CAC 40: The magnifying glass is focused on core PCE prices

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The CAC 40 continued its consolidation phase below the zeniths, in the immediate vicinity of the symbolic threshold of 8,000 points, in a market which is wondering about the timetable for lowering rates on both sides of the Atlantic. In this regard, we will have an important indicator this Thursday with the publication of PCE (personal consumption expenditures) prices, the Fed’s preferred measure in its assessment of price dynamics.

“The consensus stands at +0.4% for “core” PCE inflation in monthly variation, which would be the strongest progression observed since February 2023. On the other hand, the consensus is +2.8% in annual data, which would mark a continuation of the improvement towards the Fed’s objective of 2%, knowing that the figure stood at 2.9% in January”, notes Alexandre Baradez (IG France).

Note that the core PCE (excluding food and energy), due to its calculation methodology different from the CPI, is indeed the Fed’s preferred inflationary gauge, the one which influences it the most in the construction of its monetary strategy. And it is clear that the return to target inflation of 2% is certainly well underway, but that it is not a linear path.

Yesterday, operators accepted the figures for US Q4 GDP growth in preliminary data, at +3.2% at an annualized rate, a slight downward revision compared to advanced data. Note that preliminary data is released after the very first estimates, and before the final data.

“The market now anticipates three rate cuts from the Fed for this year (75 basis points or 0.75%), compared to more than six cuts anticipated at the start of the year. For the European Central Bank too, expectations of rate cuts in 2024 have been halved since the start of the year, to less than 100 basis points now,” notes Xavier Chapard of LBPAM.

On the values ​​side, very rich and dense news to report with occasionally very large daily differences on certain files.

Teleperformance fell 14.14%. The plunge in the customer relations group is linked to the announcements of a Swedish fintech, Klarna, which revealed significant feats of its AI assistant in terms of customer relations, which makes the market fear a disappearance of specialized companies in this sector. Worldline lost 10.2% after revealing lower-than-expected growth in the fourth quarter as well as medium-term targets considered unambitious by analysts. Atos finally gained 4% after noting the failure of negotiations to sell its historic activity to Daniel Kretinsky while communicating unsurprising 2023 results. The bitoech OSE Immunotherapeutics took 51.6% after announcing a partnership with the American giant Abbvie to develop an experimental treatment to treat severe and chronic inflammation.

On the other side of the Atlantic, the main equity indices contracted slightly on Wednesday, like the Dow Jones (-0.06%) and the Nasdaq Composite (-0.55%) on the eve of the publication of key figures on inflation. The S&P500, the reference barometer of risk appetite in the eyes of fund managers, symbolically returned 0.17% to 5,069 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 $1.0830. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $78.10.

On the agenda this Thursday, to follow in priority the core PCE prices at 2:30 p.m. as well as the Chicago PMI activity index at 3:45 p.m.

KEY GRAPHIC ELEMENTS

The index crossed 7,700 points on gap and entered an unexplored navigation zone between 7,700 and the symbolic threshold of 8,000 points. The oscillatory RSI (relative strength index) is recovering, suggesting a final bullish surge before consolidation that can be broken down into several legs. We will carefully monitor the possible formation of a gap of shortness of breath or exhaustion in the next sessions.

Ultimately, breathing towards the orange trend line (mm50d) is the preferred option.

FORECAST

Considering the key graphical factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that crossing 8000.00 points would revive the buying tension. While a break of 7700.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart