CAC 40: Tensions on rates, luxury struggling

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Tensions on rates heavily penalized the luxury sector on the stock market on Monday, a sector with a high PER, particularly sensitive to the monetary issue. Its weight within the CAC 40 will have been enough to do damage: -0.85% to 7,123 points for the flagship index, of which the three biggest declines are LVMH (-2.59%), Hermès (-3 .36%) and Kering (-4.56%).

The markets are still feeling the blow, still stunned by the clear increase in bond yields. The 10-year American bond rate is at 4.52%, the highest since November 2007 compared to 4.44% on Friday evening. The interest rate on the 10-year German debt is rising to 2.795% after reaching its highest since July 2011 at 2.809% around 3:00 p.m. Its French equivalent with the same maturity reached 3.33% after a peak at 3.36% in the afternoon.

These tensions on the bond market always echo the firmness of central bankers on their monetary policy. At the end of last week, the American Federal Reserve expressed its desire to maintain its rates at high levels. “If the Fed considers that it no longer needs to act urgently and can, according to its macroeconomic forecasts, allow itself time for an additional pause in order to better understand the consequences of the current tightening, the “Dot plots”, however, indicate a more hawkish positioning than at the June meeting”, explains Thomas Giudici, head of bond management at Auris Gestion.

Yesterday investors took note of the IFO business climate index in Germany, which continues to decline, at 85.7 points without falling below the target. The economic cycle clock tool continues its worrying dynamics in the heart of the so-called crisis zone.

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 situation, France is now catching up with Germany,” commented coldly Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.”

On the other side of the Atlantic, the main equity indices benefited from some cheap purchases on Monday, after a particularly heavy week, like the Dow Jones (+0.13% to 34,006 points) and of the Nasdaq Composite (+0.45% to 13,271 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.40% to 4,337 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 $1.0580. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $88.80.

On the agenda this Tuesday, to follow in priority the consumer confidence index (Conference Board) in the United States at 4:00 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.

The flagship tricolor index came out yesterday from the bottom of a diamond figure, we are awaiting confirmation in particular from a sectoral federation, since the luxury sector alone is not enough to categorize the movement.

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 7406.00 points.

Hourly graph

Daily Data Chart