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The pre-opening data suggests a euphoric start to the session on the CAC 40, the day after the Fed’s FOMC, a meeting whose general tone was much more accommodating than anticipated. So of course the Fed left its rates unchanged, but its cumulative rate cut projections for 2024 are increasing, from 50 to 75 bps, still far from market consensus. All the same, it illustrates a change of state of mind at the head of the powerful monetary institution.
According to dot plots, central bank members’ median projection for 2024 policy rates is 4.6%, implying a total of 75 basis points (0.75%) of rate cuts next year (or three cuts of 25 basis points). According to Bloomberg, economists did not expect as much. Following these announcements, the yield on the 10-year US sovereign bond collapsed, falling to less than 4% (3.964%), its lowest level since the end of July.
The ECB will follow in the footsteps of its American counterpart this Thursday. “No interest rate change is expected as part of the ECB meeting […] says David Zahn, Head of European Fixed Income, at Franklin Templeton. “However, the focus will be on two points: the discussions around quantitative tightening (QT) and balance sheet reduction, but also on the question of knowing to what extent it is appropriate to postpone the rate cuts currently anticipated by the walk.”
“The ECB’s new projections for growth and inflation should be the main outcome of this meeting. Its previous expectations were for a rise in energy prices for the winter and, in the long term, inflation higher than the ECB’s target objective of 2%. The situation could however evolve downwards.”, for Patrick Barbe, Head of European Investment Grade Fixed Income at Neuberger Berman.
In terms of statistics, note the good surprise across the Atlantic in PPI (producer price index), a leading indicator of inflation, below expectations excluding food and energy, elements considered volatile.
On the values ​​side, Arkema grew by 4.5%, driven by an increase in purchasing advice from UBS. Carrefour lost 3% while according to the Kantar barometer over the period from October 30 to November 26, E.Leclerc saw its market share jump compared to the comparable period of 2022, rising to 24.6%. (+1.6%) while that of Carrefour fell by 0.4% to 18.8%. Solutions 30 gains more than 6% after taking stock of its ambitions, with the group aiming in particular for a double-digit gross operating margin in all its geographies.
On the other side of the Atlantic, the main equity indices ended Wednesday’s session sharply higher, like the Dow Jones (+1.40% to 37,090 points) or the Nasdaq Composite (+1 .38% at 14,733 points). The S&P500, the reference barometer of risk appetite in the eyes of fund managers, gained 1.37% to 4,707 points for a nice group shot.
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 $1.0890. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $69.70.
On the agenda this Thursday, to follow in priority the European monetary policy decision at 2:15 p.m., and the subsequent press conference at 2:45 p.m. In the meantime, traders will be tracking important U.S. indicators, like retail sales and weekly jobless claims.
KEY GRAPHIC ELEMENTS
Illustrating the market’s feeling of euphoria in this final stretch of the year, the CAC 40 should reach new zeniths from the opening of the session. We will observe to what extent all sectors participate in the increase, and if so, in what transaction volumes. Positive review.
FORECAST
Considering the key graphical factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.
This bullish scenario is valid as long as the CAC 40 index is above support at 7406.00 points.
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