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In very timid volumes, in the absence of a large fringe of operators, the CAC40 index fell to the top of the diamond figure on Friday (+0.06%) at the end of a flagship week (+3.69%), in the wake of a marked relief on the US inflation front. These recent inflation numbers for June (CPI and PPI) came in significantly below expectations, leading investors to hope that the US Federal Reserve (Fed) is adopting a more dovish tone. Even if another rate hike at its monetary policy meeting at the end of the month seems inevitable.
“At this time, the Fed is assessing the lagged effect of policy rate increases, while closely monitoring the data and developments in the banking turbulence,” three Jupiter AM managers agree in a note. market. “Because the path to an eventual rate cut is not necessarily linear. The “Goldilocks” scenario of slower growth containing inflation and in turn leading to rate cuts this year seems to have been pushed back much further than expected at the start of the year. Until inflation has fallen to acceptable levels, interest rates will remain high, which means positioning will remain on the edge.”
In the statistical chapter on Friday, the monthly trade balance deficit came out almost at equilibrium in the Euro Zone, beating expectations. Furthermore, the publication of the US consumer confidence index as defined by the University of Michigan, expected to rise to 65.5 in preliminary data, was rather pleasantly surprised, coming out at 72.6.
On the values side, Vallourec limited its gains to 1.85%, due to the pump in the price of black gold. In terms of good news, the group of seamless steel tubes announced Thursday evening that it anticipates results for the second quarter of 2023 “likely to be higher than its expectations”. Luxury stocks were also well prepared to progress, while Burberry published sharply higher sales in the first quarter, particularly driven by China. Leading the CAC 40, LVMH and Hermès took advantage of this to gain 1.7% and 1.7% respectively. .6%. Finally, Air France-KLM lost 1.8% while the American fund Apollo will inject 500 million euros into the engineering and maintenance components subsidiary of the Franco-Dutch airline.
On the other side of the Atlantic, the main equity indices ended Friday’s session in scattered order, like the Dow Jones (+0.33% to 34,509 points) and the Nasdaq Composite (-0 .18% at 14,113 points). The S&P500, the reference barometer of risk appetite in the eyes of fund managers, ended on a flat note at 4,505 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 $1.1220. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $74.50.
On the agenda this Monday, the Empire State manufacturing index at 2:30 p.m. Note the great disappointment caused by the publication of Chinese GDP in Q2, at +6.3 compared to Q2 last year, completely missing expectations. Note that Tokyo will remain closed due to a public holiday.
KEY GRAPHIC ELEMENTS
We are 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 06/07 accredits this thesis, as does the rebound over the whole of the past week, at this stage. We are approaching a level close to the upper part of this diamond, with the formation of a significant upper wick on Thursday’s candle 07/13. More than ever, a contrarian attitude to any work on the index is key.
The exit direction of the diamond will be decisive.
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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