CAC 40: Optimism on rates

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Against a backdrop of optimism on the issue of rates, the Parisian market is expected to rise substantially at the opening this Wednesday, after the long Christmas break. Remember that the market was closed on Monday December 25, naturally, but also yesterday Tuesday the 26th. Enough to digest not only the turkey with chestnuts, but also the latest statistics to date arguing for a pivot by the Fed.

IN particular, published Friday as the statistical highlight of the week, the PCE price index, the most followed by the American Federal Reserve (Fed), fell against all expectations by 0.1% in November. On an annual basis, the increase is limited to 2.6% year-on-year in November, compared to 2.9% the previous month. Excluding volatile elements such as energy and food, the basic “core PCE” inflation index stands at 3.2%, against a consensus of 3.3% and after 3.4% in October.

The day before, growth was revised significantly downward to 4.9% at an annualized rate, compared to 5.2% for previous estimates. Enough to fuel the scenario of a more lenient Fed, consistent with the tone adopted by J Powell at the end of the last FOMC of the year.

Swiss Life AM strategists continue to “count on a deceleration of the American economy in the first half of the year, even if its magnitude should be less significant than expected after the Fed’s change of tone in December.” A tone which was then surprising by its accommodating tone.

On the value side, Nexity recorded a nice increase (+10.75%) after announcing that it had entered into exclusive negotiations with the asset manager Bridgepoint to sell its property administration activities to it on the basis of a value business of 440 million euros. Ubisoft limited its decline to 1.45%, penalized by new restrictions planned by the Chinese authorities to curb player spending on online games. Its Chinese partner and video game giant Tencent lost 12.35% on the Hong Kong Stock Exchange.

On the other side of the Atlantic, the main equity indices ended the Tuesday 26/12 session in the green, like the Dow Jones (+0.43% to 37,545 points) or the Nasdaq Composite (+0.54% to 15,074 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.42% to 4,774 points. A nice group shot in short.

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 $1.1050. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $75.50.

On the agenda this Wednesday, to follow as a priority the Richmond Fed manufacturing index at 4:00 p.m.

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. In the immediate future, it is a healthy wedge consolidation (wedge) which is taking shape. An exit from the top, subject to an acceleration in transaction volumes, would announce the formation of a final bullish leg before a long breather in prices.

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.

Hourly graph

Daily Data Chart