CAC 40: The markets have a meeting with J Powell and C Lagarde

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Encouraged by information on measures to support the economy in China, operators brought the CAC 40 (+1.32% Friday) close to its zeniths. However, the highly anticipated NFP report on American employment did not send a convincing message about a reduction in tensions.

According to local state media cited by Reuters, the politburo of the Chinese Communist Party has decided to stimulate domestic demand and support economic recovery, in particular by implementing a “proactive” budgetary policy.

First of all, the unemployment rate, expected to be stable at 3.9% of the active population, experienced a downward “gap”, falling to 3.7% of the active population. Job creation, which is closely monitored, came out above expectations in the immediate vicinity of 200,000 new units, against a target of 184,000, and a month of October at 150,000. Finally, no truce, quite the contrary , on the dynamics of average hourly wages, up 0.4%.

If this picture is flattering for the American economy, which once again shows its resilience, the fear is that of an impact on prices, even as the inflation curve began to bend significantly. In the wake of this major statistical publication, the American 10-year rebounded to 4.23.

But this statistic must be restated for several elements. “Much of the employment growth this month can be attributed to the end of the UAW and Hollywood strikes,” notes Bank of America. Capital Economics points out that the end of these strikes added 47,000 positions and that, in addition, the public sector created 49,000 jobs in November.

The markets therefore concluded that the NFP report was not likely to unduly “strengthen” J Powell’s speech at the end of the last FOMC of the year on December 13. We will have a final ECB Governing Council this week as well. The opportunity to measure more precisely the probability of a first reduction in key rates, in the first or second quarter of 2024.

On the value side, luxury was in the spotlight in the wake of press reports on a Chinese recovery plan. Hermès gained 1.48% to 1,982 euros, Kering 2.58% to 413.8 euros and LVMH, the largest capital weighting of the CAC40, 3.28% to 739 euros. Airbus gained 2.50%, supported by Deutsche Bank which returned to purchase on the value, judging that the tensions on its supply chain are easing.

On the other side of the Atlantic, the main equity indices ended Friday’s session in positive territory, like the Dow Jones (+0.36% to 36,247 points) and the Nasdaq Composite (+0 .45% at 14,403 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, increased by 0.41% to 4,604 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 $1.0770. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $71.70.

On the agenda this Monday, nothing to eat. We will have to wait tomorrow for the publication of the German ZEW and consumer prices across the Atlantic to reconnect with statistical benchmarks.

KEY GRAPHIC ELEMENTS

The flagship Parisian index, now close to its zeniths, needs to breathe. The Relative Strength Index (RSI) is now in the overbought zone, and the slope of the 20-day moving average (dark blue) is exceptionally high. A first lateral zone of consolidation between 7,406/7,400 and 7,500 points is identified.

FORECAST

Considering the key graphical 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 crossing 7585.00 points would revive the buying tension. While a break of 7406.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart