(News Bulletin 247) – The CAC 40 index (-1.37% to 6,125 points) will have ended a trying month of August exactly at its monthly low points, in a rather sustained level of activity for the period, weighed down by the gas crisis in Europe, and the declared desire of the leaders of the major central banks to fight against chronic inflation, even if it means slowing down economic activity. Inflation was discussed yesterday, with the latest figures from the consumer price indices in the Euro Zone. And it is clear that prices continue to slide.
The consumer price index in the monetary union accelerated beyond expectations, +9.1% at an annualized rate. Excluding food, energy, alcohol and tobacco (volatile elements), prices rose by 4.3%, against 4.1% expected, causing pressure on all risky asset classes, family including the Euro is a prominent representative…
Unsurprisingly, it is energy that directly and indirectly pulls prices up. “As for the main components of inflation in the Eurozone, energy is expected to experience the highest annual rate in August (38.3%, compared to 39.6% in July), followed by food , alcohol & tobacco (10.6%, compared to 9.8% in July), industrial goods excluding energy (5.0%, compared to 4.5% in July) and services (3.8%, compared to 3.7% in July)”, detailed EuroStat in its press release.
The odds of seeing a 75 bp rate hike from the ECB at the next Governing Council meeting next month are mechanically growing. “This will increase the pressure on the ECB to consider at least an outsized rate hike (75 basis points) at next week’s meeting. Whereas so far we were expecting a 50 basis point move basis in September, today’s figures as well as a clear desire among a number of Governing Council members for a “strong” hike (in the words of Bundesbank President Nagel) underpin the market expectations, which are split between 50 bps up and 75 bps up,” reads a research note from Nomura.
To be statistically complete, the operators have composed with the survey of the private firm in human resources ADP (Automatic Data Processing), which highlights the creation of 132,000 new jobs, well below the consensus (300,000) . And this while the need for hiring is growing. The monthly federal employment report, which will be released on Friday, will be a hot item in the week’s calendar, as tensions in the job market are a leading indicator of inflation.
On the values side, very large capitalizations of the CAC40, in luxury or energy, weighed heavily on the whole index yesterday, like Kering (-2.42% to 503 euros), Schneider Electric (-3.12% to 118.78 euros) or Total Energies (-3.32% to 50.69 euros). Excluding the index, Eramet lost 3.25%.
On the other side of the Atlantic, the main equity indices closed again in negative territory, with the Dow Jones losing 0.88% to 31,510 points and the Nasdaq Composite dropping 0.56% to 11,816 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.78% to 3,955 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. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $89.10.
To be followed as a priority on the statistical agenda this Thursday, a battery of industrial PMI activity indicators (synthetic data for the Euro Zone at 10:00 a.m.), weekly registrations for unemployment benefits in the United States at 2:30 p.m. as well as the manufacturing PMI (ISM) at 4 p.m. Find the full statistical agenda here.
KEY GRAPHIC ELEMENTS
The immediate proximity of Friday’s close, after a sharp downward acceleration, with the weekly lows, sends a negative message. It confirms the validation of a figure comparable to a bearish chartist pattern with a bearish neckline, which the August 22 gap had already sketched out.
The 6,550 points definitely qualify as resistance, and we are seeing an entry into a new framework below the 50-day moving average (in orange). The candle charted on Tuesday, had it been built below Monday’s lows, could have signaled an impending technical rebound. This is not the case. We had confirmation of this on Wednesday with a close exactly on the monthly low points.
This Wednesday candle, in marubozu of school, responds to that of Friday, by already being well below, marking the heart of a wave of releases.
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 6308.00 points.
Hourly data chart
Chart in daily data
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