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The day after a long weekend, the CAC 40 index began to decline (-1.45% to 7,383.20 points), with the approach of important monetary meetings. The Fed is completing its Monetary Policy Committee on Wednesday, and the ECB will do the same with its Board of Governors tomorrow. Operators are less inclined to risk taking in the absence of confirmation of a deflation in inflation.
While US inflation slowed to 4.2% year on year in March from 5.1% in February, the underlying component (excluding energy and food) has tensed investors. “Core” inflation increased over one month, by +0.3% and slowed less than expected over one year, to 4.6% against 4.7% in March and 4.5% expected by economists polled by the Wall Street Journal. On the Old Continent, inflation also remained high within the euro zone countries. In France, for example, it rebounded to 5.9% over one year in April, after having slowed to 5.7% in March, according to an initial estimate published by INSEE. According to the latest figures published this morning by EuroStat, inflation core hit 5.6% in annualized data, for the month of April.
“The monetary tightening cycle seems to be entering its final phase with the last tightening of the screws by the central banks (ECB, Fed, BoE) over the next few months”, for Romane BALLIN, bond manager at AURIS Gestion, who notes of “prudence”, in the face of “numerous uncertainties”, among which “the absence of agreement in Congress on an increase in the ceiling of the public debt”, the American banking stress, and the deterioration of the sovereign rating of the France by Fitch.
For the outcome of the FOMC tonight, a new tightening of 25 bps is almost certain. What is at stake is whether the Federal Reserve will then take a long break. “The Federal Reserve should proceed with a final increase in its rate of 25 basis points before a period of stability for several months”, anticipates Emmanuel Auboyneau, Managing Partner of Amplegest. “Inflation has not yet been brought under control and is still a matter of concern. But, on the one hand, we must now allow time for previous rate hikes to take effect and, on the other hand, new upcoming hikes could generate new banking stresses that the Federal Reserve wants to avoid. We are therefore thinking of a status quo after this last probable bearing.”
Side values, Sanofi (-2.8%) suffered from a degradation of advice to the sale from Deutsche Bank. On the smallest capitalizations, Vilmorin jumped by more than 45%, the price of the seed company being based on the price of the public offer to purchase from its majority shareholder with a view to its withdrawal from the listing. In addition, the decline in crude oil prices penalized (para) oil files such as Schlumberger (-3.96%), TotalEnergies (-5.07%), or Vallourec (-5.72%).
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in the red, like the Dow Jones (-1.08% to 33,684 points) or the Nasdaq Composite (-1 .08% at 12,080 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.16% to 4,119 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 $1,1020. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $72.20.
To follow as a priority on the macroeconomic agenda this Wednesday, the unemployment rate in the Euro Zone at 11:00 a.m., and for the United States, the results of the ADP employment survey at 2:15 p.m., the ISM services at 4:00 p.m. crude inventories at 4:30 p.m., the monetary policy decision at 8:00 p.m. and the Fed press conference at 8:30 p.m.
KEY GRAPHIC ELEMENTS
The three-color flagship index ended Tuesday at the low points of the session, exactly on the upper limit of the bullish gap of April 11, suspended. Under this gap, an area close to 7,235 points is in the sights. Above, a lateralization below historical highs is looming.
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 7585.00 points would revive the tension in the purchase. While a break of 7234.00 points would relaunch the selling pressure.
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