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No new records for the CAC 40 on Tuesday, the flagship French index having ended the session down slightly by 0.30% to 7,932 points, still stuck in a phase of lateralization below the psychological threshold of 8,000 points. If this threshold has attracted prices in recent weeks, it is now establishing itself as an intermediate resistance under which a breathing phase takes place. And this as we approach two major meetings: the outcome of the ECB Governing Council on Thursday, and the NFP (Non Farm Payrolls) report on American private employment on Friday.
François Rimeu, senior strategist at La Française AM, thinks that “the ECB should try to buy time regarding its future decisions on lowering interest rates.”
“At the press conference, Christine Lagarde will likely keep a moderate tone and reaffirm the ECB’s firm commitment to bringing inflation back towards its 2% target. The economy is more resilient and inflation is falling more slowly than which was initially planned a few weeks ago. Therefore, a change in monetary policy stance is less urgent. The ECB still has time and can wait until June. We do not anticipate any notable movements financial markets following the ECB meeting.”
The resilience of underlying inflation, as well as the difficulties encountered by the German economy, the most powerful in the Eurozone, will inevitably be discussed.
The Sentix investor confidence index in the Euro Zone showed a slight increase yesterday although in negative territory, at -10.5. The institute provided the following commentary on the leading economic power in the Euro Zone: “The German economy is increasingly turning into a ‘ghost train’. Given the improvement in global data, it is becoming increasingly obvious that it is Germany’s atypical, unfortunately ineffective, economic policy that is preventing a complete economic recovery in the heart of Europe. The recession remains current and the data even continues to deteriorate. situation is as fragile as it was in July 2020 in the middle of the Covid crisis.”
Concerning Friday’s NFP report, operators will not be monitoring the health of employment, which is undoubtedly very good, but the persistence of tensions, particularly wage tensions, which contribute to the resistance of the inflationary phenomenon that the Fed has been trying to contain since the month. New job offers, weekly registrations for unemployment benefits and the ADP survey will, on this point, punctuate the week, before the NFP on Friday. After more than 350,000 positions created in January in the private sector (excluding agriculture), the consensus does not exceed 200,000 for the month of February.
In the statistical chapter on Tuesday, to report the final data of PMI services in the Euro Zone, unsurprisingly, in the immediate vicinity of the 50 point mark which separates, by construction, an expansion from a contraction of the sector considered. Disappointment on the other hand on the American ISM services, which admittedly narrowly missed the target by coming out in February at 52.6.
On the value side, Thales was the stock in sight this Tuesday. The defense and technology group finished at the top of the CAC 40 thanks to a sharp increase of 9.07% to 150.90 euros. The company generated cash flow well above expectations and slightly better operating profitability than expected. Thales took with it Dassault Aviation (+3.2%), which owns 26% of its capital.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in the red, like the Dow Jones (-1.04%) and especially the Nasdaq Composite (-1.65%). ). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.02% to 5,078 points, preserving the symbolic threshold of 5,000 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 $1.0860. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $78.40.
On the agenda this Wednesday, to follow as a priority across the Atlantic, the ADP employment survey at 2:15 p.m., and new job offers (JOLTS) at 4:00 p.m. We will also follow the first part of the biannual hearing of J Powell, Chairman of the Fed, before parliamentarians.
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, beyond 8,000 psychological points. Ultimately, breathing towards the orange trend line (mm50d) is the preferred option. The latter is currently gravitating towards 7,610 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 8000.00 points.
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