CAC 40: Entry into a phase of high volatility

(News Bulletin 247) – The CAC 40 yesterday lost 3.83% to 6,521 points, in trading volumes twice the average, with the start of Russian military hostilities in Ukrainian territory. The flagship Parisian index, however, ends well away from its session lows (6,432 points), thanks to the reversal of steam on Wall Street, supported by the prospect of a gesture, in response, from the Fed. And therefore a relaxation of the rate hike schedule in this new context. The main equity indices ended, admittedly to very different degrees, in the green.

“Central banks will play a key role in calming financial markets and certainly delaying expectations of monetary contraction. We are in a way similar to March 2020.” can we read this morning in a note from Richelieu Gestion. “Depending on the sanctions that will be imposed, the shock to growth could however undermine the outlook for medium-term inflation and lead institutions to postpone the hike in key rates. The assessment of these two opposing forces will be delicate and promising. of great uncertainty.”

The Kremlin has now crossed the Rubicon: after having recognised, by openly supporting the separatists in Dombass, the independence of two regions in this eastern part of Ukraine, it has gone on the open military offensive, which constitutes a further step in the escalation, and further materializes the entry into a new Cold War with the West. New sets of sanctions have been taken by the United States and the European Union. “An economic boycott of Russia would not in itself be disturbing for international trade, Russia only contributing to world GDP below 2%. However, consequences are to be expected for the price of oil, already marked by fears of inflation, and the symbolic cap of 100 USD for crude oil could panic the algorithms.”

Statistical benchmarks took a back seat yesterday. It should be noted, however, that the US Q4 GDP, in final data, came out in line with expectations, at +7.0% quarter on quarter.

On the values ​​side, a large fringe of the rating ended in the red, with in particular losses of 9.07% to 29.22 euros for Renault and 12.15% to 27.30 euros for Societe Generale, two very established in Russia. Conversely, the shares of groups present in information security, armaments and defense have done well, such as Thalès (+4.87% to 88.36 euros) or Dassault Aviation (+4.18 % at 119.5 euros).

On the other side of the Atlantic, the main equity indices finished in the green, despite opening in very bright red. If the Dow Jones managed in extremis to grab 0.28% to 33,223 points, the Nasdaq Composite, with strong technological “coloration”, gained 3.34% to 13,473 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, rose 1.50% to 4,288 points.

A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.1210. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $98.00.

To follow in priority, on the agenda this Friday, the M3 money supply in the Euro Zone and the PCE price index in the United States at 2:30 p.m. Ms. Lagarde will speak at 4:00 p.m. during an online conference dedicated to the war in Ukraine.

KEY GRAPHIC ELEMENTS

The 6,760 points, which we have identified so far as a gradually weakened floor, will give way this morning, on a wide gap, opening the way to a new market phase. Recall that the index traced from February 16 to 18 a combination of candles in three crows. This combination was followed by a very significant bearish engulfing structure, accompanied by volumes that were far from shy for a session, let’s not forget, without American benchmarks due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive. A phase of high volatility begins.

FORECAST

In view of the key graphic 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 a crossing of 6672.00 points would revive the tension in the purchase. While a break of 6390.00 points would relaunch the selling pressure.

Hourly data chart

Chart in daily data

©2022 News Bulletin 247