(News Bulletin 247) – Despite the day being a public holiday, yesterday (November 1, Toussaint), the Paris Stock Exchange remained open, and its benchmark barometer for equities, the CAC 40, experienced another session of high volatility, approaching the outcome, this Wednesday, of a new Monetary Policy Committee of the Fed (FOMC). The CAC managed to grab 0.98% to 6,328 points, thanks to the luxury sector, driven by unconfirmed rumors that Beijing would consider easing its health measures against Covid-19 from next March. However, the index ended very far from its session highs. Result: a candle in doji very elongated, with a very pronounced high wick.
Regarding the meeting of American monetary policy this Wednesday, the stake, beyond a widely anticipated increase of 75 basis points in Fed Funds is to refine the “neutral” rate projections, ie the interest rate beyond which the Fed acts as a braking force preventing the economy from overheating. The Federal Reserve will be able to rely on the PCE indices published on Friday. Consumer prices according to this index (Personal Consumption Expenditures Price Index) increased by 6.2% over one year. Over October, prices rose 0.5%, within target. The Fed will naturally take into account, moreover, tensions on employment, while the monthly figures (NFP) are expected for Friday. This Wednesday, the investigation of the private firm in HR ADP will give a precious taste. Yesterday, it was the new job offers (JOLTS) which were scrutinized, at 10.72 million, beyond expectations for the month of September.
“At this stage, if the “dovish pivot” seems to be approaching, it is not yet certain! Indeed, despite the onset of recession, the signals militating for a continuation of the monetary tightening cycle have not yet dissipated and encourage us to remain cautious” warns Romane Balin, (Auris Gestion). Beware, therefore, “of a false start, in terms of a “dovish pivot””, and this, on both sides of the Atlantic…
“The Federal Reserve should once again raise rates “jumbo” (75 basis points) at its meeting ending on November 2”, anticipates, like many analysts, Thomas Costerg, Senior US Economist at Pictet Wealth Management . “Despite growing political pressures, including open letters from some Democratic senators fearing collateral damage to the economy, the Fed should stay ‘right in its boots’ given the persistence of inflation.”
Verdict at 7:00 p.m. for the monetary policy decisions themselves and at 7:30 p.m. for the press conference.
To be complete on the macroeconomic front, the US manufacturing PMI activity indicator came out yesterday down at 50.2, very close to the 50 points that separate, by construction, an expansion (beyond) from a contraction ( below) the sector considered.
On the value side, Hermès finished at the top of the CAC 40 thanks to an increase of 3.01% to 1,350 euros, Kering gained 2.75%, LVMH is not outdone (+ 1.85%) just like Christian Dior (+2%). On the rest of the rating, Euroapi rose by almost 2.5% as the company announced an initial investment of 18 million euros to increase the production capacity of its factory located in Frankfurt. FDJ closes up 1.4%, the leading gambling operator in France has obtained the approval of the National Gaming Authority to offer “online circle games”. Games that include, among other things, poker.
On the other side of the Atlantic, red dominated the day before the FOMC issue. The Dow Jones contracted slightly, 0.24% to 32,653 points and the Nasdaq Composite lost 0.89% to 10,890 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.41% to 3,856 points.
Note that the American East Coast will switch to winter time overnight from Saturday to next Sunday. In the meantime, Wall Street will open at 2:30 p.m. (Paris time) and not 3:30 p.m., therefore.
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 $0.9870. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $89.20.
To be followed in priority on the statistical agenda this Wednesday, the manufacturing PMI in final data in the Euro Zone at 10:00 a.m., the ADP employment survey at 1:15 p.m. and crude inventories across the Atlantic at 3:30 p.m.
KEY GRAPHIC ELEMENTS
The flagship Parisian equity index continues to form a wide wedge, with an exit from the bottom (not yet in the news) would rhyme with a resumption of the bearish current in significant volatility. The good performance at this stage of stocks with high current beta, combined with trading volumes, leaves the field open to a short period of balance of forces present. Two scenarios are now considered for the very short term, once the precarious balance is broken: the entry into a consolidation pennant, or the formation of a new corrective leg. In the immediate future, after a shortness of breath gap, the barometer traced on Tuesday November 1st a doji with a very pronounced high shadow, uninviting.
FORECAST
In view of the key graphic factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.
We will take care to note that a crossing of 6383.00 points would revive the tension in the purchase. While a break of 6142.00 points would relaunch the selling pressure.
Hourly data chart
Chart in daily data
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