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The CAC 40 (-0.70%) validated its downward exit on Friday from a vast flattened diamond figure which had been accumulating energy since the end of May. In addition to luxury, technology has now been added as a sector fully participating in the decline. Thus Dassault Systèmes lost 1.59%, Teleperformance 1.83% and Wordline, the red lantern, 2.31%. The market remains under pressure from a high interest rate environment, a situation catalyzed by the latest central bank meetings on both sides of the Atlantic.
Between the high points of September 15 and the low points of the 26, there is a delta of more than 400 points.
This prospect of a long-term high rate environment is catalyzing the market’s current release of selling energy.
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.
“The members of the FOMC still anticipate an increase in key rates before the end of the year before lowering them twice, against four previously, next year,” anticipates Thomas Giudici (Auris Gestion), based on the dot plots of the Fed, the famous dot chart published quarterly, which had the effect of a cold shower on the markets.
The President of the European Central Bank, Christine Lagarde, in the same spirit, declared that “interest rates will be set at sufficiently restrictive levels for as long as necessary”, during a speech before the Economic Affairs Committee and Monetary Affairs of the European Parliament. Isabel Schnabel, member of the board of governors of the European Central Bank, for her part indicated on Monday that “the inflation problem is not yet resolved”.
“Investors will be scrutinizing the price index (PCE) excluding food and energy (the Federal Reserve’s preferred inflation measure) this Friday to find out if the rate hike cycle is coming to an end. The risk of a lock-in the American administration, the famous “shutdown”, also threatens the markets, the American Parliament considering that there is little time left to find an agreement to break the budgetary impasse”, warns César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management
In terms of statistics, the focus was on the American consumer confidence index (Conference Board), which contracted more than the consensus predicted, to 103.0.
On the values side, we talked about tech as a selling force. Luxury, already under attack, remained under pressure like LVMH (-1.44%), Hermès (-1.49%) and Kering (-2.18%).
On the other side of the Atlantic, bright red largely dominated, with an American 10-year yield now significantly above 4.50%. The Dow Jones lost 1.14% to 33,618 points and the Nasdaq Composite lost 1.57% to 13,063 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, dropped 1.47% to 4,273 points.
An update on other risky asset classes: around 8:00 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 Wednesday, to follow as a priority orders for durable goods in the United States at 2:30 p.m.
KEY GRAPHIC ELEMENTS
The flagship tricolor index came out yesterday from the bottom of a diamond figure; we were awaiting confirmation, in particular from a sectoral federation, since the luxury sector alone is not enough to categorize the movement. We had participation yesterday from the technology sector, and to some extent from the automotive sector. A pullback on the diamond is not excluded, before bearish tensions resume.
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.
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