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In volumes rendered mechanically very fed for calendar reasons (day of the 4 witches), the CAC forged ahead on Friday, gaining 1.34% to 7,388 points, digesting the important monetary policy meetings of the week, however imprint of firmness. The luxury sector will have largely enabled the flagship index to shine on this last session of the week. The session on Monday should be much calmer in the absence of benchmarks from Wall Street, which will remain closed due to a holiday.
The ECB’s decision to raise its key rates by 25 bp (a decision widely expected), but above all the prospects for additional increases, and the particularly hawkish adopted by Mrs. Lagarde yesterday at the end of the Board of Governors, allowed the Euro to regain some oxygen, regaining against the Dollar levels dating from May 11th.
“Mrs. Lagarde was very explicit on this point. [signaler un nouveau resserrement]and said it was “very likely” that rates would be raised again in July, given the outlook for high inflation,” said Francesco Pesole, Economist at ING.
“A cycle of disinflation is certainly opening up to us, but underlying inflation remains problematic, particularly in Europe, and seems to be fueled by a still robust labor market and high wage costs. The fall in inflation will therefore take time, as reflected by the announcements of the Fed and the ECB, which do not anticipate a return to their 2% target before 2025”, analyzes Raphaël Thuin, Director of Capital Markets Strategies at Tikehau Capital.
In the macroeconomic chapter on Friday, RAS on the final consumer price data in the Euro Zone, which came out in line with the first estimates for the month of May, up 5.3% at an annual rate, excluding food, energy, alcohol and tobacco (core data ). Good surprise, however, on the preliminary data of the US consumer confidence index (U-Mich), which came out at 63.9, significantly above expectations.
In terms of values, as seen in the preamble, luxury carried the CAC 40, with LVMH, Kering and Hermès ending up 3%, 2.2% and 1.8%, respectively. The sector was able to benefit from a technical rebound after its recent stock market soft spot, but also from the interest of investors who are positioning themselves ahead of the earnings season.
On the other side of the Atlantic, the main equity indices lost ground on Friday in a session of consolidation of the recent advance, like the Dow Jones (-0.32%) or the Nasdaq Composite (-0.68%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.37% to 4,409 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 $1.0930. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $71.30.
On the macroeconomic agenda this Monday, to follow the NAHB index of the American residential market at 4:00 p.m.
Particular attention will be paid to the valuation of the aircraft manufacturer AIRBUS, as the Salon du Bouget opens.
KEY GRAPHIC ELEMENTS
While the attraction effect of the gap of May 24 (its remainder, in reality) was felt, the CAC came to fail almost exactly on its lower limit on June 14 before falling back before the close. Symmetrically inverse session the next day, showing all the versatility of the market. The flagship index came at the very end of the week to completely fill this gap, without taking advantage of it to further emancipate itself.
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 7388.00 points.
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