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The confirmation of a significant easing of tensions on the American 10-year bond will have allowed the main equity indices in the Euro Zone to consolidate their prosperous week on Friday. The CAC will have contracted very slightly by 0.19%, preserving the symbolic threshold of 7,000 points at 7,047 points, and the DAX will have gained 0.30% to 15,189 points.
The bond landscape will have finally transformed the test on Friday with the verdict of the NFP (Non Farm Payrolls) report on American private employment, a report unambiguously showing a decline in tensions. all indicators point to an easing of tensions.
The unemployment rate, first of all, expected to be stable at 3.8%, has actually increased slightly to 3.9% of the active population. Average hourly wages do not increase by 0.3% monthly, as the consensus predicted, but only by 0.2%. Finally – and the figure is spectacular – job creations collapse by half (150,000 in October compared to 297,000 in September), again far from the target, close to 175,000.
A publication which should therefore reassure the Fed in its message, without formally excluding the option of a final increase in key rates. The CME Group’s FedWatch tool also allocates a probability – low but not negligible – of 10% to this scenario. This federal publication, the statistical highlight of the week, did not hinder the easing movement at work on the bond market initiated since Thursday and the Fed’s declarations. Quite the contrary since the American employment report lends credibility to the thesis that the rates of the American institution have reached their peak.
As a reminder, on Wednesday, the Fed, as expected by the market, kept its rates unchanged on Wednesday evening. Its president, Jerome Powell, acted cautiously during his press conference. “Powell stressed that the Fed is aware of the current risks and uncertainties, and that it will proceed with caution,” notes IG France.
“Powell obviously remained cautious on ‘declining inflation,’ saying the disinflation process will be bumpy but we feel significantly less anxiety than a few months ago (‘we are making progress’). He notably said that the risks to inflation were more balanced. He also appeared significantly less anxious about wages, specifying that he thought that their progression was now consistent with 2% inflation in the long term,” explains Bastien Drut of CPR AM.
On the values side, it is the files which have recently suffered the most which have made their contribution, like Atos (+5.50%), Teleperformance (+5.72%), or Wordline (+6.% ) in the technology sector, or Valeo (+6.25%) or Plastic Pmnium (+6.96%) in automotive equipment. Conversely, stocks which had held up rather well this fall declined, such as Accor (-3.26%) or TotalEnergies (-3.50%).
On the other side of the Atlantic, the confirmation of an ebbing of tensions on the bond market will have enabled the Nasdaq Composite to amplify its rise (+1.38% to 13,478 points) while the Dow Jones does not will have gained only 0.66% on Friday to 34,061 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.94% to 4,358 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 $1.0740. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around 8100$.
On the agenda this Monday, to follow as a priority the PMI services activity indicators, in final data for October in the Euro Zone at 10:00 a.m. as well as the Sentix of investor confidence in the Euro Zone at 10:30 a.m.
KEY GRAPHIC ELEMENTS
The technical situation on the CAC 40 is quite readable: the index came out of a flattened diamond (diamond) pattern on September 25, which pushed the market into the red. Two pullbacks later, it was the turn of the symbolic threshold of 7,000 points to suffer the threat of prices, a threat put into effect on October 18, 19 and 20 in increasing trading volumes.
After the formation of a congestion figure near 6,800, last week was the scene of a significant technical reaction, orchestrated and amplified by the values which had initially been the most battered. This energy, exhausted early, should give way to a rapid filling of the gap of November 2, just below the key threshold of 7,000 points.
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 7200.00 points.
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