CAC 40: The market hates uncertainty

(News Bulletin 247) – The Parisian market has definitely entered a phase of intense volatility. After having regained 2.39% to 6881 points yesterday, it is expected clearly in the red on Thursday, in the wake of losses on Wall Street, losses which were accentuated in the last part of the session. The Omicron variant, which scientists still know little about at this stage, will have been the trigger for this volatility on these price and valuation levels. The Nasdaq Composite in particular lost 1.83% yesterday.

This variant is in any case a thorn in the side of the big “money-makers” of the planet, who for the main ones, are just starting their way towards monetary normalization. Another part of the equation is inflation that sets in.

Federal Reserve boss Jerome Powell again cast a chill by acknowledging, in response to a question about the appropriateness of retaining the term “transient” to qualify the current spike in inflation, that the time has come to withdraw that word. … For the president of the Fed, recently chosen for a second term, if the price increases are broadly linked to supply problems, these increases have spread more globally and the risk of durably higher inflation s ‘is increased. In other words, it is a bit of the whole scenario put forward in recent months that has been demolished, and the banker recognizes that we will have to discuss a more rapid withdrawal of unconventional support measures, without even talking about a rate tightening. As a reminder from this side of the Atlantic, published Tuesday for the Euro Zone, inflation corrected for volatile elements comes out at an annual rate of 2.6%, against a consensus of 2.3%, and 2.0% for the final data for the month last … Regarding the broadest product base, including energy in particular, prices jump 4.9%, according to EuroStat.

Technically a phase of extended consolidation opens, in a significant volatility. “Volatility is once again invited to the financial markets at a time when the end-of-year rally is regularly taking place. Health risk, the attitude of central banks and rising costs have caused the indices to falter, paving the way for a potential consolidation. “, warns Alexandre Baradez (IG France).

In terms of statistics, operators took note of the final data from industrial PMI indicators (surveys of purchasing managers) in Europe. For the Eurozone as a whole, the data hardly deviates from the consensus (58.4 against 58.6 in the first estimate for November). Across the Atlantic, the PMI (ISM) hardly deviated from the target, also, at 61.3 for the month of November. In addition, the survey on employment by the human resources firm ADP reported 534,000 job creations in the private sector, excluding agriculture. Verdict tomorrow with the Federal NFP monthly report.

On the value side, the rebound was largely fueled by the files that had suffered the most on Friday, like ADP (+ 3.20% to 106.40 euros), Airbus (+ 3.24% to 101 , 92 euros), Air France (+ 3.35% to 3.798 euros), Axa (+ 3.63% to 25.235 euros), or even Safran (+ 4.39% to 103.12 euros).

On the other side of the Atlantic, the main equity indices finished close to their low point during the session, like the Dow Jones (-1.34% to 34,022 points) or the Nasdaq Composite (- 1.83% at 15,254 points). The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers, lost 1.18% to 4,513 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$. A barrel of WTI, one of the barometers of risk appetite in financial markets, was trading around 66,50$.

To be kept on the agenda this Thursday, as a priority, the unemployment rate in the Euro Zone at 11:00 a.m., and across the Atlantic, weekly registrations for unemployment benefits at 2:30 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. While this gap has been nibbled in the lower part, a new session in bright red is emerging.

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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