(News Bulletin 247) – The overheating of 10-year Treasuries, now clocking right in the middle of operators’ screens, is causing growing temptations to take profits, particularly on growth records. Typically, in Paris: Téléperformance, LVMH, Cap Gemini and other Kering. On the other side of the Atlantic, the new weakness of the Nasdaq Composite yesterday (-2.60%) should weigh.
“Tech companies will be especially watched during [la publication des] results [trimestriels]”, for Vincent Boy (IG France).” Excessive valuations of this type of stock have been challenged in recent weeks and a disappointing outlook could worsen the correction on the sector.
While the scenario of three episodes of federal rate hikes over the year 2022 seems certain, since the particularly firm tone of the last Minutes, report of the December FOMC, a scenario with 4 hikes is not excluded. The boss of JP Morgan expects the realization of this scenario: Jamie Dimon anticipates that inflation will remain well above the Fed’s 2% target in 2022 and therefore bets on more than 4 rate hikes from the central bank this year, which will lead to more volatility.
In terms of statistics yesterday, the manufacturing index of the NY Fed (Empire State) collapsed to -0.7, completely missing expectations. The score had not visited negative territory since June 2020. The Federal Reserve Bank of New York specifies that “delivery times have continued to lengthen and order books to expand. Labor market indicators indicated a moderate increase in employment and a longer average working week. Both price indices fell, but remained high. Looking ahead, however, companies remained optimistic about improving conditions ahead. the scale of the next six months”.
On the other hand, on the European side, operators are aware of the ZEW index of the business climate in Germany, the leading economic power in the Euro Zone. The score (51.7) is well above expectations, allowing the single currency to cushion its decline against the greenback. The “ZEW” jumped nearly 28 points, thanks in particular to a slightly less harsh inflation outlook according to the results of the survey.
On the values side, it is the technology compartment that bears the brunt of the new tensions on the bond market on Tuesday. Worldline lost 3.9%, Teleperformance lost 2.7% and STMicro 2.2%. Luxury heavyweights are not spared (-2.4% for L’Oréal, -2% for Kering and LVMH), and other growth stocks such as Eurofins (-1.8%) are also neglected. In addition to TotalEnergies, Thales and URW are resisting with respective gains of 1.8% and 1%.
On the other side of the Atlantic, the main equity indices fell, whether on the Value side with results below GS expectations, or on the Growth side, against a backdrop of chronic inflationary fears. The Dow Jones lost 1.51% to 35,368 points and the Nasdaq Composite 2.60% to 14,506 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 1,1340$. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $85.30.
To follow on the agenda this Wednesday, as a priority, housing starts and building permits in the United States at 2:30 p.m.
KEY GRAPHIC ELEMENTS
The underlying trend is not threatened at this stage, but it is clear that the losses on Wall Street last week had repercussions in Paris, in the form of one-off and targeted profits in Paris, profit taking whose extent must be considered in the light of initial progress, dossier by dossier. All the same, we remain well above a bullish slant and the 100-day moving average (in orange), benchmarks which gradually tend to merge, and which will therefore gain in technical significance. We are leaning towards the scenario of a price approach to this support level.
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 7390.00 points.
Hourly data chart
Chart in daily data
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