CAC 40: The week of central banks

(News Bulletin 247) – A breather in prices is looming on the CAC 40 index, as major monetary deadlines approach: the FOMC of the Fed on Wednesday and the outcome of the Governing Council of the ECB on Thursday.

The Federal Reserve will be able to rely on a confirmation, published on Friday, of the slowdown in the dynamics of PCE (Personal Consumption Expenditures) prices, its preferred measure of inflation appreciation. It is this figure, in annualized data, that it “pilots” to arrive at the 2% objective. Unsurprisingly, prices, excluding food and energy, rose by 0.3% in December, on a monthly basis. Over one year, this so-called “core” inflation slowed to +4.4%.

Statistics that maintain the prospect that the US Federal Reserve is less determined to raise its rates next week. Moreover, the probability that the Fed will tighten its key rates by 0.25 points is 98.1% according to the FedWatch tool.

On the ECB side, “Christine Lagarde will once again have to convince people that this movement is far from over. Inflexible in her mandate to fight inflation, a 50 bp increase is now guaranteed for this February meeting. All the attention will be focused on the announcements for the future: what rhythm in March? what terminal level for the deposit rate and on what horizon?” asks Julien Russo, portfolio manager, Swiss Life Asset Managers France.

In a market note aptly titled “ECB shows who’s boss of the market,” Nomura strategists argue that a 50 basis point hike is pretty much a given. While the latest European statistical releases, in particular the German PMI and IFO, have brought relief, “the ECB will likely use this positive outlook on activity as justification to continue to tighten its policy aggressively in the short term. term, and to raise concerns about the resilience of growth that could lead to even more persistent underlying inflation,” the Japanese bank’s strategists continued.

On the values ​​side, LVMH ended on a flat note after the publication of a record annual copy. JCDecaux closed up 3.1% after posting better-than-expected fourth-quarter revenue and as Barclays raised its board to “outperform” from “neutral”. The strongest progression of the day is nevertheless signed by Solutions 30 which took 23.1%. The group published its revenues for 2022 and experienced a “more dynamic than expected” end of the year, underlines TP ICAP Midcap.

On the other side of the Atlantic, the main equity indices closed in the green, like the Dow Jones (+0.08% to 33,978 points) and especially the Nasdaq Composite (+0.95% at 11,621 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, climbed 0.25% to 4,070 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 $1.0860. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $79.00.

To follow in priority on the macroeconomic agenda this Monday, the preliminary data of the German GDP at 10:00 am.

KEY GRAPHIC ELEMENTS

Note the increase in the gap, at this stage, between the 20-day moving average (in dark blue) and its 50-day counterpart (in orange), with a marked upward bias. A basic bullish message, therefore, which may be temporarily clouded by increased temptations to take profits.

In the immediate future, the index “holds”, above 7,000 symbolic points, which serves as a basis for intermediate technical support. The drawing of a doji at this stage of the advance, after moreover a new small gap, is not synonymous with indecision, as seen above, but with simple delay within a buying trend.

Only a break in the 20-day moving average, like on December 15, would catalyze a pronounced downturn.

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 7180.00 points would revive the tension in the purchase. While a break of 7000.00 points would relaunch the selling pressure.

Hourly data chart

Chart in daily data

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