(News Bulletin 247) – The offensive, even belligerent tone of the speeches of the major central bankers who held their last monetary meeting of the year, will have heavily penalized the CAC 40 last week. The flagship index of the tricolor rating will have fallen, over the whole of week 50, by 3.37%, weighed down in particular by growth stocks sensitive to the rise in rates, namely on luxury or technology : STMicroelectronics (-5.16%), Kering (-6.20%), Cap Gemini (-7.27%), or Wordline (-9.87%).
After the Fed on Wednesday, it was the ECB’s turn on Thursday to complete its Board of Governors, the last of the year. Although the scale of the ECB’s rate hike was not surprising (+50 bp), the tone of the speech and the revision of economic forecasts caught the eye. The powerful Frankfurt Monetary Institution has revised its economic projections, particularly in terms of inflation, counting on a rate for the euro zone of 8.4% in 2022, 6.3% in 2023 then 3.4% in 2024 and finally 2.3% in 2025.
The operators were nervous at the time of the press conference following the various monetary announcements. A press conference “characterized by a particularly “Hawkish” language”, [c’est à dire offensive, bellliqueuse]for Francesco Pesole, economist at ING, “Christine Lagarde explicitly stressing that the markets are underestimating the monetary tightening necessary to bring inflation back to its target.”
What remains “uncertain about the pace and extent of ECB rate hikes, given the great uncertainties surrounding the dynamics of inflation”, for Konstantin VEIT, portfolio manager at PIMCO. “The market is currently pricing a final rate of around 3.25%, which doesn’t seem unreasonable after today’s hawkish statements.”
This intransigence on the part of the big moneymakers, combined with growing fears of going into recession in the main economic centers of the planet, will have weighed heavily on risk appetite.
Statistically, however, the health of the US economy is not looking good, according to the first estimates of the S&P Global monthly survey of purchasing managers published on Friday. The composite “flash” PMI index, which compiles the manufacturing industry sector and the services sector, contracted in December to 44.6 after 46.4 in November. It remains for the sixth consecutive month below the 50 mark separating contraction and expansion of activity. Earlier in the day, traders took notice of the first estimate of the Eurozone PMI indices for the month of December. The composite index, which measures the activity of the entire private sector, recovered to reach 48.8 against 47.8 in November, remaining however below the threshold of 50 indicating a contraction in activity.
On the other side of the Atlantic, the main equity indices closed Friday’s session in the red, like the Dow Jones (-0.85% to 32,920 points) or the Nasdaq Composite (-0, 97% at 10,705 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.11% to 3,852 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 $1.0640. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $76.60.
To follow as a priority on the macroeconomic agenda on Monday, the IFO index of the business climate in Germany at 10:00 a.m. and the NAHB index of the American residential real estate market at 4:00 p.m.
KEY GRAPHIC ELEMENTS
The three-color index traced in one session the entire amplitude of the consolidation figure above 6,550 points, the integrity of which was threatened. The close on Thursday 15/12 was very close to the lows of the session, and the power of the volumes came to lend credence to the option of a break, at the end of this threshold. First attempt on Friday, with validation by the volumes. If the sectoral federation is not yet there, the technical signal sent is clearly negative.
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 6740.00 points.
Hourly data chart
Chart in daily data
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