CAC 40: The gap of April 5, filled, is no longer a scar

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The market will have finally digested the figures on American employment (NFP) published on Friday, figures which, by their firmness, weighed on the yields of American sovereign bonds.

As a reminder, if average hourly wages, at +0.3%, did not move away from the target this time, job creations in the private sector excluding agriculture in March amounted to more than 300,000, exploding the target to 212,000 (275,000 creations in February). Finally, the unemployment rate, expected to be stable at 3.9%, fell to 3.8% of the active population. Enough to bring grist to the mills of the most cautious Fed executives.

“For the Fed, these data show that there is no urgency to lower rates, and that the risk of higher rates for longer is increasing,” point out the LBPAM economists.

“That said, the market already integrates this risk well, since it now only integrates a one in two chance for a first rate cut from the Fed in June, and 61 basis points (or 0.61 percentage point, Editor’s note) of rate cuts by the end of the year. This somewhat limits the risks for risky assets, at least as long as the prospects of a rate cut, sooner or later, remain in place”, they qualify.

The CAC finally gained 0.72% to 8,119 points yesterday, settling slightly after having completely filled the bearish gap on Friday, a quotation gap which no longer appears like a scar.

All eyes are already on the outcome of a new ECB Governing Council on Thursday. If a status quo on the rates themselves is an almost established scenario, the language elements which will be used at the press conference will be an opportunity to refine the estimated timetable for rate cuts.

“Inflation continues to decline. The harmonized consumer price index excluding volatile elements fell for the first time in two years below the symbolic threshold of 3%, to 2.95% in March over one year. is below the forecast of central bank economists. This is therefore very encouraging,” notes Christopher Dembik, investment strategy advisor at Pictet AM. “In most EU member countries, the process of disinflation continues at a sustained pace.”

The trajectory of inflation normalization is indeed showing more reassuring signs on this side of the Atlantic in any case. “Two more crucial inflation figures are due between next week’s April meeting and the ECB’s subsequent decision at the start of June. We are likely to see some softening in these figures – particularly at this time. which concerns services inflation – so that the ECB is confident about a rate cut in June”, anticipate Nomura strategists. Numbers

Operators took note on Monday of the Sentix investor confidence index in the Euro Zone, which rose to -5.9 this month, well above expectations.

Nothing to get your teeth into regarding American macroeconomic statistics this Monday. We will have to wait until Wednesday to see the agenda really thicken with the famous CPI (consumer price index). They are expected to increase by 3.4% year-on-year, for the broadest basket of products.

On the value side, Atos jumped 18.9%, while an investment fund provided support for the rescue plan of the company Onepoint, which owns 11% of Atos. Believe plunged 9.2% after Warner Music announced that it would not ultimately make a takeover bid (OPA) for the online music specialist. Nexans jumped 3%, benefiting from a note from HSBC which raised its price target from 97 to 105 euros while remaining a buy on the cable manufacturer’s stock.

On the other side of the Atlantic, the main equity indices ended Monday’s session at levels very close to perfect balance, between -0.04% and +0.03% for the S&P500, the Dow Jones and the Nasdaq Composite.

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 $85.80.

On the agenda this Tuesday, to follow in priority the figures of the French trade balance at 8:45 a.m., as well as the NFIP index of American small businesses.

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 (confirmation graphic rejection) 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 towards the lower part of an ascending channel (in black) on the daily chart.

The session of Tuesday April 2, by the volumes, the length of the red body of the corresponding candle, reinforced the 8,220 points as a difficult level to cross.

Note that below 8,000 there is a gap (February 22), the power of attraction of which could be tested.

In the immediate future, the index had the strength to completely fill, and very quickly, Friday’s bearish gap, a quotation gap which no longer appears like a scar.

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 8220.00 points.

Hourly graph

Daily Data Chart