(News Bulletin 247) – Definitely, this start of 2023 is particularly fruitful for the Parisian equity market, whose flagship index exceeded 6,900 points (+0.68% to 6,907 points) on Monday. “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. “Moreover, we must not neglect in this great performance, the psychological effect FOMO (“fear of missing out” or “fear of missing something”).”
Markets continue to digest the contents of the latest monthly US employment report. The message sent by this NFP (Federal Monthly Employment Report) is twofold and ambivalent. Because on the one hand the market is witnessing with relief a deceleration in the rise in average hourly wages (+0.3% monthly), but the unemployment rate, expected to be stable at 3.7% of the active population, is came out sharply down to 3.5%, suggesting that the Fed has not yet gone far enough in the firmness of its monetary policy to cool the economic machine. 223,000 jobs were created in the last month of 2022, in the private sector (excluding agriculture), a figure above expectations.
Regarding wages, which in this case focused the attention of operators on Friday, “the trend is slowing and could therefore reassure members of the Fed who fear that a tight job market will fuel the cycle of increases in wages and prices” which boosts inflation, explain BNP Paribas analysts quoted by AFP.
“Investors have […] chosen to see the glass half full on US employment figures. If the job market remains as solid as ever with sustained creations and even a drop in the unemployment rate, the market has preferred to focus on lowering wage pressures,” adds M Giudici.
In terms of statistics, no negative signals to report yesterday, with German industrial production dynamics and an unemployment rate in the Euro Zone in line with expectations. The Sentix index of investor confidence, although still largely in negative territory, even manages to beat the consensus, emerging up 3.5 points, to -17.5. “Hopes of averting a severe recession in Germany are gaining more substance,” read the comments accompanying the publication from the Behavioral Finance Institute.
On the stock side, Ipsen gained 0.5% after announcing the acquisition of the American biotechnology company Albireo for an initial amount of more than 950 billion dollars. Euroapi gained 3%. The former subsidiary of Sanofi announced on Monday an investment of 40 million euros to set up a new technology for the production of vitamin B12 on its site in Saint-Aubin-lès-Elbeuf, in Seine-Maritime. On the other hand, Renault lost 1.5%. The title suffered from a lowering of recommendation from Citi to “neutral”. The diamond group also communicated on Monday the result of its employee shareholding plan “Renaulution Shareplan” which saw more than 40,000 employees subscribe to additional shares. Ubisoft fell 3.3%, penalized by the plunge of Frontier Developments, another London-listed publisher which abandoned its 2023 financial targets.
On the other side of the Atlantic, the main equity indices closed in scattered order, far from their respective session highs on Monday, like the Dow Jones (-0.34% to 33,517 points) or of the Nasdaq Composite (+0.63% to 10,635 points). The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers, ended on a neutral note (-0.08% to 3,892 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 $1.0720. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $74.70.
To follow as a priority on the macroeconomic agenda this Tuesday, the NFIB index of small American companies at 12:00 p.m. and a speech by J Powell, Chairman of the Fed, at 3:00 p.m., during a conference in Stockholm.
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 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 6900.00 points.
Hourly data chart
Chart in daily data
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