(News Bulletin 247) – The digestion of the figures for US inflation, stronger than expected, relatively easy at first, becomes a little more problematic as concerns grow on the geopolitical front between Moscow and NATO, whose three-cushion billiards can cause additional pressure on energy prices, the European Union being particularly dependent on the supply of Russian natural gas. Tensions in the bond markets once again caused the Nasdaq Composite to retreat on Friday. The CAC lost 1.27% on Friday to 7,011 points. It is expected to fall sharply on Monday.
As a reminder on US inflation, a statistical highlight on Thursday, the highly anticipated consumer price indices came out markedly higher, beyond expectations, and thus raising fears of a faster and stronger turn of the screw. from the Fed. Excluding food and energy (elements considered volatile), prices rose monthly by 0.6% in December, against a consensus of +0.5%. Already in November, these prices rose by 0.6%. At an annualized rate, prices are rising by 6%, unheard of since August 1982. Including energy and food, annual inflation is 7.5%. The 10-year Treasuries immediately crossed the 2% threshold.
What relaunch the scenario of a “double” increase in federal rates next month, namely a rise of 50 bps at once. At the risk of weighing heavily on growth records.
To make matters worse, the next day, Friday, appeared the preliminary data for the US consumer confidence index according to research from the University of Michigan, down sharply to 61.7, completely missing expectations.
“The end of asset purchases is expected to continue through early March ahead of the March 15-16 FOMC when the Fed is expected to announce the first rate hike, as well as timing for subsequent ones.” notes Vincent Boy (IG France)
On Thursday, St. Louis Fed President James Bullard even said that he had become “drastically” more restrictive in light of the level of the published figures, and that he now wanted interest rates to be raised by 100 basis points by July, in just three central bank meetings. The estimated probability of a 50 basis point rate hike in March jumped from 24% to 89% in two days, according to CME Group’s FedWatch barometer, and government bond rates soared simultaneously.
“Beyond monetary policy, markets will be very attentive to the situation in Ukraine after the United States (again) made it clear that Russia could invade Ukraine at any time now. They added that Moscow could come up with a surprise pretext to act, but so far Russia has shown no signs of further aggression following the build-up of its troops on the border.”
Within the CAC 40, some files have nevertheless escaped the heavy decline in their benchmark index. This is particularly the case of Worldline, which rebounded by 5.8% while the Apollo fund seems on the point of acquiring the payment terminal activity, inherited from the acquisition of Ingenico, for an amount close to 2 .3 billion. Sanofi rose 1%, driven by an upgrade to UBS’s recommendation, while Pernod Ricard continued to ride (+0.6%) on its solid half-year results published the day before.
On the other side of the Atlantic, the main equity indices ended Friday’s session in bright red territory, like the Dow Jones (-1.43% to 34,738 points) but especially the Nasdaq Composite ( -2.78% to 13,791 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.90% to 4,418 points.
A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.1340. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $94.10.
To follow in priority, on the agenda this Monday, the respective speeches of J Bullard (Fed) (CNBC interview) and Mrs. Lagarde (ECB) before the European Parliament.
KEY GRAPHIC ELEMENTS
An oblique line of support gave way on Monday under the sectorally federated assaults of the selling camp, in a very high level of participation. This release of selling energy at this stage, in a single session (24/01), constitutes a major technical fact which characterizes the hypersensitivity of a market which is increasingly and continuously questioning the levels of valuation of the shares. . The entry into the bear market is not formally characterized, but the situation calls for the greatest vigilance under this slant. She was reinstated at the very end of the week. We put her under close surveillance. In the immediate future, plotting a wedge in hourly data is not very engaging. The three-color flagship index came out on Thursday, from below, in accelerating volumes, before starting to rise again. A final exit from the bottom of this bushel is the preferred option.
FORECAST
In view of the key graphic 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 trading below the resistance at 7120.00 points.
Hourly data chart
Chart in daily data
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