CAC 40: Increasingly pressing expectations on the trajectory of rates

(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.

The rise in 10-year Treasuries, the yield on 10-year US government bonds, continued to curb risk appetite. “Stocks continue to react to comments (from the president of the American central bank Jerome) Powell, who was rather accommodating yesterday,” said Karl Haeling, of LBBW, quoted by Agence France Presse. The CAC 40 ended the session yesterday on a note of almost perfect balance, and should enter red territory this Friday before the highly anticipated figures on American employment.

The chairman of the US Federal Reserve (Fed) said the recent data did not fundamentally change the situation. The central banker also reiterated that if “the economy generally develops as we expect, most participants in the monetary policy committee consider it likely to be appropriate to start lowering the policy rate at some point this year.”

Two members of the Fed, Neel Kashkari, president of the Minneapolis Fed, and Thomas Barkin, head of the Richmond Fed, also spoke this week taking a very cautious approach, insisting on the fact that the Federal Reserve had of 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.

Hence a crystallization of a certain nervousness on the market, without any consequences for the moment. But pre-opening data suggests a start to the session in the red, with investors’ expectations of a rate cut becoming more pressing. And THE big macroeconomic meeting this Friday will have particular resonance in this context: it is the NFP (Non Farm Payrolls) report, federal report on private employment in the United States. Measuring the persistence, if any, of tensions, will have an impact on inflation expectations, particularly through wages.

If the unemployment rate is expected to be stable at 3.9% of the active population, the number of job creations is expected to fall sharply to 205,000. The monthly increase in hourly wages is expected at 0.3% in March , compared to 0.1% in February. This last figure will be studied closely…

On the macroeconomic side yesterday, note that the ISM Services, in final data for March in the Euro Zone published yesterday morning, slightly exceeded the first estimates, coming out at 51.5 points. Furthermore, new weekly registrations for unemployment benefits in the United States totaled 221,000, very slightly above the consensus.

On the value side, Renault advanced by 3.2%, driven by HSBC which confirmed its purchase opinion while significantly raising its price target to 57 euros compared to 47 euros previously. The Sino-British bank believes that the market could be more confident in the prospects of cash generation and return to the group’s shareholder, which should further support its title. Solutions 30 for its part lost 13% while the group showed a cautious outlook for the current year, citing in particular the holding of elections in Belgium. At the level of smaller stocks, Gaussin collapsed by 42.4%, after announcing the opening of legal protection proceedings following its financial difficulties. Finally, the banking sector achieved a nice group shot, like its main representatives on the Parisian coast, BNP-Paribas, Société Générale and Crédit Agricole.

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 $1.0840. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $85.20.

On the agenda this Friday, to follow in priority the NFP report on American private employment at 2:30 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 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