CAC 40: 10-year Treasuries watched like milk on the fire

(News Bulletin 247) – The CAC 40 index lost ground on Monday ( ), amid significant volatility, in the wake of firmer yields on 10-year US government bonds, amid questions about the strategy of the Fed. Fed, which has to deal with the persistence of enormous pressure on private employment, as shown by the latest federal monthly report for the month of January. Fears of a runaway price and wage spiral have not yet been formally ruled out, and there is no doubt that J Powell will speak on the issue this evening (6:00 p.m., Paris time), on the occasion of an event organized by the Economic Club of Washington, DC

The Fed rightly signaled its mistrust of tensions over employment after the FOMC last week, auguring further rate hikes, after the Fed Funds hike of 25 bps on Wednesday. This “signals further increases to counter the risks posed by tight labor markets. continues even if the phenomenon is slow”, analyzes Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM.

As a reminder, the Fed completed its first FOMC of the year last week. “While Jerome Powell stuck to his previous outings, arguing that it was still too early to take a break from rising rates and that we shouldn’t claim victory too quickly in the fight against inflation, investors did not consider the speech to be hawkish enough to revise their optimistic expectations, preferring to focus on certain more accommodating passages such as recognizing that the disinflation movement was faster than expected.”, for Thomas Giudici, head of bond management at Auris Gestion.

Moreover, risk appetite remains thwarted by Sino-American diplomatic tensions. The United States shot down a Chinese balloon that had been flying over their soil for several days on Saturday, calling it a “spy” balloon, which Beijing denies, assuring that it was a weather surveillance aircraft that had deviated from its trajectory. The Chinese government said on Monday that the United States had “seriously affected and damaged” relations between the two countries and the head of American diplomacy Antony Blinken postponed his visit to Beijing.

In terms of statistics on Monday, few things to eat, apart from the Sentix index of investor confidence in the Euro Zone, up to -8.0 points, although still clearly in negative territory.

In terms of values, Rotschild & Co jumped 16.8% as the Rothschild family decided to launch a simplified takeover bid with a view to removing the investment bank from the Parisian rating. Orpea still dropped 17.9% after an agreement on financial restructuring was tied. The dilution of more than 99% is gradually digested by the market. More broadly, red is appropriate for all CAC 40 stocks with the exception of Renault (+0.3%). Nissan has indicated that it would take up to 15% of the capital of Ampere, of which the diamond brand intends to control the majority. Carrefour (+0.1%) and Thalès (+0.04%) complete the top three.

On the other side of the Atlantic, red dominated the main equity indices, such as the Dow Jones (-0.10% to 33,891 points) or the Nasdaq Composite (-1.00% to 11,887 dots). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.61% to 4,111 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 $1.0730. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $75.50.

To follow as a priority on the macroeconomic agenda this Tuesday, the French trade balance at 8:45 a.m., and the American trade balance at 2:30 p.m.

KEY GRAPHIC ELEMENTS

Despite the alert that sounded yesterday, the index “holds” for the time being, above the symbolic 7,000 points, which serves as a basis for intermediate technical support. Above this symbolic threshold, a consolidation can take place without jeopardizing the short-term bullish bias. Below, another serious safeguard is that of the 50-day moving average (in orange), bullish since the beginning of November 2022.

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 7422.00 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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