CAC 40: An ounce of nervousness in a market that remains solid

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Second session of great nervousness on the CAC 40 Thursday in the wake of the Board of Governors. As on Wednesday after inflation figures above expectations in the United States on Wednesday, the flagship Parisian index made a foray below the symbolic threshold of 8,000 points before recovering. It ended slightly lower yesterday, by 0.27% at 8,023 points.

Unsurprisingly, the ECB maintained its key rates for the 5th time in a row. But the speech of its president Christine Lagarde gave some indications on the future intentions of the European institution. The ECB confirms the continuous and gradual decline in inflation and emphasizes that “most measures of underlying inflation” are decreasing and that “wage growth is gradually tapering off”…

It is therefore gradually preparing the markets for a first cut in interest rates in June, if the inflation trajectory was still oriented towards its 2% target.

“The ECB kept rates unchanged as expected, but introduced an explicit reference to rate cuts in its press release for the first time since the start of the rate hike cycle,” notes Francesco Pesole, analyst at ING.

The ECB could – this would be a historic first – begin its process of monetary easing through action on rates, before its American counterpart, the Fed, in June. Although the trend on both sides of the Atlantic is towards a downward revision in the number of rate cuts over 2024.

“The forecasts [de baisse de taux] appear more reasonable and are now in line with our expectation of three reductions this year”, for Konstantin VEIT, portfolio manager at PIMCO. “The risks are probably in the direction of a less significant reduction, mainly due to the persistence of the “services inflation, labor market resilience, loose financial conditions and the ECB’s risk management considerations.”

In terms of statistics, investors took note of American producer prices in March, without deviation from the consensus (excluding automobiles), and of new weekly registrations for unemployment benefits, which, at 211,000, still come out as close to this low as possible. 200,000, reflecting persistent tensions on the job market, tensions generating inflation.

On the stock side, Publicis, the first CAC 40 stock to publish its first quarter activity, jumped 3.1%. The advertising group delivered a “solid” quarter for Bank of America, with like-for-like growth of 5.3% year-on-year.

The Société Générale bank limits its gains to 0.3% driven by the announcement of the sale of its professional equipment financing activities to BPCE for 1.1 billion euros.

On the other side of the Atlantic, the main equity indices ended the session between perfect balance for the Dow Jones (38,459 points) and renewed vigor for the Nasdaq Composite (+1.68% to 16,442 points) . The S&P500, the reference barometer of risk appetite in the eyes of fund managers, gained 0.74% to 5,199 points, playing the averages as usual.

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 $1.0710. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $85.40.

On the agenda this Friday, to follow as a priority the U-Mich consumer confidence index, in preliminary data at 4:00 p.m.

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 points 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 identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that crossing 8120.00 points would revive the buying tension. While a break of 7700.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart