(News Bulletin 247) – The month of January will have ended with an excellent performance for the CAC 40 index which will have progressed by 9.40%, thanks to an explosive first fortnight, with the support of various confirmations of a slowdown in inflation on both sides of the Atlantic. February starts with two major monetary meetings, the outcome of the FOMC this evening and the outcome of the Governing Council of the ECB tomorrow.
“The market thinks that the Fed will make a final rate hike of 25 basis points in March,” notes Alexandre Baradez (IG France). To sum up, the markets seem convinced that the Fed rate hike cycle will be over by the end of the first quarter and that the terminal rate will therefore not exceed 5% (because two more rate hikes mean a final rate range of 4.75-5.00%). Investors are therefore expecting a rather “dovish” Fed decision with a Jerome Powell press conference giving the first signs of the end of the rate hike cycle.
But beware of employment, whose signs of chronic tension will not fail, if necessary, to alert the Fed over the whole of the first quarter. Precisely on employment, operators will have valuable benchmarks this week (new JOLTS offers, ADP survey, weekly jobless claims and the high point on Friday, the federal report on private employment). Any sign of persistent and chronic tension in employment will be grounds for anticipating continued tension in the monetary cord. And can, if necessary, push back the pivot date estimates.
Yesterday in the statistics chapter, we note the missed targets for the US consumer confidence index (Conference Board), which came out down to 107.1, and for the Chicago PMi to 44.3.
In terms of values, Seb stood out with a gain of 7.94% to 95.95 euros thanks to sales that were less bad than feared in the fourth quarter. Euroapi rebounded 7.1% after announcing the restart of the manufacture of certain hormones at its Budapest site in Hungary. Elis ended up 1.6%, while the industrial laundry specialist recorded like-for-like growth of 21% last year. On the other hand, M6 dropped 4.1%, penalized by Barclays, which lowered its recommendation to “underweight” on the stock. Still suspended from trading, Orpea should soon welcome the Caisse des dépôts et des consignations as majority shareholder, reveals Liberation.
On the other side of the Atlantic, the main equity indices picked up, like the Dow Jones (+1.09% to 34,086 points) or the Nasdaq Composite (+1.67% to 11 584 dots). The S&P 500, the reference barometer of risk appetite in the eyes of fund managers, appreciated by 1.46% to 4,076 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 $1.0880. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $79.00.
To be followed as a priority on the macroeconomic agenda this Wednesday, the consumer price indices in the Euro Zone at 11:00 a.m., the ADP firm’s survey on American private employment at 2:30 p.m., new job offers (JOLTS) and the manufacturing ISM at 4:00 p.m. The Fed’s monetary policy decision is expected at 8:00 p.m., before a high-stakes press conference at 8:30 p.m. (Paris time).
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. In the meantime, neutral opinion maintained.
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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