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The CAC 40 (-0.48% Friday on 8,000 points) is expected to fall sharply this Monday, after European elections which ended, in France, with the overwhelming victory of the National Rally list (31.50% ), far ahead of the Renaissance list (14.6%). The list led by Raphaël Glucksmann took third place with 13.8% of the votes cast. Taking note of this balance of power, the President of the Republic announced to call early legislative elections, the first round of which will take place at the end of the month.
In the immediate future, investors are also digesting the particularly firm figures from the federal employment report (NFP) published at the end of last week.
In detail, if the report highlighted a slight increase in the unemployment rate, to 4% of the active population, the increase in average hourly wages, at +0.4%, exceeded the target (+0.3 %). But it is above all the dynamic of job creation which is of concern, after an ADP survey and new job offers (JOLTS) which were rather lenient this week. The American economy created 272,000 jobs in the private sector, excluding agriculture, exploding the target (182,000) and the month of April (165,000).
“The publication […] should reverse much of the soft landing optimism the market has priced in over the past few weeks on the yield front, with the resurgence of the higher rates for longer mantra. for Jeff Schulze, Head – Economic & Market Strategy at Clearbridge Investments, a subsidiary of Franklin Templeton.
In the wake of this publication, the American 10-year rose again, now close to 4.45%. Enough to put more pressure on the Fed, by further reducing its window for an initial rate cut. According to the CMEGroup’s FedWatch tool, September still holds the lead with 69% probability of a first action on the Fed Funds, while the ECB began its monetary shift on Thursday. As a reminder, this valuable tool makes it possible to evaluate the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts.
The Fed will meet this week its Monetary Policy Committee (FOMC). If a status quo on the rates is acquired, the meeting will be interesting, in particular because of the publication of the “dot plots”, this famous dot graph, illustrating the median projection of the members of the central bank for the key rates for the months to come .
Xiao Cui, Senior Economist, at Pictet expects “two rate cuts this year in September and December, as inflation decelerates and the labor market leads to a healthy slowdown. The Fed should become more aware of both the risk of a re-acceleration of inflation and that of an unexpected slowdown in the labor market We expect the hawks and doves of the committee to continue to debate the balance of risks.
On the value side, Airbus lost 2.3%, investors having not failed to sanction disappointing aircraft deliveries for the month of May according to Jefferies.
Euroapi plunged 17.9% after announcing the appointment of an ad hoc agent, as part of an amicable procedure launched at its initiative which should help the group in its discussions on the financing of its transformation project Focus -27. “Euroapi proactively called upon this independent third party in order to accelerate discussions and converge towards a solution likely to satisfy the interests of all stakeholders,” underlines the company.
Rexel limited its decline to 0.1% after delivering its medium-term objectives and its new strategic plan called “Powering up Rexel”.
On the other side of the Atlantic on Friday, the main equity indices closed in the red, within narrow margins, like the Dow Jones (-0.22%) and the Nasdaq Composite (-0.23). %). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 0.11% to 5,346 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 $1.0750. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $75.40.
On the agenda this Monday, to follow as a priority the Sentix investor confidence index in the Euro Zone at 10:30 a.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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