CAC 40: Powell, pragmatic, tries not to tense the market

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If the slightly more “centrist” position adopted by J Powell at the end of last week weighed on the markets against a backdrop of rising yields on federal sovereign bonds, the publication this Wednesday of rather encouraging inflation figures in the Euro Zone will have allowed to the CAC 40 to stop the start of the hemorrhage from the day before.

The head of the Fed was forced to tone down his speech dovish after a battery of statistics showing a greater than expected rise in the American economy last week.

“February US PCE figures appeared more or less in line with expectations. However, the annualized three-month underlying PCE increase of 3.5% (compared to 2.6% in January) could give the Fed food for thought” notes César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management.

“Moreover, the rally in markets and resumption of M&A activity (see below) suggests not-so-bad financing conditions despite successive rate hikes. While Fed Governor Christopher Waller said he saw “no urgency” to lower rates, questions will continue to arise about the timing and extent of monetary easing in the United States in the months to come.”

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.

In the meantime, the cursor is positioned towards more caution as investors’ expectations of lower rates become more pressing. The probabilities of federal rate cuts, although still in the majority, have declined significantly, to 58.7% according to the CME’s FedWatch tool.

Essential key, “the job market remains solid and not conducive to a significant moderation of wages. However, these have recently limited their progression, around 4%. This variable remains fundamental in the eyes of the Federal Reserve which seeks to prevent inflation through wages, which is more difficult to curb”, for Emmanuel Auboyneau, Managing Partner Amplegest. The NFP report, which will be published at the end of the week, will provide valuable lessons. In the meantime, the survey by the private firm ADP highlighted the creation of 184,000 positions in the private sector in March, more than the 150,000 anticipated by the consensus and the 155,000 positions created in February.

On this side of the Atlantic, the feeling is very different. One wonders if the ECB could not consider starting to lower key rates before its American counterpart… Inflation continues to slow down, even beyond expectations. Concerning the very first estimates of consumer prices in the Euro Zone, excluding volatile elements (food, energy, alcohol and tobacco), prices increased in March at an annualized rate of 2.9% compared to 3.0% expected and February at 3.1 %.

On the values ​​side, Nexity gained 4.3% after finalizing the sale of its property administration activities for an amount of 440 million euros to the Bridgepoint fund. Among small and mid-caps, Valbiotis jumped 7% after announcing the marketing in May of its anti-cholesterol food supplement. On the other hand, Lacroix fell by 6.9%. Investors sanctioned the content of the annual accounts but also the prospects formulated by the Nantes electronics group founded in 1936.

On the other side of the Atlantic, the main equity indices ended in scattered order, at levels close to equilibrium, like the Dow Jones (-0.11%) and the Nasdaq Composite (+ 0.23%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.11%.

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 Thursday, to follow as a priority the final data of PMI services in the Euro Zone at 10:00 a.m., the PPI (producer prices), still in the Euro Zone at 11:00 a.m. and the traditional weekly registrations for unemployment benefits 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 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