CAC 40: Rates are weighing, geopolitics are tense

(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.

Despite the geopolitical risk, the CAC 40 managed to pick up a few points on Monday (+0.43% to 8,045 points), in random volumes. Note that for the fifth time in a row, the body of the candle materializing the session was colored red, the closing taking place by definition below the opening level.

Remember that after ten days of rising tension, Iran launched a massive attack using drones and missiles against Israel on the night of Saturday April 13 to Sunday April 14. The international community is trying to coordinate its diplomatic efforts to encourage de-escalation and avoid conflagration in the Middle East. Wall Street, which opened slightly higher on Monday, ultimately ended in bright red (see below).

“If Iran’s attack on Israel is historic and marks a major turning point in the latent conflict between the two countries, it seems more window dressing than anything else, with all the parties involved apparently having been warned in advance”, explains Thomas Giudici, head of bond management at Auris Gestion. “The real question, and therefore the risk for the markets, lies more in the response that Israel will bring to this unprecedented attack while its historic American ally is campaigning for a contained response in order to avoid the conflagration of the region.”

The mood was weighed down by expectations of increasingly lower rate cuts in the United States. Hypothesis supported yesterday even more by retail sales, more dynamic than expected. American household spending increased by 0.7% over one month compared to February, where analysts were counting on a more contained increase, of 0.3% still on a monthly basis.

This new statistic demonstrates the robustness of the American economy. One more, after the confirmation the previous week of a significant increase in inflation in the United States. Remember that the inflation figures in the United States for the month of March were higher than expected – excluding energy and food prices – at 3.8% year-on-year in March, against a consensus of 3, 7%.

“Following the acceleration in the US CPI, we now expect two rate cuts of 25bp this year, in July and December. Compared to our previous forecasts, the scale of the anticipated easing has decreased and the timing rate cuts have been postponed”, adds César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management.

On the values ​​side, Totalenergies fell by 1.2% in line with the decline in oil prices. Air France-KLM fell by 2.3% despite this decline in black gold prices. The title of the Franco-Dutch company suffered from the lowering of the annual objectives of the German group Lufthansa, citing “still unpredictable” effects of tensions in the Middle East, and strikes. Defense stocks gained a little ground with the attack on Iran, like Thales (+0.8%) and Dassault Aviation (+1.5%).

On the other side of the Atlantic, the main stock indices ended the first session of the week in bright red, like the Dow Jones (-0.65%) and especially the Nasdaq Composite. (-1.79%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.20%, preserving the highly symbolic threshold of 5,000 points by around sixty points.

An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0610. 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 Tuesday, the German ZEW index at 11:00 a.m. and the monthly report on American industry at 3:15 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. But the nervousness remains palpable, notably with five red-bodied candles in a row.

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