CAC 40: Tighten the monetary valve, yes, but with what vigor?

(News Bulletin 247) – On the eve of the end of the last FOMC of the year for the Fed and on the eve of the outcome of the ECB Governing Council, the CAC 40 reflected the reluctance of operators , pending monetary benchmarks. The flagship tricolor index lost 0.69% to 6,895 points, covering a crossing gap during the session. To be continued on Wednesday, as a priority, the Fed’s monetary policy meeting, with the verdict on rates and the asset buyback program at 8:00 p.m. and the press conference at 8:30 p.m. A light that will be instructive in reaction to the latest inflation figures.

The Fed has already announced that it will no longer describe this price hike as “transient”, and observers now expect the institution to “announce a faster reduction” in asset buybacks in the markets, and “perhaps an allusion to the fact that the first key rate hike in the United States could come sooner than expected,” said Ipek Ozkardeskaya, analyst at Swissquote.

As a reminder, published on Friday, in the broadest product base, prices increased more than expected in November (+ 0.8% monthly), against + 0.9% in September. In data corrected for volatile elements (food and energy), prices rose 0.5%, in line with expectations, according to the latest data from the US Bureau of Labor Statistics. A new inflationary marker has also just been published yesterday with the producer price index in the United States, up by 0.8% per month for the largest basket, showing a warming greater than that predicted the target (the market consensus).

The issue of the number of federal rate hikes is at the heart of the debate. [Les opérateurs ] “now foresee three rate hikes next year, while maintaining those anticipated for 2023. for Mabrouk Chetouane, Director of Research and Strategy of BFT Investment Managers.

The Capital Markets Strategies team at Tikehau Capital are seeing two rate hikes at this stage next year. “While President Powell has stopped calling the current inflationary trend ‘transient’, this indicator of consumer prices could seal the fate of the asset purchase program (quantitative easing), and possibly accelerate its end. here in March 2022. The Fed will probably offer itself some leeway to hike its rates, if necessary, from the 2nd quarter of 2022. “

Side values, ArcelorMittal jumped 8.05% to 27.72 euros, helped by steel prices. Eurofins Scient. (-5.31% to 101.98 euros) ended in “red lantern”.

Red once again dominated this week on the other side of the Atlantic. Tuesday, the Dow Jones lost 0.30% to 35,544 points and the Nasdaq Composite, with strong technological “coloring”, 1.14% to 15,237 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted 0.75% to 4,634 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 1,1270$. A barrel of WTI, one of the barometers of risk appetite in financial markets, was trading around 69,60$.

To be continued on the agenda this Wednesday, consumer prices in France at 8:45 a.m., retail sales and the Empire State manufacturing index at 2:30 p.m. and monetary meetings as a climax: verdict at 8:00 p.m. and conference of Fed press at 8:30 p.m. The opportunity to analyze the slightest inflection in the language elements allowing to further refine the monetary normalization calendar.

KEY GRAPHIC ELEMENTS

Omicron will have had the effect of revealing the hypersensitivity of the Parisian market, in particular its “Growth” files (for which the valuation multiples are high), mainly in luxury goods and technology. Result: the resumption of an unconditional buyer’s rally is no longer on the agenda. A continuation of broadband nervous oscillations should be considered. Band whose amplitude is now defined, between 6,650 and 7,185 points. Between these two bands, nervous and choppy oscillations are to be expected. The form that consolidation will take will be instructive.

The crossing gap of November 26 is now fully retraced. Watch out for the formation this Tuesday of a potential combination of candles called three black crows. We are putting this training under surveillance. Negative opinion proposed.

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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