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While the likelihood of a reduction in Fed Funds yields from March has contracted slightly, although still very strong, the Parisian market started 2024 on a slightly negative note, its flagship index, the CAC 40, contracting by 0.16% to 7,530 points, in still low volumes for this very first session of the year. The American markets will have had a negative impact, particularly on the technology sector front, with the decline of 3.58% in Apple, whose opinion was downgraded from “hold” to “underweight” by Barclays. Analysts, led by Tim Long, highlight their fears about the dynamics of demand for iPhones, the Apple brand’s extremely famous smartphone.
In terms of statistics, the industrial PMIs came out with no significant difference compared to the first estimates, at 44.4, against 44.2. This is a 7-month high.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, provided the following insights: “The Eurozone manufacturing sector remains mired in a sharp contraction, and December HCOB PMI data shows little improvement in the economic situation compared to the previous month. The survey continues to highlight marked declines in activity and new orders, the decline in sales having slowed only slightly compared to its sustained pace in November. Sluggish demand reflects the current economic gloom, which is also reflected in our HCOB nowcast model, which suggests a decline in the region’s GDP in the fourth quarter. If true, this new quarterly contraction would confirm the start of a technical recession in the euro zone since the third quarter of 2023.”
The market approaches 2024 with the fear that geopolitics will break the upward momentum of the rally at the end of 2023. “If the inflation / central banks theme should naturally continue in 2024, this new year will not be able to ignore, once again, the (geo)political risks as the subjects are numerous in the four corners of the globe”, warns Thomas Giudici, head of bond management at Auris Gestion. “In the Middle East first of all, where we thought the conflict was quite limited but which could ultimately have more repercussions on the economy than initially anticipated: tensions in the Red Sea have in fact increased a notch in in recent days with the entry of an Iranian warship into the area, reviving fears of an extension of the conflict, the day after American strikes on three Houthi ships, in response to attacks on the carrier Maersk, in part of the multinational naval force responsible for protecting ships in the area.”
On the values ​​side, two sectors stood out on Tuesday. The oil sector already, supported by the rebound in black gold prices after new attacks in the Red Sea and the renewed tensions in the Middle East. Vallourec gained 1.35%, Technip 1.37% and Schlumberger 1.58%. The automotive sector then, thanks to the good figures published for the French market in 2023. Renault gained 1.15%, Plastic Omnium 1.58% and Valeo 1.69%.
On the other side of the Atlantic, the differences were significant, between the Nasdaq Cpmposite (-1.63%), very sensitive to expectations of falling rates, and the Dow Jones (+0.07%); very sensitive too, but in the opposite way, due to its composition rich in banking stocks. The S&P500, the reference barometer of risk appetite in the eyes of fund managers, played to the averages by contracting 0.57% to 4,742 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 $1.0960. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $70.40.
On the agenda this Wednesday, to follow as a priority, across the Atlantic, the ISM manufacturing PMI and new job offers (JOLTS) at 4:00 p.m. as well as the Fed Minutes, traditional chronological report of the debates during the last monetary policy meeting.
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 has emerged, since the slowdown of December 14, remarkable in terms of the size of the red body of the corresponding candle. 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.
If the 7,400 were quickly broken, however, this breathing phase would be initiated.
FORECAST
Considering the key graphical factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.
This bearish scenario is valid as long as the CAC 40 index is below resistance at 7695.00 points.
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