CAC 40: American inflation is hanging on

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The return to normalization of inflation is definitely not a smooth and linear path, across the Atlantic. The downside of a very solid economy and persistent tensions on the employment front, prices accelerated upward in March.

Retail prices came out above expectations, at +0.4% in monthly data, excluding food and energy. On an annual basis, in the broadest base of products, prices increased by 3.5%, which represents a clear acceleration in inflation compared to February (+3.2%).

Enough to cause additional heating of the Treasuries 10-year, yields on 10-year US Treasury bonds, now above 4.50%, the highest since mid-November. And enough to encourage members of the American Federal Reserve (Fed) not to rush to lower key rates. Moreover, investors are only counting on two rate cuts of 25 basis points (0.25 percentage points) for the current year, with a probability of more than 75%.

On the Parisian market, this resulted in a very nervous session on Wednesday, with the CAC even making a rapid incursion below the psychological threshold of 8,000 points, before recovering to finish in balance at 8,045 points. .

It is in this context that investors will approach the other major meeting of the week, the outcome this Thursday of the Governing Council of the European Central Bank (ECB).

The question that remains is that of Christine Lagarde’s room for maneuver, who could beat J Powell for the first rate cut in June, even if only by a few hours… The price trajectory is indeed a little more comfortable for the boss of the ECB. However, “services inflation in the euro zone has proven to be more persistent than expected and compared to previous cycles of disinflation”, put into perspective the strategists at Nomura, who predict “a decline in services inflation this year and next year, but [des] risks […] clearly trending upwards.”

“The ECB has been concerned that services inflation has not fallen significantly. We expect the ECB to start cutting rates in June and will do so once per meeting this year, but “The biggest risk to our rate forecast is either a later start to the taper cycle or a slowing of the pace of cuts if these upside risks become the central scenario.”

On the securities side, Edenred suffered, losing 4.2%, penalized by Jefferies’ initiation of hedging at “underperformance” which is the equivalent of selling to the bank. The real estate developer Kaufman & Broad gained 6.3% after reporting a 10% increase in its booking volumes in the first quarter, despite a sluggish market.

On the other side of the Atlantic, the main equity indices ended Wednesday’s session in the red, like the Dow Jones (-1.09%) or the Nasdaq Compoiste (-0.84%). . The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 0.95% to 5,160 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 $1.0740. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $85.70.

On the agenda this Thursday, to follow as a priority the ECB’s monetary policy decision at 2:15 p.m. and the Institution’s press conference at 2:45 p.m. In the meantime, at 2:30 p.m., we will monitor producer price indices and weekly registrations for unemployment benefits across the Atlantic.

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 8120.00 points.

Hourly graph

Daily Data Chart