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In a tense market, operators are struggling to take initiatives, pending an agreement in Congress on raising the debt ceiling. If the American President, Joe Biden, and the Speaker of the House of Representatives, Kevin McCarthy say they are optimistic about the outcome of the negotiations, no agreement has been formally validated, leaving the specter of a default of payment of the world’s leading economic power in early June.
César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management is concerned: “This is an urgent matter: the US Treasury Department said on Friday it had only $88 billion to pay government bills in May 10 – a figure to compare with the 110 billion available a week earlier.”
The CAC 40 contracted slightly on Tuesday, by 0.16% to 7,406 points, against the backdrop, again, of a demand for visibility on the risk of entering recession in the United States and the estimated pace of the Fed Funds curve.
“The decline in inflation is a reality in the United States, but the cost of housing is barely falling. The shortage of supply is slowing down the correction in property prices. As for the labor market, it remains tense and maintains the “wage inflation. On the other hand, tighter corporate credit conditions point to a likely recession in the fourth quarter in the United States. Therefore, we expect a pivot-plateau in the federal funds rate”, estimates Jeanne Asseraf-Bitton, Director of Research & Strategy at BFT IM.
In statistics on Tuesday, strong disappointment to report on the German ZEW, a barometer of investor sentiment which plunged from 4.1 to -10.7. “Financial market experts expect the already unfavorable economic situation to worsen over the next six months. As a result, the German economy could slide into a recession, albeit to a limited extent. The drop in the sentiment indicator is partly due to expectations of further interest rate hikes by the ECB. In addition, the potential default of the United States in the coming weeks adds uncertainty to the global economic outlook”, comments the ZEW Chairman, the Professor Achim Wambach, on the results of the eponymous survey.
Across the Atlantic, the disappointment in monthly retail sales (+0.4%), which fell short of expectations in April, combined with the yardstick of the catastrophic publication, at the end of last week, of the household confidence (U-Mich, preliminary data), questions the state of health of domestic consumption, the main engine of American wealth creation, structurally.
Side values, Bouygues (-3.71% to 30.59 euros), after the publication of its quarterly copy. The conglomerate posted slightly better-than-expected first-quarter results, but Equans’ margins seem to be holding investors back.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in negative territory, with concerns about public debt, like the Dow Jones (-1.01% 33,012 points ) or the Nasdaq Composite (-0.18% to 12,343 points), to a lesser extent. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.64% to 4,109 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 $70.60.
To be followed as a priority on the macroeconomic agenda this Wednesday, the consumer price index in the Euro Zone at 11:00 a.m., and housing starts and building permits at 2:30 p.m.
KEY GRAPHIC ELEMENTS
Beware of the probable commitment of the three-color flagship index in a shoulder, head and shoulders pattern above a graphic base materialized by the bullish gap of March 30, below 7,235 points. We will watch like the milk on the fire, the continuation if necessary of this route to identify work scenarios. Breaking the 7,316 / 7,320 points would accelerate clearings towards the aforementioned level. In the immediate future, a continuation of a balancing of the buying and selling forces in a nervous atmosphere is expected, in particular with regard to the formation of the two large dojis drawn at the end of last week, and the red body of the candle of Monday 15 .
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 7585.00 points.
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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.
