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With the approach of important monetary maturities (FOMC of the Fed and Council of Governors of the ECB), the market is tightening, in the light of the persistence of inflation in the main economic poles of the planet. Tensions in the job market in the United States, the decision by Saudi Arabia to cut production next month by 1 million barrels per day, and the decision last night by the Bank of Australia to give new tightening of the monetary screw weighs… Just like the remarks made by Christine Lagarde, President of the ECB.
According to comments reported by the Reuters agency, the central banker felt that she currently saw no “tangible proof” that underlying inflation (excluding energy and food prices) had reached “a peak”. Pricing pressures also remain “high”, she added, speaking at a hearing before MEPs.
In terms of statistics, operators took note of “PMI” activity indicators for services, in final data for May, a little less optimistic than in the first estimate. This PMI (for Purchasing Managers Index) comes out at 55.1 for the whole of the Euro Zone and at 57.2 for Germany. Across the Atlantic, the ISM Services disappointed, plunging towards 50 points (at 50.3). Remember that below the threshold of 50 points, by construction, the score evokes a contraction of the sector considered.
In terms of stocks, luxury had a difficult session, probably suffering from profit taking. LVMH, Hermès and Kering shares all fell between 0.9% and 2%. Excluding the CAC 40, Eramet escaped the downward pressure (+2.6%), the stock benefited from Stifel’s initiation of hedging on the purchase. The design office sees promising prospects for the deeply restructured mining and metallurgical group. On the small cap side, Transgene jumped 22% after the publication of positive results for its HPV-related cancer vaccine.
On the other side of the Atlantic, red dominated on Monday, even as tech heavyweights held up. The Dow Jones lost 0.59% to 33,562 points, in the feverish expectation of the announcement of a support plan for the Chinese economy. The Nasdaq Composite symbolically dropped 0.09% to 13,229 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.20% to 4,273 points.
“The Chinese government would work on a new plan to support its real estate sector in order to boost economic growth,” said Thomas Giudici, head of bond management at Auris Gestion. “These measures would include the reduction in certain districts of down payments when buying, the reduction of commissions on transactions or even the relaxation of restrictions for residential purchases. While these elements are undeniably good news, the path is still long for the Chinese indices after the rebound started.”
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 $1.0730. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $71.70.
On the macroeconomic agenda this Tuesday, the PMI construction index in the United Kingdom at 10:30 am. Already published, at 08:00 am, the dynamics of orders to German industry disappointed strongly for the month of April, completely missing expectations, contracting by 0.4%.
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. Finally, the previous day’s session resulted graphically in a candle with a red body without a shadow.
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 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.
