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Reassured by the endorsement of the US Senate, which gave the green light to the bipartisan agreement to suspend the US debt ceiling for two years, the Paris market regained momentum on Friday, with the support of stocks at strong current Beta effect on banking, energy and automotive equipment. On compartment A of Societe Generale gained 4.27%, Valeo 4.40%, Vallourec 4.44%, Schlumberger 4.51%, Renault 5.03%, and Faurecia nearly 8% to 21.27 euros.
The session was marked by the confusing content of the NFP (Non Farm Payrolls) report for the month of May, with a significant increase in the unemployment rate from 3.4% to 3.7% of the active population, proof of “the ‘efficiency’, with the inverted commas in the Fed’s restrictive policy. This slowdown is finally palpable on employment, whose dynamics of wage increases remain stable moreover… But – because there is a but -, the US economy would have created nearly 340,000 jobs in the private sector (excluding agriculture), exploding the target. What give new nodes to the brain of the Fed, whose obsession is the runaway spiral prices wages, hitherto avoided.
The “mixed situation in the United States between industrial recession, dynamic employment and falling productivity”, summarizes Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM. “Wage inflation is gradually moderating but rising wages combined with falling productivity (-4.6% annualized in the 1st quarter (Q1)) are threatening corporate profitability.”
Market operators are also deciphering this report to try to anticipate the decision of the American Federal Reserve (Fed) at its next monetary policy meeting on June 13 and 14. These data have so far not greatly changed the situation, since, according to the CME Group’s FedWatch tool, investors attribute a probability of 69% to a status quo on key rates and 31% to an increase in 25 basis points (0.25%), more or less the same figures as before the publication of the employment report.
On the other side of the Atlantic, the main equity indices gained ground on Friday, like the Dow Jones (+2.12% to 33,762 points), or the Nasdaq Composite +1.07% at 13,240 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.45% to 4,282 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 $1.0690. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $72.00.
On the macroeconomic agenda this Monday, the final data for the services PMI in the Euro Zone at 10:00 am, the Sentix index of investor confidence in the Euro Zone at 11:00 am, and the US ISM Services PMI at 4:00 pm.
KEY GRAPHIC ELEMENTS
Here are the technical elements that we presented on Friday before the opening:
“The intermediate bearish target that we identify, 7,088 points, has been reached. under close surveillance the volumes on this reaction, to measure the purely technical aspect.”
These volumes, without being thick, were significantly higher than those observed the day before. Meanwhile, intra-day gains were plentiful. Under these conditions, the current working band is between 7,088 points and the bearish gap of May 24, whose upper limit is worth 7,378 points.
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 7088.00 points would relaunch the selling pressure.
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