CAC 40: Eyes already on US inflation

(News Bulletin 247) – In the absence of a consistent message from J Powell on the inflections of American monetary policy, during a symposium organized yesterday by the Bank of Sweden in Stockholm, the Paris stock market fell contented with consolidating, without falling into the temptation of strong profit-taking, which in itself is already a sign of strength. The start of 2023 remains fruitful for the CAC 40 (-0.55% yesterday), which has posted a gain of 6.11% since the start of the year.

This intervention followed comments deemed restrictive by several members of the Federal Reserve (Fed). Mary Daly, the president of the San Francisco Fed, has indicated that she expects the American central bank to push its rates beyond 5% before pausing. Atlanta Fed President Raphael Bostic made similar comments, seeing the Fed come in at a terminal rate between 5% and 5.25%, down from a current range of 4.25% to 4.50%.

“While the avalanche of macroeconomic figures during the first week of the year tended rather to confirm the decline in inflationary pressures on both sides of the Atlantic, which is a positive signal, the path towards normalized inflation is still a long time and to be confirmed”, nevertheless wishes to warn Thomas Giudici, head of bond management at Auris Gestion. “Furthermore, in this fine performance, we must not neglect the psychological FOMO effect (“fear of missing out” or “fear of missing something”).”

Equity markets on both sides of the Atlantic are “helped[s] by the reopening of China, which has happened faster than expected, and although the number of infections is currently exploding, investors anticipate a strong rebound in the economy afterwards and are looking beyond the risks ahead over the next few weeks”, according to the reading of Vincent Boy, Market Analyst at IG France.

On the value side, Spie lost 2.46% to 24.56 euros after launching a hybrid debt issue that could result in potential dilution for the group’s shareholders. Several titles were penalized by lowering of recommendations. Klépierre fell 3.7% as Royal Bank of Canada moved from “outperformance” to “sector performance”. The same financial intermediary downgraded its opinion from “sector performance” to “underperformance” on EssilorLuxottica, which lost 1.8%.

On the other side of the Atlantic, the main equity indices ended up on Tuesday, like the Dow Jones (+0.56% to 33,704 points) or the Nasdaq Composite (+1.01% to 10,742 dots). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, rose 0.70% to 3,919 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 $1.0750. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around 75.00$.

To follow as a priority on the macroeconomic agenda this Wednesday, oil stocks across the Atlantic at 4:30 p.m. The consumer price figures (December CPI) will be published tomorrow, and will undoubtedly be the highlight of this second part of the week.

KEY GRAPHIC ELEMENTS

This ability to close exactly on the weekly highs is interesting at this stage (S1), and must be confirmed by the volumes and the sector federation to consider a more lasting grip on the buying side. In the absence of such confirmations, entry into a highly volatile consolidation pattern, with an uncertain exit direction, is the preferred option.

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 7036.00 points would revive the tension in the purchase. While a breakout of 6694.00 points would revive selling pressure.

Hourly data chart

Chart in daily data

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