CAC 40: The rise in rates continues to weigh

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The restrictive tone of the Fed, which concluded a meeting of its Monetary Policy Committee last week, against a backdrop of now chronic firmness in crude oil prices, will have weighed down the mood on the markets. The rise in long rates will have put pressure on it. The CAC 40 (-0.40% Friday) will have contracted by 2.63% over the whole week.

As a reminder, the Fed has, as widely anticipated, left its Fed Funds unchanged, leaving the door open to a further increase. The Fed has made it clear to us that these high rates will constitute a monetary matrix for a long time. And that the Fed Funds terminals, i.e. their high points, have probably not yet been reached.

This firmer than expected tone used by the Institution is justified by a stronger resistance than expected in the American economy after long months of restrictive monetary policy – the forecasts for growth rates and unemployment rates speak for themselves. Furthermore, the famous “dot plots” campaigned for slightly higher rates, for an even larger majority of members, before stabilization. As a reminder, the “dot plots” are a dot graph showing the new key rate projections of Fed members. In short, compared to June, the camp hawkish has clearly gained thickness.

In terms of statistics on Friday, operators had to deal with preliminary data from the PMI services. The French component, in particular, for the services sector alone, comes out at 43.9, completely missing expectations. The French industrial sector is not left out. “In terms of the weakness of the industrial economy, France is now catching up with Germany,” comments coldly Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.”

“The PMI index for the French manufacturing sector actually fell back in September, while across the Rhine, the corresponding PMI index recovered somewhat compared to its very low level in August. The services sector, on the other hand, is performing much weaker in France than in Germany, with the activity of German service providers showing signs of stabilization while that of their French counterparts has declined again. This difference may “explained by the importance of the luxury market in France, this sector generally suffering more acutely the effects of an economic slowdown than other services.”

On the value side, Ubisoft increased by 4.5%, the near-finalization of the acquisition of Activision by Microsoft opens up great prospects for the French publisher with the recovery of “cloud streaming” rights to very attractive licenses, such as the franchise ” Call of Duty. On the other hand, Solutions 30 plunged 16.8% after disappointing its half-year accounts.

On the other side of the Atlantic, the main equity indices ended a complicated week on Friday, symbolically in the red, like the Dow Jones (-0.31% to 33,963 points) or the Nasdaq Composite (-0.09% to 13,211 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 0.23% to 4,320 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 $1.0650. 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 Monday, the IFo business climate index in Germany at 10:00 a.m. and a speech by Ms. C Lagarde, President of the ECB, at 3:00 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.

In the immediate future, we will have to expect a major test: that of the lower limit of this diamond, in an atmosphere marked by excitement. Pre-opening data suggests a release this Monday. It will need to be validated by the volumes and the closing level.

FORECAST

Considering the key graphical 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 below resistance at 7350.00 points.

Hourly graph

Daily Data Chart