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After a flagship week for the flagship index, under the effect of a confirmation of a slowdown in inflation across the Atlantic, the reversal of steam operated yesterday will have been brutal, under the effect of a battery of macroeconomic statistics disappointing Chinese prices, which will have penalized the luxury sector. However, the representation of this sector in the CAC 40, by the number of files (3, or even 4 if we include L’Oréal), but above all by its cumulative capitalization, weighs very, very heavily. In the end, the flagship Parisian index will have started the week with a loss of 1.12% to 7,291 points.
L’Oréal lost 1.81% to 413.9 euros, Kering 1.95% to 490.2 euros, LVMH 3.73% to 859 euros and Hermès 4.21% to 1,912 points. Luxury is clearly the dominant sector of the CAC 40, with 38% in total including LVMH, Hermès, Kering but also the cosmetics group L’Oréal. This figure increases to 41.16% by adding EssilorLuxottica, sometimes included in this sector by financial analysts covering luxury. China is the first outlet for French luxury creations (leather goods, fashion, accessories, perfumes, etc.), behind the United States.
This very beginning of the week was thwarted by Chinese indicators that were very unattractive, weighing on risk appetite. Retail sales, in particular, for the month of June, missed expectations, as was growth in Q2, at +6.3% compared to Q2 last year, compared to consensus at +7.1%. “Although this could lead to new support from the government, the evolution of the Yuan and the situation on the level of indebtedness could reduce the room for maneuver of the party”, comments Vincent Boy, market analyst IG France .
As a reminder, US CPIs for June showed last week, much to traders’ relief, a moderate but noticeable cooling in price dynamics, which they can cross-reference with the findings of the latest jobs report, showing also a fall, albeit slow, 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. The PPIs published in the process (producer price indices) corroborated this trend towards a cooling of the economic machine.
“While these elements should not call into question the central scenario of a further Fed rate hike at the end of the month, there is a good chance that this will be the last of the monetary tightening cycle initiated in March 2022. Indeed, in addition to the disinflation movement at work, the impact of the rise in interest rates should begin to weigh more on growth and on the job market as indicated by the Beige Book”, analyzes Thomas Giudici , head of bond management at Auris Gestion.
On the other side of the Atlantic, the main equity indices ended the first session of the week in the green, like the Dow Jones (+0.22% to 34,585 points) or the Nasdaq Composite ( +0.93% to 14,244 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, climbed 0.39% to 4,522 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 Tuesday, retail sales in the United States at 2:30 p.m. as well as the monthly federal report at 3:15 p.m.
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. We are leaning towards a bottom exit. Volumes, volatility and above all a sectoral federation will fully confirm this.
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.
The News Bulletin 247 board
Hourly data chart
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I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
