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The release of a diamond chart figure which will have prevailed for 4 months, is now fully validated, a break and a pullback later, with the participation of many sectors. To tech and luxury, initially, were added automobiles, construction, banking to a certain extent and transport.
The surge in long-term rates is naturally directly linked to these declines supported by a certain number of large capitalizations on the Parisian stock market. In particular, the French 10-year saw its yield remain above 3.53. The American 10-year for its part continued its surge beyond 4.85. A movement sustained yesterday by the JOLTS survey on job openings in the United States, beyond expectations, and corroborating a scenario of chronic tensions on the job market. Tensions themselves generating inflation, and therefore monitored like milk on fire by the Fed.
Job openings were higher than expected at 9.61 million in August, shattering the consensus which expected 8.815 million job creations after 8.92 million in July. Once again, the markets interpret this good news for the American economy as bad news for the financial sphere, as it gives credibility to the probability that the American Federal Reserve (Fed) will once again raise its key rates by the end of the year. First verdict next month with a new FOMC (Monetary Policy Committee). The CME’s FedWatch tool predicts a 25 bps increase in Fed Funds with a significant probability of 25.7%. At that time, the Fed will have new benchmarks on consumption, prices and employment.
Operators will therefore closely monitor the conclusions of the ADP survey at 2:15 p.m. this Wednesday, and the monthly NFP report on private employment on Friday.
“Inflation remains more than twice above the targets of central banks on both sides of the Atlantic and convergence towards this target risks being long and uncertain. So we must not declare victory too quickly, a message that central banks should keep until the end of the year”, warn LBPAM strategists.
On the values side, On the CAC 40, only two survivors escaped the gloom of the Parisian market, namely Pernod Ricard (+1.2%) and Danone (+0.6%). Tech and real estate fell with rate increases, Unibail-Rodamco-Westfield lost 4.05%, Worldline lost 3.8% and Capgemini 2.3%. The hit of the day is signed by Vantiva which ends up sharply by 21.9%. The former Technicolor announced the acquisition of part of the activity of the American CommScope, a specialist in connected homes, in exchange for a 25% stake.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in the dark red, especially the Nasdaq Composite (-1.87% to 13,059 points) but also the Dow Jones (-1.29% to 33,002 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.37% to 4,229 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 $1.0460. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $89.00.
On the agenda this Wednesday, to follow in priority the PMI services in final data for the Euro Zone at 10:00 a.m., the ADP survey on American employment at 2:15 p.m. and the American PMI services at 4:00 p.m.
KEY GRAPHIC ELEMENTS
The flagship tricolor index came out at the start of week 39 from the bottom of a “diamond” pattern; 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. It is now the banking sector, and that of construction, which has begun to participate in the downward movement. A pullback on the diamond occurred on Friday 29/09, clearly, before a clear resumption of downward pressure. The bearish message is reinforced.
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 7200.00 points.
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