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In the absence of a benchmark from Wall Street, which remained closed (Juneteenth – day to commemorate the end of slavery), and without a major statistical indicator, the CAC 40 fell back on Monday by 1.01% to 7 314 points, partly as a result of the continued decline in the luxury sector. Hermès lost 1.28%, Kering 1.69% and LVMH 1.75%.
Operators gradually digest tones hawkish employed by the US and European central banks last week.
“The Fed and the ECB have (de) demonstrated their inability to predict inflation figures and are therefore sailing by sight to determine the way forward, which contributes to strong divergences between their expectations and those of the market”, analyzes Thomas GIUDICI, Head of bond management at Auris Gestion.
“It is on the side of the Fed that these are the strongest […]”. M Giudici sees “the Fed’s speech as a posture aimed at giving pledges to the most hawkish members and keeping inflation expectations anchored. We therefore still expect the Fed to pause with key rates remaining at a high plateau until the end of the year.”
Conversely, Christian Scherrmann, US DWS Economist, notes that “Fed Chairman Jerome Powell reiterated participants’ desire to continue raising rates, while emphasizing that it was ‘prudent’ to wait this time – ultimately the dot plot is not an action plan and decisions will be made from meeting to meeting, he added. “There was no discussion of how the two planned hikes will be carried out, Mr. Powell reaffirmed his ‘meeting by meeting’ approach.”
As a reminder, the Fed left its rates unchanged (remuneration of Fed Funds at 5.25%) while the ECB decided to raise its key rates by 25 bps (a decision widely expected). But the prospects for additional increases, and above all the tone 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.
As for values, luxury suffered, as seen above, and the construction and concession groups Vinci (-4%) and Eiffage (-5.4%) fell while the Council of State returned, according to Les Echos, an opinion to the government in which it issues a green light to a potential surcharge on motorway companies, but under conditions. Project which was confirmed this morning by the Minister of Economy and Finance Bruno Le Maire, on France Télévisions. Safran (+1.74%) and Airbus (+0.23%) benefited from the spotlight linked to the opening of the Paris Air Show.
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 $71.00.
On the macroeconomic agenda this Tuesday, to follow in priority housing starts and building permits at 2:30 p.m.
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. Besides, the harami bearish traced on Monday invites us to maintain a particularly cautious attitude.
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 7410.00 points.
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