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Last week will have rhymed with suffering for the CAC40, which will have lost more than 3%, under the effect of the particularly firm tone of the major central banks and the absence of stimulus measures in China, whose growth forecasts have been revised to the decline by major US banks and rating agencies.
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 monetary policy hawkish 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.”
The atmosphere was also weighed down by the publication on Friday of a battery of PMI activity indicators in Europe. All targets are completely missed. Especially, the German industrial component stands at 41.0, the lowest since… May 2020. The services component in France, expected at 52.2, collapses to 48.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the survey: “After two consecutive quarters of contraction, the risk of a further fall in eurozone GDP in the second quarter increased in June. , due in particular to weak activity in the services sector in France. bearish curve of the PMI Composite index announces a difficult second half for private companies in the euro zone, characterized by a general decline in order books over the coming months.
Across the Atlantic, equivalent indicators were published, with the key to unpleasant surprises as well, particularly on the front of its industrial component, which came out at 46.3. the “composite” PMI index fell back to 53 at least in June, also marking a slowdown compared to May (54.3).
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 conducted 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).
On the value side, SES-imagotag plunged (-58.3%) after accusations of accounting irregularities from Gotham City Research, a fund that is betting on the stock’s decline. The company responded on Thursday evening, saying the fund’s report contained “gross inaccuracies”, reserving the right to take legal action. Air France (-5.60%) was largely shunned by investors.
On the other side of the Atlantic, the main equity indices lost ground in the last session of the week, like the Dow Jones (-0.99% to 15,829 points) or the Nasdaq Composite ( -1.01% to 13,492 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.77% to 4,348 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 $1.0900. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $69.40.
On the agenda this Monday, to follow in priority the IFO index of the business climate in Germany, expected to drop to 90.7.
KEY GRAPHIC ELEMENTS
The decrease in successive high points (April 24, May 19, June 16) is now characterized.
We were monitoring the gap drawn on Thursday on Friday. It was preserved at the close, with in addition a close of the weekly candle on its low points. This further degrades the short-term configuration.
A passage in weekly view suggests the beginning of an unattractive chartist figure.
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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