CAC 40: Federal rate cut in June, 1 chance in 2 according to the CME

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Under pressure from government bond yields, the CAC 40 returned 1.11% to 8,061 points on Friday, losses finally accumulated from the gap opening. Note that the NFP (Non Farm Payrolls) report on American private employment, published in the afternoon, despite content showing persistent tensions, will not have unduly penalized the Parisian market, with the support of the the optimism of Wall Street for which “Good News is… Good news!”

If average hourly wages, at +0.3%, did not move away from the target, job creations in the private sector excluding agriculture 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.

As a reminder, two members of the Fed, Neel Kashkari, president of the Minneapolis Fed, and Thomas Barkin, head of the Richmond Fed, spoke this week adopting a very cautious approach, insisting on the fact that the Federal Reserve had time. And the president of the Atlanta Fed, Raphael Bostic, estimated this Wednesday that the persistence of inflation risked forcing the American central bank to only lower its rates at the end of the year.

Now, the CME Group’s FedWatch tool puts the probability, in free fall, of a cut in federal rates in June at 50%.

On the values ​​side, in the wake of the firmness of crude, Totalenergies recorded an absolute peak during the session, at 67.38 euros, before ending the session with a symbolic decline. Outside the CAC 40, we can cite Wendel which gained 0.8% after announcing the sale of 9% of the capital of the tests, inspections and certification specialist Bureau Veritas, which limited its decline to 0.7%.

On the other side of the Atlantic, the main equity indices ended Friday’s session in the green, despite the significant rise in 10-year Treasury bond yields. The Dow Jones gained 0.80% to 38,904 points and the Nasdaq Composite, with a strong technological coloring, 1.24% to 16,248 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, appreciated by 1.11% to 5,204 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 $1.0830. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $85.00.

On the agenda this Monday, the Sentix index of investors in the Euro Zone at 10:30 a.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 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.

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