CAC 40: Lack of federation after monetary meetings

(News Bulletin 247) – Overall reassured by the turning point considered controlled by central bankers in the entry into monetary normalization, on both sides of the Atlantic, the market has rather well passed the heart of the week. Thursday, the CAC 40 gained 1.12% to 7,005 points, however, finishing very far from its peaks of session. The phase of high volatility that began on November 19 is not over.

Yesterday it was the turn of the ECB, after the Fed on Wednesday, to pass on the grill, completing a Board of Governors. The monetary institution headed by Christine Lagarde indicated that it was keeping its key rates unchanged while announcing a gradual reduction in the pace of asset repurchases: net purchases of debt as part of its emergency purchase program against the pandemic (PEPP), with 1.850 billion euros, will be further reduced in the first quarter of 2022 and will expire as planned at the end of March.

As a reminder the day before the Fed completed the last FOMC of the year, particularly expected after a battery of statistical benchmarks showing inflation no longer there is nothing “transitory”. The word no longer even appears in communications from the Federal Reserve. The Fed’s “hawkish” tone finally reassured the markets, in the sense that the cursor has been moved finely enough by J. Powell to deliver a clear message of fight against inflation, without brutality. In other words, the monetary turn towards increased tightening was widely anticipated by the trading rooms.

Concretely, the Fed plans to stop the bond buyback program in March, and an increase of three quarters of a point in its rates, in three times, over the coming year. And this with the aim of fighting against inflation that is no longer temporary. Associated with the new economic projections, this strategic commitment of the Fed was not considered more “hawkish” than expected. This turn (not too tight) was anticipated. “Several former Fed members, such as William Dudley, Dennis Lockhart and more recently Narayana Kocherlakota, have published columns calling on the Fed to quickly tighten its monetary policy to bring inflation back on a more acceptable path,” noted Alexandre Baradez (IG France) before the outcome of the FOMC.

Finally, “a decision quite in line with expectations” for Ronan Blanc, Managing Analyst at Financière Arbevel. “The Fed is trying to become an actor in its monetary policy again with some success (admittedly half-forgiven fault?). And fortunately for it, the cyclical peak of inflation seems close. The longer-term question is to know at what level she could land past that peak. That’s probably where she’ll be expected. So far she’s saving time and doing it pretty well. ” A “courageous” decision, for John Plassard, (Mirabaud), for whom the Fed “is finally tackling the rise in inflation before it gets potentially out of control. Investors have welcomed this decision, betting that the Fed will not will not find himself “behind the curve” by adopting a tone much more hawkish (hawk) and planning 3 rate hikes in 2022.

In terms of statistics, the manufacturing index Empire State, just like the weekly registrations for unemployment benefits, missed expectations. SARs on the federal industrial report broadly in line with expectations, both in terms of production volumes and that of the rate of use of productive capacities.

On the value side, Value was in the spotlight yesterday, like emblematic files: Société Générale (+ 2.00% to 29.33 euros), Vinci (+ 2.13% to 86.40 euros), Renault (+ 2.22% to 29.505 euros), Stellantis (+ 3.25% to 16.834 euros), and ArcelorMittal (+ 5.07% to 28.81 euros). Conversely, EDF plunged 15.46% to 10.035 euros, after having detected faults on reactors, forcing the operator to revise its EBITDA target downwards.

Across the Atlantic, the main equity indices

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 1,1330$. A barrel of WTI, one of the barometers of risk appetite in financial markets, was trading around 71,60$.

To be kept on the agenda this Friday, to follow as a priority the IFO business climate index in Germany at 10:00 am, consumer prices in the Euro Zone at 11:00 am, still in the Euro Zone. Nothing substantial to eat on the American side this Friday.

KEY GRAPHIC ELEMENTS

We did not come out of a volatile broadband phase. The resumption of an unconditional buyer’s rally has not been on the agenda since November 19. 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 therefore still to be anticipated. The form that consolidation will take will be instructive.

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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