CAC 40: Thank you LVMH

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The CAC managed to preserve some gains on Wednesday (+0.62%) at the end of a volatile session, against a backdrop of nervousness about the evolution of bond yields, in a darkened geopolitical landscape, and at the start of the ball quarterlies from large groups.

While it was building a significant rebound in protest, it turned downward during the session, from its close in the green to the luxury sector, driven by LVMH (+2.84%), after the publication of its activity in the first quarter. If the group’s growth slows, the publication contains reassuring elements, both regarding the resistance of the American market and sales of Chinese customers.

Ultimately, the flagship French index will have fully filled the bearish gap formed the day before.

“The market remains on the defensive this week, still impacted by lower expectations of rate cuts from the Fed and by the risks of escalating tensions between Israel and Iran. Thus, oil remains above 90 dollars per barrel, interest rates are at their highest since November on both sides of the Atlantic, just like the dollar”, summarize the LBPAM economists.

A relative easing of tensions on bond yields during the week will have provided some breathing space. And this before the publication this Thursday of weekly registrations for unemployment benefits and the manufacturing index of the Philadelphia Fed (Philly Fed). As a reminder, particularly vigorous retail sales at the start of the week caused an additional rise in prices. Treasuries 10 years.

On Tuesday evening, the president of the US central bank, Jerome Powell, said that “if high inflation persists”, the Fed “can maintain the current level (of rates) for as long as necessary”.

At the same time, investors continue to monitor the situation in the Middle East after Iran’s attack on Israel this weekend. Monday evening, the head of Israeli diplomacy, General Herzi Halevi declared that the army would “respond to the launch of so many missiles and drones”, according to comments reported by Agence France Presse (AFP). As a reminder, 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.

For 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 response contained in order to avoid conflagration of the region.”

To be complete in terms of values, in addition to LVMH, Hermès and L’Oréal, through mimicry, were well oriented. Conversely, Derichebourg lost 5.2% after issuing a warning on results, caused by the stronger than expected impact of the cyberattack suffered at the end of 2023.

On the other side of the Atlantic, the main equity indices ended Wednesday’s session down, on the eve of important macroeconomic deadlines. The Dow Jones contracted by 0.12% while the Nasdaq Composite suffered much heavier losses (-1.15%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.58%.

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 $1.0690. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $82.30.

On the agenda this Thursday, to follow as a priority, at 2:30 p.m., across the Atlantic, the weekly registrations for unemployment benefits as well as the manufacturing index of the Philadelphia Fed (Philly Fed index).

KEY GRAPHIC ELEMENTS

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. Then a major technical event occurred, namely the breaking of the gap, the highly symbolic threshold of 8,000 points. The latter, however, does not appear as a scar on the index in the sense that it was filled in from the following session.

We are in the heart of a deep, legitimate breath on the flagship tricolor index.

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 7821.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart