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Weighed down by luxury stocks, whose weighting within the index is very high, the CAC 40 lost 1.33% to 7,378 points on Tuesday. This highly strategic sector on the Paris Stock Exchange, and more broadly for the French economy, has been roughed up after an analysis note from Deutsche Bank, which underlines that the sector is trading with a demanding premium in view of its prices. historical. She recommends Richemont, Swatch and Moncler for purchase, but neither LVMH nor Hermès. Find all the details here.
We note at this stage, no sectoral or factorial federation in the market downturn, which was the result of luxury alone, like emblematic representatives, such as Kering (-2.97% to 525.90 euros), LVMH (-5.01% to 834.20 euros), and Hermès (-6.54% to 1,890 euros). Enough to weigh down, the three of them the three-color flagship index which ended exactly on its low points of the session.
The market also remains on the defensive in the absence of concrete progress on raising the US public debt ceiling.
“The deadline for Republicans and Democrats to agree is set for June 1, ie in 10 days, before a technical default by the United States. If the discussions continue, they remain tense by the very admission of the protagonists with even a break during the weekend”, specifies Thomas Giudici, head of bond management at Auris Gestion, who puts these figures into perspective:
“The main sticking point still remains around spending cuts. Republicans are still pushing to get them back to their 2022 level, a $130 billion drop, while increasing the defense budget. , Democrats want to extend the borrowing limit through 2025 by raising tax revenue with higher taxation of the wealthiest households and businesses, a red line for Republicans. an agreement will be found, Joe Biden being rather a man of consensus, these procrastinations bring uncertainty and volatility to the markets which do not need it.
Finally, the market had to deal with unattractive leading indicators on Tuesday, through the PMIs. While the synthetic score for the Euro Zone as a whole is 1.3 points away from the target for industry, the disappointment is clear for the German score alone, with the PMI melting down to 42.9, completely missing the target.
Dr Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the figures: “The optimism of industrialists in the Euro Zone about their 12-month business outlook has fallen compared to April, while the volume of their sales fell sharply and their buying activity, as well as the level of their inventories, decreased during the month.
“Order developments are not alarming, however, with EuroStat data for the second quarter highlighting order books well above their long-term averages in the major monetary union economies.”
On the other side of the Atlantic, red also dominated Tuesday on the main equity indices, like the Dow Jones (-0.69% to 33,065 points) or the Nasdaq Composite (-1.26 % at 12,560 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 1.12% to 4,145 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 $1.0810. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $72.30.
To follow as a priority on the macroeconomic agenda this Wednesday, the IFO index of the business climate in Germany at 10:00 a.m. and the Minutes of the Fed, the traditional report of the last FOMC, at 8:00 p.m.
KEY GRAPHIC ELEMENTS
We witnessed Tuesday a frank fall of the CAC, without sectoral federation. Nevertheless, the close exactly on the low points of the session challenges, and puts pressure on a certain number of growth files.
Breaking the 7,316 / 7,320 points would accelerate clearances towards 7,235 points. Only a clear overrun, with sectoral federation, of 7,585 points would generate an additional leg up.
The relative momentum of the remarkable moving averages remains concerning.
In the immediate future, a visit to the 7,316 points, with high stakes, is to be considered.
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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