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Second session of the year in very bright red on Wednesday for the CAC which lost 1.58% to 7,412 points, in volumes which tend to normalize. The decline is therefore accelerating, with profit-taking based on certain sectors (technology, automobile, luxury), while geopolitical fears combine with a return to more realism on the rate cut timetable. A market psychology confirmed, post-market, by the publication of the Fed Minutes, which showed that the members of the Board are overall much less confident than the market in the scenario of a first monetary easing as of the month Of March.
“In the United States, the desire of the monetary authorities is to support a soft landing of the economy. To date, the probability of such an outcome is high but still requires the vigilance of the Central Bank,” warns Emmanuel Auboyneau , AMPLEGEST Associate Manager.
“Leaving the feeling that the fight against inflation has been won could cause a revival of confidence, and therefore of consumption and investment. Such a rebound would undoubtedly be poorly received by the markets while the economic deceleration is only just beginning. inflation stands at 3.5%, which is no longer very far from the objective. But points of vigilance remain, particularly in housing. Rents represent 30% of the inflationary index and they must be monitored in a context of remaining housing crisis.”
The geopolitical risk in the Red Sea, combined with the liquidation in Lebanon of the number two of the political branch of Hamas, weighs on the appetite for risk on the financial markets.
“If the inflation / central banks theme should naturally continue in 2024, this new year will not be able to ignore, once again, (geo)political risks as the subjects are numerous in the four corners of the globe” warns Thomas Giudici, head of the bond management of 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.”
“After taking a back seat for a while, the war in Ukraine is also coming back to the forefront with the recent intensification of bombings,” continued Mr. Giudici.
Tensions on the bond markets, particularly on the yields of 10-year US Treasury bonds, have strained operators. These 10-year Treasuries surreptitiously rose above 4% before easing again.
In terms of statistics, American manufacturing activity recovered more than expected in December, to 47.4 points compared to 46.4 in November, while remaining below 50 points, a level marking the border between contraction and expansion of activity. As for job offers in the United States, for the month of November, they fell more than expected, according to the Jolts survey to 8.79 million against 8.821 million anticipated by the consensus and after 8.852 million offers in october. Then, the markets will read the minutes of the last meeting of the American Federal Reserve.
On the value side, as we specified in the preamble, the technology, luxury and automobile sectors were struggling, like some of its representatives in compartment A of the rating, Soitec (-5.02 %), LVMH (-3.82%) and Valeo (-5.90%).
On the other side of the Atlantic, the main equity indices experienced a difficult session, as illustrated by the Dow Jones (-0.76% to 37,430 points) and the Nasdaq Composite (-1.18% to 14,592), penalized by the rise in government bond yields. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.80% to 4,704 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 $1.0930. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $73.40.
On the agenda this Thursday, to follow in priority the PMI Services index in final data for December in the Euro Zone at 10:00 a.m., the ADP survey on American private employment at 2:15 p.m. and weekly registrations for unemployment benefits. Valuable benchmarks before the statistical high point which will be reached tomorrow with the publication of the NFP (Non Farm Payrolls) report, the monthly federal report on private employment.
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 points were quickly broken, however, this breathing phase would be initiated. This level, weakened, still holds. It constitutes a technical safeguard under careful observation.
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 7585.00 points.
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