CAC 40: Semi-dove, Powell does not rush the markets

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With the support of rather reassuring figures on American inflation, the CAC 40 enjoyed a rebound on Wednesday (+0.97% to 7,864 points), a rebound mainly driven by cyclicals which had been battered since the announcement. of the dissolution of the National Assembly. Société Générale gained 2.10%, Saint Gobain 2.12%, Vinci 2.33%, Legrand 2.43% and Schneider Electric 4.76%.

CPI prices (consumer price index) only increased by 0.2% in one month (excluding food and energy), below a target of +0.3%. Over one year the increase is 3.4%, again below the target (3.5%). Enough to cause a slight relaxation on the American 10-year bond, at 4.28%. And this just before the end (well after the close in Paris) of a Fed monetary policy meeting.

“Finally a real good surprise for American inflation in 2024,” appreciates Bastien Drut of CPR AM. “This report is very clearly good news for the Fed (American Federal Reserve, Editor’s note). While the year 2024 had started poorly, with the first four inflation reports which had been less good than expected, the report April, in line with expectations, and that of May, better than expectations, will be able to revive discussions on rate cuts by the Fed”, develops the strategist.

This FOMC has certainly reinforced the probabilities of a single cut in federal rates this year, due in particular to the updating of economic projections and the publication of dot plots, but also by the clear language used by the Institution. According to the CME Group’s FedWatch tool, the probability of a drop in Fed Funds remuneration is 61.50% for the September deadline.

Investors also continue to monitor the political situation in France. The President of the Republic, Emmanuel Macron, spoke at the end of the morning, justifying his decision to dissolve the Assembly after noting a “blockage”. The tenant of the Elysée called on political forces “who do not recognize themselves in the extremist fever” to come together and establish consensus. On the other hand, he ruled out a resignation in the event of an electoral setback after the result of the legislative elections.

On the other side of the Atlantic, the main equity indices ended in mixed order, with tech continuing to take off: the Nasdaq Composite set new records by gaining 1.53% while the Dow Jones, rich in banking, symbolically ended the session in the red (-0.09%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.85% to 5,421 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 $1.0800. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $77.90.

On the agenda this Thursday, to follow as a priority the producer price indices and the weekly registrations for unemployment benefits in the United States at 2:30 p.m.

KEY GRAPHIC ELEMENTS

The shoulder, head and shoulder graphic figure traced since April 16 is in the process of breaking its neckline, which corresponds more or less to the gap of February 22, fully filled yesterday during the session. the short-term graphic configuration is degraded.

In quick succession, the flagship tricolor index failed two major technical tests: it exited from the bottom of a channel on May 29, and as seen previously, it exited from the bottom of a chartist figure on June 10 .

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 7900.00 points.

Hourly graph

Daily Data Chart