(News Bulletin 247) – The persistence of high inflation across the Atlantic can only confront the market with a reality: that of maintaining a firm monetary policy for many more months. The question of the timing of the rate inflection, and that of the value of the terminal rate of Fed Funds is far from settled. Especially since the PCEs (personal consumption expenditures), the Fed’s favorite measure in its inflation assessment, came out above the target on Friday (+0.6% month-on-month vs. +0.4%). Figures which come together with new signs of tension on employment (weekly registrations for unemployment benefits under 200,000 on Thursday) and consumption (U-Mich and household spending on Friday).
“The markets are adjusting to the risk of a stronger and longer tightening”, summarizes Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM. “The consumer deflator, the Fed’s preferred inflation measure, is accelerating beyond expectations to 5.4% y/y overall and 4.7% y/y excluding food and energy. tend with an expected terminal rate of 5.5%+ (upper limit) and a lower probability of seeing a rate cut before 2024.”
The CAC 40 will have lost 1.78% to 7,187 points on Friday, tracing a significant gap between the high and low points of the session.
On the values side, investors continued to dissect the many publications. Saint-Gobain (+4.82% to 55.93 euros) delighted the markets after signing historic records and better than expected performance on all of its annual indicators. Excluding the CAC 40, Fnac Darty fell more than 9% after warning that its first half of 2023 would be difficult due to adjustments in household spending and energy costs. Just like Valeo (-9.1%) after having published prospects for 2023 which do not please investors.
On the other side of the Atlantic, the main equity indices ended in bright red territory, on the back of stronger than expected inflation (PCE) data. The Dow Jones lost 1.02% to 32,816 points and the Nasdaq Composite 1.69% to 11,394 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 1.05% to 3,970 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 $1.0550. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $75.80.
To follow as a priority on the macroeconomic agenda this Monday, across the Atlantic, durable goods orders at 2:30 p.m. and housing sales in progress at 4:00 p.m.
KEY GRAPHIC ELEMENTS
The flagship equity index of the Paris Stock Exchange widened its losses on Friday after a statistical publication, closing Friday exactly on the low points of the session, and tracing a structure in marubozu lined with a clear bearish engulfing. The alert is significant, and paves the way for a reflux towards the 50-day long moving average (in orange). For the future, it will take a bundle of concordant signals to militate for a trend reversal. We are not there.
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 7422.00 points.
The News Bulletin 247 board
Hourly data chart
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I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
