CAC 40: The rally is leveling off

(News Bulletin 247) – The recent reassuring statements by the President of the American central bank, combined with the prospect of an easing of the zero-Covid policy in China, are now fully integrated into the prices of a CAC 40 which is capping in the construction of its rally started at the end of September. The whole issue remains the market’s anticipation of the shape of the Fed Funds curve. A calmer, but potentially longer climb, with a higher summit than expected? The indices were not lacking last week, with PCE prices in particular more lenient than expected, but a US employment report still showing signs of tension.

The traditional NFP (Non Farm Payrolls) took on its full meaning after the surprisingly soft tone adopted by the Fed boss in the middle of last week and the publication of inflation (PCE) confirming a slowdown in price increases. The report is likely to tense the mood again, showing signs of persistent tension. Because while the unemployment rate stood at a stable level, at 3.7% of the active population, the number of job creations in the private sector (excluding agriculture) remained high, at 263,000 new units, well above above target; and above all, the dynamics of wages (+0.6% on a monthly basis) shows no signs of easing.

“The world economy has slowed down, but is this enough to calm inflationary pressures and in particular those stemming from the level of wages?” asks Emmanuel Auboyneau, Managing Partner Amplegest. “That’s probably not the case in the minds of our central bankers, who alternate between more conciliatory rhetoric and a resolve to fight rising prices. A pause in rising rates is still premature at this stage.”

On the stock side, Sanofi fell 2% after confirming that it was considering an offer for Irish biotech company Horizons Therapeutics, whose market capitalization is approaching $23 billion. The group clarified that any offer, if it were to take place, would be made in cash. Aramis Group fell by 4.5% after posting a loss for its entire 2021-2022 financial year, which ended in September, a first in 20 years.

On the other side of the Atlantic, the main equity indices ended in scattered order, not far from equilibrium: +0.10% to 34,429 points for the Dow Jones and -0.18% to 11,461 points for the Nasdaq Composite. The S&P 500, the reference barometer of risk appetite in the eyes of fund managers, closed down very slightly, by 0.12% at 4,071 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 $1.0560. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $80.30.

To be monitored as a priority on the statistical agenda this Monday, a battery of PMI in final data for the month of November (Euro Zone data at 10:00 a.m.) as well as the American services ISM at 4:00 p.m.

KEY GRAPHIC ELEMENTS

The prices of the flagship Parisian index are now at the top of a range between 6,550 points and 6,740 points, in which, until now, the beginnings of a chartist pattern were emerging. This would only continue in the event of a decline in the lateral channel. Conversely, a clear overshoot, on an uncontested gap for example, would pave the way for a rapid achievement of 6,900 points. In the immediate future, a new breath in prices below 6,740 points is the preferred scenario, which was confirmed by the content of the NFP report on Friday.

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 6898.00 points.

Hourly data chart

Chart in daily data

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