CAC 40: Tensions on rates, on the eve of the publication of PCE

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In light of the sharp increase in tension on the bond markets, particularly in the United States, the Parisian market looked gloomy on Wednesday, its flagship index the CAC 40, unceremoniously breaking the lower limit of an upward channel. And this two days before THE statistical publication of the week, namely PCE prices (personal consumption expenditures), the Fed’s preferred measure in its assessment of inflation.

The yield on 10-year Treasury bonds (Treasuries 10 yrs) crossed 4.60%, in the wake of a series of good macroeconomic publications, likely to invite the Fed to keep its finger pressed on the button ” break”. On Tuesday, it was the turn of the American consumer confidence index to exceed the target. As a reminder, consumption is the main engine of wealth creation across the Atlantic, and any leading indicator of consumption is necessarily closely followed in the trading rooms.

According to the CME Group’s FedWatch tool, investors now only expect one rate cut this year from the Fed, compared to two previously.

This Thursday it will be the turn of the American monthly GDP and weekly registrations for unemployment benefits to test, if necessary, the composure of the markets.

But the bond issue is once again painful, albeit to a lesser extent. on this side of the Atlantic, with inflation accelerating in Germany. The German consumer price index, calculated according to European standards, jumped more than expected, to 2.8%, against a consensus of 2.7% and after 2.4% in April. Not enough at this stage to shake the hand of Christine Lagarde who should proceed, at the end of the next Council of Governors, with a first reduction in key rates.

On the value side, tech, luxury and automotive equipment particularly suffered, amplifying the variations in their benchmark indices, such as Soitec (-3.20%), LVMH (-2.84%). , or Valeo (-2.97%). Conversely, Renault took the lead in the CAC 40 at the close for the second consecutive session. The title of the Diamond brand gained 3.2%, thanks to an increase in the buy recommendation from Goldman Sachs.

On the other side of the Atlantic, red dominated at the close on the main stock indices, namely the Dow Jones (-1.06% to 38,441 points), the Nasdaq Composite (-0.58 % at 16,920 points) and the S&P500 (-0.74% at 5,266 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 $1.0790. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $78.90.

On the agenda this Thursday, to follow the monthly GDP data, and new weekly registrations for unemployment benefits, across the Atlantic, at 2:30 p.m.

KEY GRAPHIC ELEMENTS

Major technical event Wednesday May 29: the breaking of the lower limit of a bullish channel, in conditions of significant volatility and volumes. The ebb movement takes on meaning, and the next bearish stage is materialized by the gap of February 22, set to be filled, and whose lower limit is worth 7,821 points. Note that the candle, in marubozu on Wednesday, illustrated the continued mobilization of the seller’s camp throughout the session. Closing at session lows calls for extreme caution in the short term.

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 8000.00 points.

Hourly graph

Daily Data Chart