CAC 40: Resistance to profit-taking temptations

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The hawkish remarks of the President of the NY Fed will only have temporarily slowed down the main European markets. The latter declared that the members of the monetary policy committee were not, for the moment, “really talking about rate cuts at the moment”, on the show Squawk Box of CNBC.

“We are very focused on the question before us, which is, as Chairman Powell said, whether monetary policy is tight enough to get inflation back to 2%. That is the question at hand. to us,” he said. These statements therefore contradict the words of Jerome Powell, who admitted on Wednesday evening that members of the Fed had discussed rate cuts.

“The central bankers’ ball was not easy last week”, for Romane BALLIN, bond manager at Auris Gestion, who gives some keys to understanding, with hindsight, the major monetary meetings of the past week, may not yet be completely digested.

“If some explain this unexpected pivot by recent polls in the United States which are quite unflattering for Joe Biden, particularly in certain key states, the climate was in any case one of euphoria on the equity and credit markets while interest rates have, once again, clearly relaxed.”

“Several points of attention from the ECB side: 1/Christine Lagarde explicitly mentioned that rate cuts were not a subject of discussion (“no discussion, no debate on this question”), 2/she also clearly indicated that the fall in sovereign rates in recent weeks was excessive, 3/finally, monetary tightening was even reinforced by a notch through the accelerated reduction in the size of the balance sheet.”

However, the market continues to demonstrate, at this stage, very impressive resistance to profit-taking temptations.

In terms of statistics on Monday, the IFO business climate in Germany was down, below expectations, at 86.4.

On the value side, ArcelorMittal jumped 5.5% in reaction to a consolidation operation in the sector, with the takeover of the American group US Steel by Nippon Steel, its Japanese rival. Still in basic materials, oil and oil prices were boosted by the 3% rebound in oil prices after the attacks in the Red Sea. In Paris, Totalenergies increased by 1.1%, Vallourec appreciated by 3.6% while Technip Energies gained 3.1% at the close.

On the other side of the Atlantic, the main equity indices finished once again in the green, anecdotally for the Dow Jones (stable at 37,306 points), less anecdotally for the Nasdaq Composite (+0.61 % at 14,904 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.45% to 4,740 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 $1.0940. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $72.00.

On the agenda this Tuesday, the final consumer price index data for November in the Euro Zone at 11:00 a.m., as well as housing starts and building permits across the Atlantic at 2:30 p.m. For the rest of the week, operators will be particularly attentive to the release of the PCE index, the preferred gauge of the American Federal Reserve (Fed), which will be published Friday afternoon. Without forgetting the consumer confidence index (Conference Board) tomorrow.

KEY GRAPHIC ELEMENTS

The creation of new zeniths on the CAC, the high point of the autumn rally, will have crowned a remarkable federation movement. The first signs of the need for breathing have nevertheless appeared since Thursday, precisely since these new records were set. Neutral opinion proposed at the start of the week due to the divergence observed between price and RSI in hourly view.

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 8000.00 points would revive the buying tension. While a break of 7406.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart