CAC 40: The nerves of operators are put to the test

(News Bulletin 247) – Last session, this Monday, of a nerve-wracking January for operators, a month which will have seen the confirmation of a tight coming monetary turn for the Fed, against a backdrop of persistent price tensions and employment in particular across the Atlantic. The exacerbated geopolitical tensions between Moscow and Kiev will have contributed to the drying up of risk appetite, particularly penalizing for growth stocks.

The past week, at high risk, will have been marked by the FOMC of the Fed. If, as widely expected, no hike in federal rates was on the agenda – the tap will start to be tight in March -, Mr J. Powell remained evasive in distilling the calendar indices on the rate of rise of the Fed Funds in 2022. In the end, it was impossible for the operators to refine the number of increases (3? 4? 5?).

In the end, a scenario, which seemed “extreme” even a few weeks ago, of five Fed Funds hikes over the year, with a “double blow” why not as early as March, does not is not totally excluded from the universe of possibilities.

For Ronan Blanc, manager-analyst at Financière Arbevel, Jerome Powell is clearly on the offensive. “After having locked himself in a transitional scenario on inflation for too long”, the boss of the monetary institution “is trying to regain control, without letting himself be influenced by ambient noise (geopolitics, omicron impact, drop in equity markets )”.

The monetary adjustment cycle will be faster than in previous episodes because the underlying economic fundamentals are also more robust”, continues Ronan Blanc. And if the reduction of the balance sheet is underway, “purchases will not disappear for all that and thus prevent the yield curve from flattening too much (and leading investors to anticipate the worst-case scenario: a recession).

“The Fed is undoubtedly paying for its stubbornness in 2021 on inflation. We would have liked to gain more monetary visibility, but we will have to wait a little longer for the signals of disinflation to be more apparent. It is probably a matter of weeks. In the meantime, the relay is given to companies whose publication of results should be a factor of stability for the markets”, advances the manager.

Since the start of the year, the CAC has posted an almost neutral balance sheet, but symbolically in the red (-0.82%) for its third negative weekly balance sheet in a row. Friday, in the wake of the brilliant results of LVMH, which gained up to 5% at the start of the session, the Paris Stock Exchange had nevertheless started the day in the green. But once again the gains quickly evaporated, confirming the impressive resurgence of volatility that we have observed (in one direction or the other) for several sessions – the CAC 40 thus dropped 2.9% between the opening and 2 p.m. before recovering almost 2% in the afternoon. The first tricolor capitalization (and largest weighting of the CAC) finally gains 3.2%, after reporting a net profit more than doubled in 2021.

In terms of statistics, PCE (Personal Consuption Expenditures) prices, the Fed’s favorite barometer for taking the temperature of prices, even before the CPI rose in December at a monthly rate of 0.5%, in line with expectations, according to the Bureau of Economic Analysis, on a basis excluding energy and food (the most volatile items in the basket),

On the other side of the Atlantic, a rebound in protest fueled by cheap purchases on Friday, especially in the technology sector. The Dow Jones gained 1.65% to 34,725 points, while the Nasdaq Composite jumped 3.13% to 13,770 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 2.43% to 4,431 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 1,1160$. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around 87,80$.

Following the agenda this Monday, the Chicago PMI index at 3:45 p.m.

KEY GRAPHIC ELEMENTS

An oblique line of support gave way on Monday under the sectorally federated assaults of the selling camp, in a very high level of participation. This release of selling energy at this stage, in a single session, constitutes a major technical fact which characterizes the hypersensitivity of a market which is increasingly and continuously questioning the levels of valuation of shares. The entry into the bear market is not formally characterized, but the situation calls for the greatest vigilance under this slant. She was reinstated at the very end of the week.

PREVISION

In view of the key graphic 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 a crossing of 7115.00 points would revive the tension in the purchase. While a breakout of 6747.00 points would revive selling pressure.

Hourly data chart

Chart in daily data

©2022 News Bulletin 247