CAC 40: It holds up!

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The ball of the central banks last week, through their moderately accommodating tone, will have allowed the market to stick to its peaks, the CAC continuing its phase of lateral consolidation below 8,220 points, against a backdrop of very impressive resistance to the temptations of taking stock. profits.

The National Bank of Switzerland has opened the door to rate cuts by major Western central banks. If some economists had counted on such a movement, the consensus rather held the month of June for a first cut. The Swiss monetary institution has decided to reduce its main rate by 25 basis points to bring it down to 1.5%. “With the Bank becoming more accommodating and inflation likely to be lower than forecast, we continue to forecast two further rate cuts this year,” writes Capital Economics.

For its part, the Bank of England maintained its interest rate but indicated that it was ready for monetary easing. “We currently believe the Bank will cut interest rates from August, although markets believe there is a greater chance it will do so in June following today’s meeting ‘today’, say the Nomura economists.

“The latest inflation publications show that core inflation (excluding food and energy) continued to fall to 4.5% in February (compared to 5.1% in January) and that overall inflation returned to 3.4% in February after peaking at more than 11% in October 2022. Not enough to trigger another rate cut from the Bank of England (the main rate is still at 5.25%, i.e. on the levels of 2008), underlying inflation is still a good distance from the 2% target, but the monetary institution declared yesterday that “things are moving in the right direction”, commented Alexandre Baradez (IG France).

Earlier, the Fed fully reassured the financial community by confirming that the scenario of three cuts in federal rates held up, and that inflation continued, on trend, to decrease, despite some “stirs”. A status quo on the rates for this deadline has been confirmed, as widely expected.

Whitney Watson, Co-Head & Co-CIO, Fixed Income & Liquidity Solutions, Goldman Sachs Asset Management believes that “the progress of inflation over the past year and the signals of disinflation, with the rebalancing of several markets ( particularly the labor, property and rental markets), will lead the Fed to begin its cycle of rate cuts this summer.”

“Overall, despite recent hiccups on the road to inflation, major central banks remain on track to cut rates in the coming months.”

In terms of statistics on Friday, there was little to eat apart from the IFO business climate index in Germany. The index rose to 87.8, above expectations. The business cycle clock tool still positions Germany in the ‘Crisis’ box, with a trajectory towards the ‘Economic Recovery’ box.

On the values ​​side, Kering (-3.57%) ended badly in a week marked by a warning on its first quarter sales. The stock fell 11.91% the day after this publication. The entire luxury sector, a key sector in Paris on the stock market, was in turmoil, like the poor performance on Friday of Hermès (-1.02%), L’Oréal (-0.53%) and LVMH (- 2.28%). In a note that prefaces the first quarter revenues, Royal Bank of Canada estimates that growth should be sluggish at LVMH in the first quarter, with the bank forecasting like-for-like growth of 1.9%.

“While this has been reported for several months, the reality of a quarter of stagnant revenue growth (and sequential deceleration), with limited upside risk based on the demand environment, leaves no doubt few possibilities to play in the short term”, explains the Canadian bank. Royal Bank of Canada also lowered its target on Kering to 440 euros compared to 480 euros previously.

On the other side of the Atlantic, the main equity indices finished in mixed order, like the Dow Jones (-0.77%) and the Nasdaq Composite (+0.16%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended the session on a balanced note at 5,234 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 $1.0820. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $80.80.

On the agenda this Monday, to follow as a priority new home sales in the United States at 3:00 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 swing 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