CAC 40: A little pressure with American inflation

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Penalized by Wall Street after the publication of consumer price indices, the Parisian market fell below its historic highs, contracting by 0.84% ​​to 7,625 points. Prices across the Atlantic, including food and energy, increased at an annual rate of 3.1%, representing a much smaller slowdown in inflation than the target, at 2.9%, suggested. Enough to further reduce hopes of cumulative declines in Fed Funds yields over the year 2024. The firmness (understanding the persistent tensions) on the job market, as well as the thorny question of rents (they are part of the calculation methodology) largely explain these worrying figures.

THE Treasuries 10-year government bond yields continued to rise, now close to 4.30%.

So-called core inflation, which excludes volatile food and energy prices, remains stable at 3.9% over one year, where the consensus compiled by the Wal Street Journal also counted on a weaker progression, of 3.7%

“Good news [Bad news] is once again bad news, but over the past few years, the rising profits that accompany higher inflation have more than overwhelmed the valuation headwinds from rising interest rates, as evidenced by American stocks which are trading near their all-time highs” tends to put Joshua Jamner, analyst at ClearBridge Investments, a subsidiary of Franklin Templeton, into perspective.

On the values ​​side, the only company in the CAC 40 to have so far published this week, Michelin jumped 6.9%, signing by far the strongest progression in the CAC 40. The bibendum largely exceeded expectations on its cash generation, benefiting of its move upmarket and its ability to drive prices upwards. The group also announced a share buyback program of up to 1 billion euros over three years.

The CAC 40 was penalized by the decline in tech stocks, STMicroelectronics which lost 3.5% and Dassault Systèmes which returned 1.3%.

Strongest increase in the SRD this Tuesday, the pleasure boat specialist Beneteau recovered 7.5% after raising its financial objectives for 2023. The group published a record turnover for last year.

Air France-KLM fell 2.6%, weighed down by a deterioration in Redburn’s opinion from “neutral” to “sell”.

Note that the Chinese market is closed this week due to the New Year festivities. “It is difficult to plan in the short term on this market as the successive measures taken by the Chinese authorities seem insufficient in the face of sulking investors” notes Sébastien Grasset, Director of Management at Auris Gestion. “If the latest measures to date (eg announcements of expanded intervention by the state fund Huijuin Investment, sweeping away at the CSRC, very strict rules to reduce the volumes of short sales, etc.) seem to have enabled the Chinese stock markets to regain colors, let’s remain cautious because if the sun (measures of the authorities) has made an appointment with the moon (market sentiment and flow), as the “Singing Madman” reminded us, “the moon is not there and the sun is waiting …”.”

On the other side of the Atlantic, the main equity indices ended Tuesday’s session in the red, like the Dow Jones (-1.35%) and especially the Nasdaq Composite (-1.80%). ). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.37% to 4,953 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 $1.0710. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $77.60.

On the agenda this Wednesday, to follow as a priority the Q4 GDP in first estimates 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).

A first divergence between price and RSI, between the last two high points (14/12 and 31/01) becomes clear.

Furthermore, a resistance zone is gradually building on the historic highs, in the form of a double peak below 7,700 points.

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 7700.00 points.

Hourly graph

Daily Data Chart