CAC 40: No bridge for the CAC which comes to test the 8,000 points

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Supported by Wall Street against the backdrop of the decline in American 10-year bonds, and by good European economic statistics, the CAC managed to gain 0.49% on Monday, only to fail at the close a hair short of the symbolic 8,000 points.

Please note that despite the public holiday nature of Wednesday and Thursday, the Parisian market will remain open, under usual opening and trading conditions. We should expect very timid volumes throughout this week, conducive to a “bridge” from which a large segment of operators will benefit.

In terms of statistics, good news on the PMI Services activity barometer, in final data for the month of April, which stands at 53.3, above the first estimates for the entire Euro Zone. Dr. Cyrus de la Rubia, Chief Economist at the Hamburg Commercial Bank, provided the following valuable insights:

“Productivity, however, represents a significant challenge for the services sector as well as for the ECB. Since the start of 2021, service providers in the euro area have continued to recruit, even during phases of economic slowdown observed in 2022 and 2023, a trend suggesting significant staff turnover forcing companies to hire several individuals for the same position in order to maintain the same level of activity, and therefore indicating a drop in productivity.

“At the same time, the PMI index of prices paid (which largely include wage costs) highlighted a strong increase in costs over the last twelve months, after a clear recovery already observed in 2022. These strong inflationary pressures should lead the European Central Bank to show restraint regarding the extent of a possible cut in interest rates expected in the coming months.”

Investors also took note of the Sentix investor confidence index in the Euro Zone, up significantly to -3.6, above expectations.

“If a first rate cut [européens] in June therefore seems to be materializing, the continuation of the monetary easing schedule remains uncertain at this stage”, warns Romane Ballin (Auris Gestion). “The recent rebound in activity in Europe (GDP up 0.3% in Q1 in the euro zone) argues for a gradual and cautious approach. There are also numerous debates within the institution, with some worrying about the consequences for the exchange rate in the event of a prolonged divergence between key rates on both sides of the Atlantic.”

On the value side, Teleperformance recorded the largest increase in the CAC 40 with 5.9% while Société Générale fell again by 0.8% after returning 5.2% on Friday, the market worrying about the income dynamic in the bank retail in France. Outside the CAC 40, Carmat rebounded by 9.8% driven by an encouraging milestone on a key clinical trial to obtain reimbursement for its artificial heart in France as well as its commercial authorization in the United States. Some company results will also be revealed, such as the accounts for the first quarter of Bouygues on Tuesday, or those for the entire 2023-2024 financial year of Alstom on Wednesday.

On the other side of the Atlantic, the main equity indices started the week well, like the Dow Jones (+0.46%) but especially the Nasdaq Composite (+1.19%), again close to its peaks with the decline of the American 10-year. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.03% to 5,180 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 $1.0760. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $78.50.

On the agenda this Tuesday, priority will be given to retail sales in the Euro Zone at 11:00 a.m. The German trade balance figures which have just been published contained no surprises.

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. It is now the level of 8,120 points which plays its role as graphic resistance.

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

Two bearish targets present themselves: the bullish gap of February 22, the lower limit of which is worth 7,821 points, then the intermediate support at 7,700 points. Until then, the occasional formation of sharp downward acceleration in prices cannot be ruled out, before remobilization of the buying camp.

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