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The CAC 40 index continued, with the expected volatility, its jerky oscillations within a diamond pattern (flattened diamond), investors taking advantage of confirmation of a slowdown in inflation across the Atlantic, to make their shopping. The three-color flagship index gained Thursday 1.57% to 7,333 points, in rising volumes.
June US CPIs show, to traders’ relief, a moderate but noticeable cooling in price dynamics, which they can cross-reference with the findings of the latest jobs report, also showing a decline, albeit a slow one, of the temperature. In detail, prices, food and energy included, rose in June at an annualized rate of 3.0%, whereas the consensus, already optimistic, foreshadowed an increase of 3.1%. Excluding food and energy, elements considered volatile, the monthly rise in prices is 0.2%, also below the consensus.
This publication of these price data was expected like milk on the fire as the Fed will hold its monetary policy meeting in two weeks. The statistics of the day, however, give hope that the Fed eases its monetary tightening, even if its members have signaled for a long time that a new rate hike was to be expected and will be, unless surprised, recorded. The CME’s FedWatch tool suggests a 25 bp increase in Fed Funds remuneration, with a probability of more than 92%.
François Rimeu, Senior Strategist, La Française AM prefers to take a step back, noting “too tight labor markets and too high wage inflation, and therefore ultimately for central bankers a risk of seeing core inflation remain high for still some time. [M Rimeau] born [voit] no warning signs of an impending reversal.”
On the value side, STMicroelectronics finished at the top of the CAC 40 thanks to a gain of 4.7%, benefiting from an increase in recommendation from Jefferies to “hold” against “sell” previously. Axa gained 3.1% while according to Reuters the group would consider selling or listing separately its XL Re reinsurance branch. Asked by the agency, the company did not comment. Thales gained 3%, the market appreciating the announcement of the takeover of Cobham Aerospace Communications, which specializes in aircraft cockpit security communications systems, for an enterprise value of 1.1 billion dollars. Casino took over 10.8% while according to Les Echos, the two capital contribution offers, those of the duo Kretinsky-Ladreit de Lacharrière, and that of the trio Niel-Pigasse-Zouari will both be raised.
On the other side of the Atlantic, the main equity indices ended Wednesday’s session in the green, like the Dow Jones (+0.25% to 34,347 points), or the Nasdaq Composite (+ 1.15% at 13,918 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, rose 0.74% to 4,472 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 $1.1140. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $75.80.
On the agenda this Thursday, to follow in priority industrial production in the Euro Zone at 11:00 a.m. and the producer price index in the United States at 2:30 p.m.
KEY GRAPHIC ELEMENTS
The weekly candle of week 27, bearish, totally encompasses, by its body, the candle of week 26. The negative message delivered, in the short term at least, takes shape. If necessary, we would be at the heart – that is to say in its broadest phase – of a diamond figure. 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, as does the rebound over the whole week, at this stage. We arrive at a level close to the upper part of this diamond. More than ever, a contrarian attitude to any work on the index is key.
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 7015.00 points would relaunch the selling pressure.
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