CAC 40: One eye on long rates, the other on crude oil

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Thanks to inflation figures lower than expected, on both sides of the Atlantic, the CAC 40 (+0.26%), less than the DAX (+0.41%), managed to grab a few points. However, we will note the inability to finish close to the high points of the session (or weekly, it depends), and thereby the materialization of a pullback on a diamond figure whose exit from the bottom is confirmed.

According to the latest EuroStat data, across the Euro Zone as a whole, prices adjusted for volatile elements are now showing an annualized increase of 4.5%, compared to a more pessimistic target of 4.8%. Enough to bring a feeling of relief, and enough to advance the idea that the terminal European rates may already be reached. “As for the main components of euro zone inflation, food, alcohol & tobacco are expected to see the highest annual rate in September (8.8%, compared to 9.7% in August), followed by services (4.7%, compared to 5.5% in August), industrial goods excluding energy (4.2%, compared to 4.7% in August) and energy (-4.7%, compared to -3.3% in August), adds the pan-European statistical institute.

On the other side of the Atlantic, the basic “core PCE” inflation index, for personal consumption expenditures, the Fed’s favorite index in its assessment of price dynamics, increased by only 0.1% over one month after +0.2% in July. The consensus expected a stable pace of +0.2%. In the process, the American 10 began to consolidate, however remaining well above the 4.50 mark. Still not enough, at this stage, to erase the minority but significant probabilities of an increase in Fed Funds from the November FOMC. Worse, an impression of vagueness could emerge from the next debates between members of the Federal Reserve, at the risk of instilling a feeling of insecurity.

“The surge in long-term rates subsides at the end of the week, mitigating the correction of risky assets,” summarizes Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM. “

On the value side, with a consolidation on long rates, tech and luxury had a good session, with Dassault Systèmes gaining 1.9% and Worldline 1.02% while LVMH advanced 1.47% and L’Oreal by 0.74%. Falling bond yields supported these growth stocks. Additionally, for luxury, Bank of America strategists raised their view on the sector to “outperform” from “previously market performance.”

On the other side of the Atlantic, the main equity indices closed Friday’s session in scattered order, like the Dow Jones (-0.47%) and the Nasdaq Composite (+0.14%). or the S&P500 (-0.27%), the benchmark barometer of risk appetite in the eyes of fund managers.

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 $1.0570. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $91.90.

On the agenda this Monday, to follow as a priority a battery of PMI activity indicators. Synthetic data for the entire Euro Zone, final data for September, will be published at 10:00 a.m. On the American side, we will focus on the industrial PMI at 4:00 p.m. and a speech from J Powell at 5:00 p.m.

KEY GRAPHIC ELEMENTS

The flagship tricolor index came out at the start of the week 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 on Wednesday from the technology sector, and to some extent from the automotive sector.

A pullback on the diamond intervened Friday, clearly.

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 7210.00 points.

Hourly graph

Daily Data Chart