CAC 40: Will J Powell stay straight in his boots?

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The CAC 40 surreptitiously set a new historic record, at 7,582.47 points on Tuesday, before turning around during the session, after the publication of consumer prices in the United States. In the end, the flagship Parisian index will have contracted by 0.11% on the eve of the last American monetary policy meeting of the year.

For the month of November, annualized prices were up 3.1%. Excluding food and energy, they increased by 0.3% monthly, in line with expectations. On the broadest basket of products, the consumer price index increased by 0.1% over one month in November, where the consensus was banking on stability of this indicator compared to October.

“The Federal Reserve will surely be keen to calm market expectations regarding the next rate cuts,” says Emmanuel Auboyneau, Managing Partner of Amplegest. “The recent and massive drop in long-term rates is explained by encouraging inflationary figures and by economic activity in slight decline. The rise in short-term rates is very probably over but Jerome Powell will explain that vigilance must always be required. He These will be elements of language whose purpose will be to alleviate the pressure from investors and to give themselves time.”

See you at 8:00 p.m. for the decision itself and the new economic forecasts, and at 8:30 p.m. for the traditional press conference. The CME’s FedWatch tool suggests a chance (up to 40% all the same) of a first loosening of the monetary tap by 25 bps in March. As for the American 10-year, it fell back towards 4.20.

The ECB will follow in the footsteps of the Fed tomorrow, with the outcome of its final Council of Governors in 2023.

Operators took note of the ZEW confidence index in the Euro Zone’s leading economy, at 12.8 points, beyond expectations. “Despite the current budget crisis, Germany’s assessment of the situation and economic expectations have improved slightly again. This is due to the fact that the share of respondents expecting a fall in interest rates share of the ECB in the medium term has doubled. This is good news for the German construction sector, for which we see significantly more optimistic expectations this month. Likewise, the share of respondents expecting a further decline in inflation rates is falling”, comments ZEW President Professor Achim Wambach on the survey results.

On the values ​​side, the red lantern of the CAC, Renault lost 1% after announcing the sale of around 5% of the capital of its partner Nissan, an operation which will result in a significant accounting loss in its net income. Publicis, on the other hand, dominated the debates by gaining 1.35% to 82.40 euros.

On the other side of the Atlantic, still no profit taking, on the eve of the FOMC: the Dow Jones gained 0.48% to 36,577 points and the Nasdaq Composite 0.70% to 14,533 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.46% to 4,643 points.

An update on other risky asset classes: around 8 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0780. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $68.10.

On the agenda this Wednesday, priority will be given to producer prices in the United States at 2:30 p.m. and the outcome of the FOMC at 8:00 p.m. The press conference, which will be well attended, is scheduled for 8:30 p.m. (Paris time).

KEY GRAPHIC ELEMENTS

The flagship Parisian index, now at its zenith, 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