CAC 40: Powell dampens hopes of a rate cut in March, even May

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“March? It’s too early!” This is not the literal translation, but it is in essence the message that J Powell sent to the rare operators who were still hoping for a first reduction in federal rates at the end of the next meeting of the Monetary Policy Committee. In light of the measured tone of the language used at the press conference, June now seems the most likely option for a start of change on the Fed Funds. The CME Group’s FedWatch tool gives, without the slightest ambiguity, a 100% probability of monetary easing, whatever the extent, in June.

In the meantime, the CAC 40 should start the session in red territory, upset by the sharply lower closing of the Nasdaq Composite (-2.23%). It must be said that for the moment, the quarterly passage on the grid of the Magnificent 7 is not ideal. While waiting for the quarterly copy this Thursday from Apple, Amazon and Meta, Microsoft (-2.69%) and Alphabet (-7.35%) have paid the price for a financial community that is legitimately greedy in its expectations, on these levels valuation…

In terms of statistics, one of the hot spots on the calendar this week will undoubtedly be the publication of the NFP (Non Farm Payrolls) report, a federal report on private non-agricultural employment. A benchmark followed very precisely by the Fed as tensions on the job market can mechanically feed inflation, through wages. In the immediate future, relatively good news on Wednesday with the preview of the survey by the private human resources firm ADP (Automatic Data Processing) with job creations (107,000) very clearly below the target.

SEB made a strong impression (+6.2%) thanks to satisfactory annual sales, crossing the 8 billion euro mark. Elis, for its part, limited its lead to 0.3%. The industrial laundry group published growth slightly below expectations in the fourth quarter but raised its cash flow and margin forecasts for the 2023 financial year. Vivendi gained 1.6% after confirming its plan to split into several entities , now going from three to four, with the stated aim of reducing its conglomerate discount.

On the other side of the Atlantic, the main equity indices ended Wednesday’s session in the red, like the Dow Jones (-0.82% to 38,150 points) or the Nasdaq Composite (-2 .23% at 15,164 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, depreciated by 1.61% to 4,845 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 $1.0780. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $75.90.

On the agenda this Thursday, the first estimates of inflation in January in the Euro Zone at 11:00 a.m., the Bank of England’s monetary policy decision at 1:00 p.m., weekly registrations for unemployment benefits at 2:30 p.m. as well as the ISM manufacturing PMI at 4:00 p.m.

KEY GRAPHIC ELEMENTS

The bevel (wedge) which had predominated until then was broken in its momentum by the formation of a large gap and an increase in gains during the session itself on Friday January 26. A major challenge now awaits the CAC: the creation of a series of absolute records. To do this, the participation of the luxury and spirits sectors alone would be insufficient.

In the immediate future, taking a breather from the lessons is the preferred option during this last part of the week. With a close eye on the stocks that have climbed the most since mid-January.

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.

Hourly graph

Daily Data Chart