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The Council of Governors of the European Central Bank, unsurprisingly, ended yesterday with a first rate cut, of 25 basis points. The question that remains at this point is: when is the next one? The CAC 40, between two waters against a backdrop of monetary questions, and interpretation of the ECB’s new economic projections, managed to gain 0.42% at the close, 40 points above the symbolic threshold of 8,000 points.
However, the ECB warned that we should not move too quickly and declare victory too soon in the fight against inflation. The institution has also revised its inflation forecasts upwards for 2024 and 2025, compared to the March projections, which will be likely to fuel debate on a possible break in July.
“These revisions have not called into question today’s monetary policy action, but generate uncertainty about the pace to come,” for Thomas Giquel, Head of bond management at Indosuez Wealth Management.
“More than ever, the central bank is monitoring economic figures to decide on its monetary impulse. It is also a way of recreating uncertainty in the bond markets, and therefore the risk premium.”
Quoted by Reuters, Emmanuel Auboyneau, associate manager at Amplegest, expects “one to two other rate cuts from the ECB by the end of the year, compared to one to two cuts in total in the United States. Nothing will happen before September and I think that in July, there will be nothing from the ECB, although we will have to monitor the inflation figures for June and July.”
The market will be eyeing the NFP (Non Farm Payrolls) report, federal report on American employment for the month of May, at 2:30 p.m. this Friday. It will confirm or refute the rather reassuring publications, scattered throughout the week on employment (JOLTS, ADP, registrations for unemployment benefits), publications which have allowed a relative calm on the American 10-year, now in the immediate vicinity of 4.3%.
Concerning this NFP, the unemployment rate is expected to be stable at 3.9% of the active population, average hourly wages up 0.3% and the number of job creations in the private sector (excluding agriculture) at 182,000. .
On the value side, Rémy Cointreau, which was well oriented after the publication of its annual results, finally ended down slightly by 0.1%. Getlink rose 1.9% supported by Barclays which raised its advice to “overweight” on the value. The British bank anticipates a significant recovery in the company’s shuttle business, and less competitive pressure from ferries. The recently introduced Planisware managed to occupy first place in the ranking in compartment A of the rating, gaining 6.33%.
On the other side of the Atlantic, the main equity indices ended Thursday’s session at levels close to equilibrium, like the Dow Jones (+0.20%) or the Nasdaq Composite (- 0.09%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, remained stable at 5,352 points.
An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0890. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $75.50.
On the agenda this Friday is the monthly federal employment report 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 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 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 8220.00 points.
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