(News Bulletin 247) – “Gloom”: if we had to sum up Wednesday’s session in one word, it would be this one. The CAC 40 index contracted by 0.80% to 7,310 points, with the return of benchmarks from Wall Street. The final PMI Services data in Europe degraded risk appetite sentiment.
For these activity indicators in services in Europe, in final data for the month of June, the disappointment is there, with a score of 52 points for the whole of the Euro Zone. This is a 5 month low. The Euro Zone economy is at a standstill at the end of the second quarter. Although growth continued in the services sector, it slowed to its weakest pace in five months. It was also offset by a sharp decline in production in the manufacturing sector, which accelerated compared to May.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, shed the following light: “The French services sector was the weakest performer in June, with France also being the only country covered. by the survey to have reported a drop in activity in services compared to the previous month. This deterioration in the economic situation in France can be explained, in addition to more general factors such as the tightening of financial conditions and the weakening demand, by the strikes and demonstrations organized in recent months against the pension reform project.
As a reminder on Monday, the final industrial PMI data also gave no satisfaction. It was the German component in particular that made the markets wince, coming out below the first estimates, at 40.6, the lowest since June 2020.
Services activity in China also disappointed. The services PMI there fell to 53.9 in June from 57.1 in May.
On the value side, the Casino share continued its stock market plunge, and dropped nearly 33% while the group delivered the content of the two capital contribution offers, that led by Daniel Kretinsky on the one hand and that of the trio Niel-Pigasse-Zouari, on the other hand. In both cases, the indications given by the company suggest a dilution of more than 99% for the shareholders. Boiron jumped 27% to ultimately exceed by 10 cents the price of the simplified takeover bid by the Boiron family, which intends to withdraw the group from the stock market. This offer includes a fairly homeopathic bonus for the shareholders, of 36% according to the calculations of the company which is based on the detachment of an exceptional dividend. But by restating this aspect and comparing the closing price on Monday (39.5 euros) with the value of 50 euros, this premium drops to 27%.
On the other side of the Atlantic, in the wake of the Fed Minutes without much surprise, the main equity indices ended in the red, like the Dow Jones (-0.38%) or the Nasdaq Composite (-0.18%). The S&P500, the reference barometer of risk appetite in the eyes of fund managers, contracted by 0.20%. At the end of this month, a new meeting of the Monetary Policy Committee is scheduled. According to the CME’s FedWatch tool, the odds of a 25 basis point hike, after the June break, exceed 88%. “If the scenario of another Fed rate hike at the end of July still holds, […] with a voluntary Jerome Powell during his last declarations, [Thomas Giudici, chez Auris Gestion] consider[e] nevertheless that a new break is still likely”.
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 $1.0860. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $71.60.
On the agenda this Thursday, the conclusions of the ADP survey on American employment at 2:30 p.m., weekly registrations for unemployment benefits at 2:30 p.m., the ISM PMI and new job offers (JOLTS) at 4:00 p.m.
KEY GRAPHIC ELEMENTS
Last week’s weekly candle shows the relief of a financial community which is simultaneously witnessing a soft landing for the US economy, with no new unpleasant surprises on the inflation front. The next resistance levels are located at 7,500 then 7,585 points. This would require a sectoral federation within the ACC, which we do not have. The alternative scenario is one of widened, diamond-like consolidating congestion.
If necessary, we would be at the heart – that is to say in its largest phase – of this diamond. As a reminder, this is a figure close to a rhombus. Graphically, the diamond looks like a more or less flattened diamond: at the start of the pattern’s formation, prices move inside a widening wedge, then, halfway through, they oscillate at inside a tapering triangle.
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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