing to even partially nibble Friday’s huge bearish gap, and ending far from the high points of the session. In the end, the flagship Parisian index nibbled 0.54%, while tracing an unpleasant red candle. When asked whether “Omicron” poses a serious threat to the ongoing global economic recovery, scientists have their approach, politicians have another, and … markets have theirs …

This health announcement is likely to “see the probabilities of a Fed rate hike decrease for May and June, shifting a little more the possibility of seeing such an increase in the short term”, for Vincent Boy (IG France). What to expect now? In the coming weeks, “crucial” for J. Plassard (Mirabaud), it is necessary to follow the advantage taken if necessary by Omicron over Delta, the variation in the incidence rate in the most affected countries, the cases of hospitalization. and death. To the question of a potential questioning of monetary policy, John Plassard answers clearly: “The answer is clearly yes. It is difficult to see how the American central bank could accelerate its tapering and raise its interest rates to 3 times in 2022 (as Goldman Sachs now thinks) if the new Omicron variant were to cause several countries to close their borders and partially shut down their economies. ”

“This new catalyst comes in a context where the pre-existing delta variant has already caused a wave of new cases in Europe despite high vaccination rates, amplifying the fear reaction this Friday.”, For Vincent Manuel, Director of Investments at Indosuez Wealth Management.

In terms of statistics, note the surprise dynamic of current home sales in the United States, jumping nearly 8% in October from one month to another, exploding expectations.

Side values, Carried away Friday by the generalized purge (with the notable exception of a few health specialists like Eurofins, Sartorius Stedim Biotech and Valneva), the French luxury giants fueled the rebound of the flagship index on Monday. Upon the announcement of the untimely death of American designer Virgil Abloh, creator of the Louis Vuitton men’s collections, LVMH limited its rebound to 0.75% but Kering (+ 2.75%) and Hermès (+2.2 %) have increased significantly. Shopping center owner Unibail-Rodamco-Westfield gained 2.6%, after plunging 13% on Friday.

On the other side of the Atlantic, the main indices on closed the first session of the week in the green, however making the big gap between growth stocks, technology in the lead, in form, and industrial stocks and banking (Value), less attractive in the eyes of the markets. Result: the Nasdaq Composite rebounded strongly, 1.88% to 15,782 points, while the Dow Jones nibbled only 0.68% to 35,135 points. The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers, gained 1.32% Monday to 4,655 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 1,1320$. One barrel of WTI, one of the barometers of risk appetite in financial markets, was trading around 67,40$.

To be continued on the agenda this Tuesday, to be followed as a priority, consumer prices in France at 8.45 a.m., and for the United States, the Chicago PMI at 3.45 p.m. and the closely followed consumer confidence index (Conference Board) at 4:00 p.m.

KEY GRAPHIC ELEMENTS

We were awaiting the plot of the amplitude of a large figure of broad consolidation to come. This has been done since Friday, and this marked increase in downward volatility. Result: a huge bearish gap and a close on the low points of the session almost. In addition, the bullish gap of November 1 was fully filled during the session, showing the installation of the flagship index in a new framework.

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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