CAC 40: American employment under the microscope, the monetary calendar in question

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If the CAC 40 closed Thursday’s session in the green (+0.52% to 7,450 points), this first week of the year remains marked by profit-taking, catalyzed by the geopolitical situation at different points of the planet, and by a return to reality for many operators regarding the timetable for lowering rates.

The CME’s FedWatch tool now puts the probability of a reduction in federal key rates at 66% in March, while this figure peaked at 84% at the end of 2023. The tool is developed by CME Group (from the merger of the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT)) from the future on Fed Funds.

The Fed’s “Minutes”, published Wednesday evening, somewhat confirmed this. This traditional report from the Fed’s last monetary policy meeting. In a word, the markets are returning to more realism about the timetable for rate cuts. Especially on the first. The Federal Reserve’s minutes, published after the European markets closed, set the record straight a little. They showed that its members are overall much less confident than the market in the scenario of a first monetary easing from March.

The latest statistics published yesterday in the United States have also sowed doubt among investors regarding a rapid easing of the monetary policy of the American Federal Reserve. According to the monthly survey published by ADP, the private sector in the United States created more jobs than expected, at 164,000 in December against 120,000 consensus and after 103,000 creations the previous month. As for the essential registrations for unemployment benefits, these fell from 18,000 over one week to 202,000 new registrations. It is in this tense context that operators will read the federal monthly report (NFP), at 2:30 p.m. Here are the different consensuses: +0.3% for average hourly wages, 168,000 job creations, and an unemployment rate up slightly to 3.8% of the active population. Remember that the scope of this report is private non-agricultural employment.

On the value side, Total (+1.20% to 62.48 euros) alone will have made it possible to stop the hemorrhage on the French flagship index, in the wake of the closure of a major oil field in Libya adding pressure extra on the black gold offer. Alstom recovered some colors (+2.4%) after losing almost 10% the day before, in reaction to a negative analyst note from Barclays. The railway equipment manufacturer announced the signing of a contract in Saudi Arabia for its experimental tram project. Nexity gained more than 3.5%, supported by a positive rating from TP ICAP Midcap which appreciates the real estate developer’s latest strategic initiative. The red lantern of the CAC 40, STMicroelectronics, on the other hand, suffered the blow (-3.95%) weighed down by the resounding warning on Mobileye’s results. The company specializing in assistance and autonomous driving is currently plunging 26% in New York even though it has warned that its 2024 revenues will be well below expectations.

On the other side of the Atlantic, the main equity indices ended in mixed order, in reaction to the renewed tension in 10-year Treasuries at around 4%. The Nasdaq Composite, very sensitive to the monetary issue, lost 0.56% to 14,150 points. The Dow Jones, rich in banking stocks, survived by gaining 0.03% to 37,440 points. Finally, the S&P500, the reference barometer of risk appetite in the eyes of fund managers, fell by 0.34% to 4,688 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 $72.70.

On the agenda this Friday, to follow the consumer prices in first estimates for December in the Euro Zone at 11:00 a.m. and the NFP report on American private employment at 2:30 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 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.

Hourly graph

Daily Data Chart