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The CAC 40 index, in relatively timid volumes, reached 8,000 points during the session on Wednesday (+0.87%), on the eve of a historic meeting of the Council of Governors of the European Central Bank. Historic because the ECB could get ahead of the Fed in its start of lowering rates.
But “the markets remain concerned by the fact that the last stage of the fight against inflation forces central banks to ease their rates only reluctantly”, for Martin WOLBURG, chief economist of GENERALI ASSET MANAGEMENT.
“May (flash) inflation rebounded to 2.6% year-on-year, from 2.4% year-on-year. This is linked to special factors such as base effects in energy prices, but also, and above all, to the rebound in services inflation Members of the Governing Council of the ECB, such as Schnabel and de Guindos, have warned against the evolution of wage growth, which represents a risk for. inflation.”
If a reduction in key rates of 25 basis points is almost certain, investors will read with the greatest attention the new economic projections from the Monetary Institution based in Frankfurt.
For Pictet WM strategists, “markets will focus on economic projections. Changes in technical assumptions since March argue in favor of marginal changes, but they should be rather hawkish. Projections for GDP growth and Inflation rates for 2024 are expected to be revised slightly upwards, reflecting recent developments. These marginal changes, combined with strong first-quarter wage growth reported last week and strong services inflation in May, will support the hawkish thesis. (hawkish) that a July rate cut is not warranted. This would be consistent with our scenario of a July pause after the initial June cut.”
Even if the market remains expectant before the ECB, green was the dominant color, in the wake of rather reassuring figures on American employment, or at least on the state of its tensions.
The survey by the private firm ADP (Automatic Data Processing) yesterday highlighted job creation in the private sector (152,000) significantly lower than expected, and down significantly from April to May. Enough to bring a little relief before the publication this Thursday of weekly registrations for unemployment benefits and Friday of the federal NFP (Non Farm Payrolls) report. Because this week is definitely placed under the sign of employment, a huge statistical issue. Any sign of easing tensions on the employment front militates for less pressure on wages, and therefore prices…
Already on Tuesday, new job offers (JOLTS) came out below expectations, allowing Wall Street to close, albeit narrowly, in the green.
“American JOLT data [de mardi]lower than expected, highlighted a tightening of the labor market in the world’s largest economy, which raised hopes for a more accommodating approach from the Fed (US Federal Reserve, Editor’s note) and provided support to the stock markets”, notes Pierre Veyret, technical analyst at Activtrades.
In the wake of these figures, 10-year Treasuries, the yield on 10-year American sovereign bonds, relaxed very clearly towards 4.33%, compared to a jump to 4.638 on 05/29.
According to the Fed Watch tool, operators now estimate a first rate cut by the American Federal Reserve in September at 67.3%, compared to less than 50% last week. The tool allows you to analyze the probabilities of changes in federal rates and US monetary policy based on the price of 30-day federal funds futures contracts.
On the value side, OVHcloud gained 7.05%, probably benefiting from cheap buybacks while the stock still showed a plunge of 25% over one month. Atos (-6.7%), for its part, remained poorly oriented, with a mega-dilution awaiting its shareholders, regardless of the future buyers of the digital services company in great financial difficulty. The technological section of the rating took on a few colors, like the emblematic representatives: Cap Gemini (+1.59%), Alten (+2.15%), Wordline (+2.43%), and Soitec (+3 ,30%).
On the other side of the Atlantic, the main equity indices finished in the green, in this context of bond easing. If the Dow Jones, rich in banks, limited its increase to 0.25%, the Nasdaq Composite soared by almost 2%, setting a new historic record at 17,187 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 $1.0880. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $74.30.
On the agenda this Thursday, to follow in priority the weekly registrations for unemployment benefits in the United States at 2:30 p.m., and the ECB decision, a quarter of an hour earlier. The press conference is expected for 2:45 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 Wednesday 29/05, illustrated the continued mobilization of the seller camp throughout the session. Closing at the low points of this session calls for the greatest caution in the short term. This candle followed a bearish encompassing combination.
A shoulder, head, and shoulder figure begins to appear. Its neckline can be compared to the aforementioned gap.
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 8220.00 points would revive the buying tension. While a break of 7820.00 points would restart the selling pressure.
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