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The past week will have, in the form of volatility, betrayed intense nervousness in the trading rooms, traders being ambivalent about US inflation, and worried about the health of the German economy. Over the week, the CAC 40 (-1.26% Friday) managed to save the furniture (+0.34%) thanks to the two sessions on Wednesday (+0.72%) and Thursday (+1.52%) .
Statistical high point on Thursday, consumer prices nibbling 0.2% in July, in line with expectations, whether for the widest product base or the data corrected for volatile elements. Over one year, prices increased by 3.2%. Not enough to further feed the mill of the most hawkish members of the Fed.
For San Francisco Federal Reserve (Fed) Chair Mary Daly, it is still premature to declare the “victory” of the US Federal Reserve over inflation. “There’s still work to be done. And the Fed is fully committed to resolutely bringing inflation back to its 2% target,” she told Yahoo! Finance.
The CME tool FedWatch now assigns almost 90% probability to the scenario of a pause at the end of the FOMC in September.
“The dynamics of disinflation are changing in nature: it is mainly energy that brought down inflation in the first half of the year, but it is underlying inflation (housing and to a lesser extent transport ) which will fall in the second half of the year. Headline inflation could experience a period of relative stability around current levels, with the decline in underlying inflation counteracting clearly favorable ‘price at the pump’ base effects”, suggests Bastien Drut, Head of Studies and Strategy at CPR AM.
“Core” inflation, i.e. excluding food and energy prices, came out in line with market consensus at 4.7%, over one year and below 4.8 % of the month of June.
A feeling of caution which will be reinforced over this last part of the week by the producer price indices for the month of July, which at +0.3% regardless of the product base used, exceeded the consensus in monthly rhythm. Moreover, the consumer confidence index (preliminary data, U-Mich) contracted to 71.2, below the target without however moving significantly away from it.
On this side of the Atlantic, eyes remain nervously riveted on Germany, which is beginning to concentrate a certain number of concerns. The leading economy in the Euro Zone, although of course still very powerful, shows tangible signs of greater fragility than for France.
As a reminder at the start of the week, the Sentix index of investor confidence in the Euro Zone certainly rebounded significantly, to -18.9. However, “Germany is adding fuel to the fire: the first economy in the euro zone becomes the weakest link in the euro zone, weighs heavily on the monetary union as a whole. The component of the index for for Germany falls for the fourth consecutive time to -30.7 points,” read a commentary note accompanying the Sentix survey. The disappointment was also severe on German industrial production figures in June (-1.5% in volume compared to May).
The economic colossus of the Euro Zone, which entered recession, weakened by the fall in domestic consumption, is therefore weakened. We will carefully follow the next statistical publications on our powerful neighbor: ZEW, inflation, CPI, growth data, industrial reports, will be scrutinized even more than usual.
In terms of values, very little to eat on Friday. Coface limited its decline to 0.8% after announcing slightly lower half-year results. The credit insurer will present a new strategic plan on March 5, 2024. Atos dropped 4.3% as the S&P agency plans to downgrade the IT group’s rating by one notch.
Across the Atlantic, major equity indices ended Friday’s session in mixed order, with the Dow Jones managing to gain 0.30% to 35,281 points and the Nasdaq Composite contracting 0.68% at 13,644 points. The S&P500, the reference barometer of risk appetite in the eyes of fund managers, lost a symbolic 0.11% to 4,464 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 $1.0935. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $82.00.
On the agenda this Monday, no significant statistical indicator, able to shift the Parisian market in any case, is to be reported. We specify that tomorrow, August 15 (Assumption, public holiday), will not be idle, and the Bourse de Pairs will open under the usual conditions of schedules and quotation. We should nevertheless expect a particularly reduced activity.
KEY GRAPHIC ELEMENTS
The exit from the congestion figure on Friday July 21 was thwarted twice, on July 26, on a wide gap, and over the whole of the past week, on a break in the short moving average. The bullish message has momentarily lost its meaning.
We will monitor any formation (and confirmation at the end of the session) of a bearish gap. We witnessed the perfect repeat of the August 02 candle on Tuesday, ie a school doji with elongated shadows, a marker of nervous indecision at the heart of an enlarged pattern of consolidation.
On Thursday August 10, the tricolor index came up against the upper limit of a larger diamond, the validity of which was effectively tested on Friday. High volatility is expected until the end of the month.
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 7500.00 points.
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