CAC 40: Focus on PCE prices

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New heavy session Thursday on the Paris Stock Exchange are the flagship index, the CAC 40, lost 1.03% to 7,530 points, now a good distance from its historic records at 8,259 points. And this as today’s publication of PCE (personal consumption expenditures) prices approaches, the Fed’s preferred measure in its assessment of inflation. Already yesterday, the upward revision of the American quarterly GDP (+1.4%), as well as the weekly registrations for unemployment benefits, still low (233K), constituted all leading indicators of inflation.

According to the CME Group’s FedWatch tool, a scenario of a federal rate cut in September has a nearly 62% chance of happening (vs. 68% earlier in the week). The tool, as a reminder, allows you to quantify and analyze the probabilities of changes in federal rates and US monetary policy based on the price of 30-day federal funds futures contracts. It is a valuable tool and complements the dot plot diagram.

Caution should remain in order as the first round of the legislative elections in France approaches this Sunday. Gabriel Attal (Presidential Majority), Jordan Bardella (National Rally) and Olivier Faure (PS – Popular Front) confronted each other last night during a televised debate, before the official end, this evening at midnight, of the campaign.

In terms of values, Kering (+4.67%) recorded a rebound, driven by a recommendation upgrade from Bank of America, while Stellantis (-4.01%) suffered after a rating from HSBC. Edenred (-4.11%) was the CAC’s bottom performer on Thursday.

On the other side of the Atlantic, the main stock indices managed to pick up a few points on the eve of the publication of the PCE, like the Dow Jones (+0.09% to 39,164 points) and the Nasdaq Composite (+0.30% to 17,858 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, nibbled 0.09% to 5,482 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 $1.0690. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $82.00.

On the agenda this Friday, to prioritize core PCE prices, the reference barometer for the Fed in its measurement and assessment of inflation.

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 on 06/11 during the session. The short-term graphic configuration is significantly degraded.

One after the other, the French flagship index failed two major technical tests: it broke out from the bottom of a channel on May 29, and as seen previously, it broke out from the bottom of a chart pattern on June 10. Below 7,900 points, the situation remains worrying..

The “LVMH” gap has been filled. Ample, it was formed on January 26 following the publication of an excellent quarterly report from the luxury giant.

The weekly candle of week 24 testifies to a strong and continuous mobilization of the selling camp throughout the unit of time.

Week 25 was the scene of a timid, beveled reaction, without consistency or conviction, neither in terms of participation (volumes) nor in terms of sectors (no federation).

The all-encompassing bearishness of Wednesday June 26 suggests a possible exit from the bottom of this wedge.

FORECAST

Considering the key graphic 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 trading below the resistance at 7690.00 points.

Hourly data chart

Daily Data Chart