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Risk appetite on the Paris Stock Exchange contracted further yesterday, against a backdrop of confirmation of the chronic firmness of the major central banks. The Chairman of the Fed reiterated, before the Senate Banking Committee, the “probable need” to further tighten the monetary tap, to fight against persistent inflation, even if it means penalizing the job market, itself under strong tension .
This “stubborn” defense of its hawkish monetary policy follows last week’s decision to raise European key rates by 25 basis points after the Board of Governors. In addition, yesterday, the Boe (Bank of England) surprised the markets by proceeding with a stronger than expected increase of 50 basis points in the remuneration of the pound sterling….
“Central banks around the world are facing stubborn core inflation rates,” act Ulrike Kastens, Economist Europe
“Despite the sharp rise in interest rates, the risk of inflation remaining too high for too long remains high. The Bank of England is therefore rightly sticking to its ‘tightening bias’. It could become even more restrictive if inflation dynamics prove to be more persistent than expected. In this context, further rate hikes cannot be ruled out.”
A cold snap on the Stock Exchanges which resulted in the CAC 40 by a drop of 0.79% to 7,203 points, a good distance however from the low points of the session (7,145 points).
In terms of statistics, while awaiting the battery of PMI indicators this Friday (the macroeconomic high point of the week), operators took note yesterday of the weekly registrations for unemployment benefits in the United States, in line with expectations, at 264,000 new units.
On the value side, Casino lost 3.8% after announcing the sale of the balance of its stake in the Brazilian Assai as well as a series of measures to generate cash. Satellite operator SES gained 7.8% after announcing the end and failure of its merger project with rival Intelsat.
On the other side of the Atlantic, the main equity indices ended a good distance from their session lows, such as the Dow Jones (-0.01%) and the Nasdaq Composite (+0.95). %). The S&P500, benchmark barometer of risk appetite in the eyes of fund managers, nibbling 0.37% to 4,381 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 $70.20.
On the agenda this Friday, to follow in priority throughout the day a battery of PMI activity indicators. The opportunity to gauge the soft-landing of the American economy, and to measure the weakening of the German economy, which has already entered technical recession. All consensus for these PMIs are available here.
It will be recalled that by construction, a score lower than 50 evokes a contraction of the sector considered, and conversely, a score higher than the bar of 50 evokes an expansion. These surveys are carried out with purchasing managers, for the propensity of these professionals, by the very nature of their activity, to “feel” the health of business in the coming months. Hence their name PMI (Purchasing Managers Index).
KEY GRAPHIC ELEMENTS
The decrease in successive high points (April 24, May 19, June 16) is now characterized. The gap drawn yesterday, if it were to be preserved on Friday, with the weekly candle closing on its low points, would sound the alarm.
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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