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Still within a large diamond figure of congestion, the CAC 40 lost ground on Tuesday, under the weight of very disappointing economic statistics in China, and under the ripple effect of Wall Street, struggling after Comments by a Fitch decision-maker, interviewed on CNBC, on the health of the American banking sector.
The flagship Parisian index lost 1.10% to 7,267 points, tracing a bearish engulfing candle in volumes that are admittedly low, but not starving with regard to the date (August 15, at the heart of the summer holidays for many stakeholders , public holiday to boot).
Published overnight, Chinese industrial production will have increased over one year “only” by 3.7%, against a target – the consensus – at +4.3%. Clear disappointment also on retail sales, up 2.5% over one year, well off a target of +4.2%. The situation in China is so worrying that the Central Bank surprised the markets by lowering its key rates to loosen the monetary rope and support economic activity.
As for the American statistics of the day, they pleasantly surprise on consumption which, let us remember, remains the main engine of growth across the Atlantic. Retail sales across the Atlantic rose 1% in July, excluding automobiles, where investors saw a much more contained rise.
“Growth continues to hold and the consumer, a key factor in the American economy, is tending to regain confidence. % expected, and which could thwart the plan of investors who are counting on a drop in rates between the March 2024 and May 2024 meetings, and the reduction in the trade balance deficit, which is explained by the contraction of 1% in imports fueled by the decline in energy components and capital goods”, for the Auris Gestion team.
On the other hand, the Empire State manufacturing index has just plunged to -19.0 points, confirming its very high volatility since the “Covid” crisis.
Markets are also facing a resurgence of geopolitical risk linked to the Ukrainian conflict. “Markets will be watching the situation in the Black Sea, after Russia checked a Ukrainian freighter on Sunday, which led to the latter firing, in order to force the boat to stop and put a little more pressure on this essential route for the transport of raw materials in the region”, commented Mr Boy (IG France)
In terms of values, the entire CAC 40 ended in the red, but with relatively moderate declines. Teleperformance, which posted the biggest drop in the index, lost “only” 2.4%. Highly dependent on macroeconomic news, and China in particular, an important area of growth for them, luxury groups suffered releases. L’Oréal lost 1.7%, despite Bernstein’s recommendation being raised to “outperformance”. LVMH dropped 1.5%, Hermès 1%, Kering also 1%. Danone fell 1.8% as Bernstein went from “market performance” to “underperformance” on the stock.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in red territory, like the Dow Jones (-1.02% to 34,946 points) and the Nasdaq Composite (-1 .14% at 13,631 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 1.16% to 4,437 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 $1.0910. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $80.60.
On the agenda this Wednesday, to follow as a priority the very first estimates of quarterly GDP and industrial production in the Euro Zone at 11:00 a.m., as well as across the Atlantic, housing starts and building permits at 2:30 p.m., the federal report on Industry at 3:15 p.m. and Fed Minutes at 8:00 p.m.
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 2nd candle on Tuesday at the close, 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, and fully validated by the bearish engulfing candle combination at the start of week 33. high volatility is expected until the end of August, a month that does not historically deviate from a volatility trend.
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.
The News Bulletin 247 board
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