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The releases were very strong yesterday on the CAC 40 index which fell by more than 3% (3.13% to 7,082 points), touching a low point of March 28, giving credence to the idea that we are at the heart of the formation of a diamond figure. The markets are under strong pressure, suffering “from a double negative effect. For several days, the economic indicators have not been good, in Europe and Asia, as we saw again on Wednesday with the PMI Services. And elsewhere , the equity indices are penalized by the voluntarist and restrictive speeches of intention of the central banks which we already know (for the Fed, the American Federal Reserve, and the European Central Bank, the ECB) that they will certainly raise their rates in July. There will then be doubt about a second consecutive increase, a doubt that will last until September”, develops Alexandre Baradez, head of market research at IG France. “It is this concomitance between economic slowdown, and continuous pressure on interest rates, which weighs on risk appetite.
The hypothesis of a new increase in federal rates at the end of the month is almost certain. Especially since the latest employment figures show an additional overheating. The traditional survey of the private firm in human resources ADP highlighted nearly 500,000 job creations in the non-agricultural private sector, exploding the target and giving credit to the Fed’s strategy. No deviation from the target to report on the other hand concerning weekly registrations for unemployment benefits, at 248,000 new units. In this context, the figures on private employment this Friday will be scrutinized. The NFP (for Non Farm Payrolls) to be published at 2:30 p.m. as the statistical highlight of this last part of the week, will be an opportunity to gauge the dynamics of tensions on the job market, and the effect of inertia of its tensions on wages and prices.
On the securities side, all of the files listed on the CAC 40 ended in the red and particularly the cyclical securities. Technology stocks also had an atrocious session, STMicroelectronics dropped 5.1%, Capgemini returned 4.5%. The same is true for real estate companies such as Unibail-Rodamco (-5.6%), bottom of the CAC 40. Publicis, for its part, experienced a brief spike at more than 5% before falling (-1 .9% at mid-session), with speculation of a hypothetical interest from Vincent Bolloré via Vivendi, following an article by Challenges.
On the other side of the Atlantic, the main equity indices ended in the red, but to a lesser extent, like the Dow Jones on Thursday (-1.07% to 33,922 points) or the Nasdaq Composite -0.82% to 13,679 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.79% to 4,411 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 $1.0890. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $71.20.
On the agenda this Friday, the statistical highlight is naturally the NFP (Non Farm Payrolls) report on US private employment at 2:30 p.m. Wage dynamics, as well as the unemployment rate and job creations, will be analyzed in detail. Note that Christine Lagarde will lend herself to the question and answer game during the Economic Meetings of Aix en Provence this afternoon.
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.
The intense volatility on Thursday supports this thesis.
FORECAST
In view of the key graphic factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.
We will take care to note that a crossing of 7410.00 points would revive the tension in the purchase. While a break of 7070.00 points would relaunch the selling pressure.
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