CAC 40: The American 10-year bond returns to the 4% mark

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Without catalyzing a decline in prices, the renewed tension on the bond market is thwarting the plans of the most bullish on the equity markets. In Paris, the CAC symbolically ended the first session of the week in the red (-0.03% to 7,590 points), in very restrained volumes. It must be said that the President of the Fed, in an interview with CBS, recorded before the publication of the NFP report and broadcast on Sunday evening, definitively closed the door to a first cut in federal rates in March.

The NFP (Non Farm Payrolls) report hit the nail on the head on Friday, as its content exceeded the expectations of analysts and economists on all levels. In detail, the unemployment rate, expected to rise to 3.8%, ultimately remains stable at 3.7% of the active population. Problematic for inflation, the average hourly wage accelerates upwards (+0.6% against a target of +0.3%), and above all, job creations jump, to more than 350,000 in the month of January !

For strategists at Pictet Wealth Management, “it is too early to conclude that the labor market is warming up again, given other data showing a general cooling trend. But the report raises the risk of a re-acceleration of the economy, which, [alimenteraient] certainly bets on later rate cuts, and would reduce their cumulative magnitude over 2024. Powell has clearly opposed a rate cut starting in March, and the report [Non Farm Payrolls] close the door even more.”

Faced with an economy of impressive resilience, the Fed has the luxury of being able to “see it coming”, and the timetable for reducing American rates only suggests, at this stage, a first decline in the second quarter. The cumulative extent of the decline in Fed Funds over 2024 has also been revised downwards. Under these conditions, the American 10-year suddenly rose above 4%.

In Europe, the trend is identical with the yield on 10-year French debt rising to 2.816%, after closing at 2.723% on Friday evening.

On the securities side, Atos experienced a nightmare session (-28.95%) after announcing that it intended to request the appointment of an ad hoc agent to facilitate dialogue with its creditors. Which revives market concerns as the group faces a wall of debt of 3.6 billion euros maturing in 2024 and 2025. Orpea gained 4.4% after announcing a share consolidation by packages of 1,000, which should reduce the number of shares in circulation to 156 million against currently 156 billion(!).

The week will be marked by numerous company publications, with around ten CAC 40 companies due to unveil their results starting on Thursday, including Totalenergies, Vinci, L’Oréal, Hermès and Société Générale and Crédit Agricole SA. View our entire calendar here.

On the other side of the Atlantic, the main equity indices closed Monday’s session in the red, although within relatively narrow margins, like the Dow Jones (-0.71% to 38,380 points) or the Nasdaq Composite (-0.20% to 15,597 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.32% to 4,942 points.

An update on other risky asset classes: around 8 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0760. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $72.90.

On the agenda this Tuesday, priority will be given to retail sales in the Euro Zone at 11:00 a.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. (LVMH, Hermès, Teleperformance, CapGemini, Safran and Publicis).

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