CAC 40: Chic! It’s dowry day!

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With the decision of the Japanese central bank to raise its key rate – a first since 2007 – the CAC 40 set a new absolute record, in closing data (8,201 points). A strong signal which, in the eyes of managers, puts Japan back in the spotlight, after decades of deflation. For Gurpreet Garewal, Strategist at Goldman Sachs Asset Management, this decision marks “the end of an unconventional monetary policy regime.”

“Stronger wage growth, coupled with core inflation above 2% since the end of 2022, has helped the Bank of Japan gain confidence in the virtuous cycle between wages and inflation. The perception that the central bank will adopt a “one and done” approach (i.e. a single increase) may explain the measured reaction of the markets.

The Nikkei rates above 40,000 points. Note that Tokyo remained closed this Wednesday due to a public holiday.

GS anticipates “additional, albeit limited, rate hikes as real rates in Japan remain low and financial conditions accommodative relative to the inflation environment.”

Investors will now be able to focus on the outcome of the Fed’s FOMC this Wednesday. Three very important elements will be scrutinized. The Fed’s new economic projections, particularly in terms of growth and inflation, the elements of language used in press conferences, and… the famous dot plots, this dot histogram published each quarter. The mechanism is simple: the 12 voting members, under cover of anonymity, register their feelings about the level of Fed Funds for the next deadlines.

“The Fed has no reason to rush,” for Christopher Dembik, investment strategy advisor at Pictet AM. “The economy is holding up. Growth should reach 2% in the first quarter. The job market is doing well. Hiring should be stimulated by the public sector due to a later post-covid recovery than in the sector Finally, sustained inflation militates in favor of sustainably high short-term rates.”

In terms of macroeconomic statistics on Tuesday, there was the ZEW index of confidence in the German economy, in clear recovery, at 31.7 points, well beyond expectations.

“Economic expectations for Germany are improving significantly. At the same time, more than 80% of respondents expect the ECB to cut interest rates over the next six months. This could explain the more optimistic outlook for the German construction sector”, comments ZEW President Professor Achim Wambach on the survey results. “The German export sector is benefiting from increased economic expectations towards China as well as the expected depreciation of the dollar against the euro. At the same time, the assessment of the economic situation remains at a very high level. low. This data somewhat puts increased economic expectations into perspective.”

On the stock side, Airbus gained 1.8%, helped by Royal Bank of Canada which raised its recommendation to “outperform” on the stock. The aeronautics group also ended discussions to buy the BDS division of Atos (cybersecurity, supercomputers, big data) which caused the digital services company to plunge by 19.2%. Faced with a wall of debt, Atos is moving a little closer to opening a conciliation or even safeguard procedure. On the smaller values ​​side, Spartoo soared by 28.5% after publishing its 2023 results. The fashion goods group notably returned to positive gross operating income.

Note the warning on sales of Kering, whose first listings will be monitored, like all other representatives of the luxury sector on the Paris Stock Exchange.

On the other side of the Atlantic, the main equity indices ended in green territory after a session that had started poorly, like the Dow Jones (+0.83%) and the Nasdaq Composite (+0.39%). ). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.65% to 8,201 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 $1.0870. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $82.80.

On the agenda this Wednesday, to follow as a priority the American monetary policy decision at 7:00 p.m. and the press conference following this decision, at 7:30 p.m.

Let us continue to point out that since Monday, Wall Street opens at 2:30 p.m. (Paris time), and not 3:30 p.m., quite simply because the East Coast of the United States has already switched to summer time, and we have not yet. The big statistical meetings, often scheduled for 2:30 p.m., are therefore scheduled in the interval at 1:30 p.m.

KEY GRAPHIC ELEMENTS

Thanks to the crossing volumes, the bullish extension since Tuesday and the sectoral federation, we can shift the 8,000 psychological points into support, against which in the long term, a pullback (graphic rejection of confirmation) is not excluded. Now is the time to take a breather from the lessons. The CAC index has traced, in contact with the upper Bollinger band, two candles where the low points, the opening level and the closing level merge. And this before starting a slow decline.

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 8220.00 points would revive the buying tension. While a break of 8000.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart