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The Fed is completing a long-awaited Monetary Policy Committee (FOMC) meeting this Wednesday. The powerful monetary institution led by J Powell must be tying up knots in its brain, while the dynamics of crude prices reshuffle the cards on the process of normalization of inflation, hampering the chances of a soft landing for the American economy .
Over one month, WTI jumped by 15% and Brent by 12.2%. This upward movement was triggered by Saudi Arabia, which to finance colossal investments, acted to raise prices by extending the decline in its production until the end of the year. What Russia also did.
If the Fed should in all likelihood leave its key rates (Fed Funds unchanged) this evening, a final increase in November may not be ruled out. We will know more with the press conference on the one hand, and the new economic forecasts and dot plots on the other.
“A doubt remains about the November meeting and the Central Bank should consciously maintain it to give itself all the possibilities” agrees Emmanuel Auboyneau, Managing Partner of Amplegest. “The US economy remains resilient and inflation is on a declining trajectory, although still too high compared to targets. Upcoming publications on the US economy will set the trend for future monetary policy. However, we remain convinced that the process of increasing rates is coming to an end and that we will enter a period of stability, followed by a probable decline in the second part of 2024.”
In terms of statistics, there are no surprises regarding consumer prices in the Euro Zone, excluding food, energy, alcohol and tobacco in final data for August, up 5.3% year-on-year, in line with initial estimates.
On the value side, the rise in barrel prices towards $100 for the two global benchmarks logically benefits oil and oil services stocks. And in particular the heavyweight of the Parisian index TotalEnergies which gained 1.7% to 63.04 euros and exceeded its historical records during the session and at the close, with a peak at 63.25 euros during the session. Edenred gained 1.8% benefiting from an increase in the price target from JPMorgan to 69 euros compared to 65 euros previously. Excluding the CAC 40, Colas increased by 52.4% to 173 euros and is close to the price of 175 euros offered by its parent company Bouygues to buy back the shares of its subsidiary that it does not yet hold with a view to the withdraw from the Stock Exchange. SMCP plunged 29.07%. The owner of the Maje and Sandro brands suffered after lowering its targets for 2023 due to a deterioration in the ready-to-wear sector in Europe.
On the other side of the Atlantic, the main equity indices remained on the defensive in the run-up to the Fed’s FOMC, like the Dow Jones (-0.31% to 34,517 points) or the Nasdaq Composite (-0.23% to 13,678 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 0.22% to 4,444 points.
An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0690. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $90.00.
On the agenda this Wednesday, follow the verdict on rates, the Fed’s economic forecasts at 8:00 p.m. and the subsequent press conference at the FOMC at 8:30 p.m.
KEY GRAPHIC ELEMENTS
Several observations at this stage, combined with each other, break the upward dynamic seen at the end of last week.
First up is the high wick of Friday’s candle, which showed early weakness. The very wide gap on Friday was reduced by three quarters. Finally, the reintegration of the diamond is eloquent: only one session, that of Friday, saw its candle come out. We leave for a handful of sessions in this chartist figure at the end of which a strong energy will be released.
FORECAST
Considering the key graphical 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 crossing 7436.00 points would revive the buying tension. While a break of 7084.00 points would restart the selling pressure.
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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.
