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The Parisian market is expected to rise sharply this Monday, the day after the results of the first round of the legislative election. The National Rally certainly comes out on top in terms of number of votes, but to a lesser extent than the operators feared. As a reminder, one of the fears of the market, in this troubled political context, is that the next government will implement policies that would weaken the already shaky French public finances. In the immediate future in any case, the scenario of an absolute majority for the RN, at the end of the second round on Sunday July 7, is receding.
The RN (+ the Republicans who allied themselves with it) obtained 33.15% of the votes cast, ahead of the New Popular Front (NFP), credited with 27.98%, and the presidential list “Together” (20.76 %).
The CAC 40 contracted by 0.68% on Friday to 7,479 points, at the end of a complicated week marked by tension on the bond markets.
In terms of statistics on Friday, sigh of relief! No unpleasant surprises regarding the recent publication of “PCE” prices (personal consumption index), THE Fed’s preferred measure in its assessment of inflation. Excluding food and energy, in so-called core data, prices increased by 0.1% in May, which is perfectly in line with the target. The monthly progression of the index, for the month of May, however, was increased from 0.2% to 0.3%.
Enough to immediately raise the probabilities of a federal rate cut in September to 68%, as at the beginning of the week. This probability had “melted” to 62% in the middle of the week as leading indicators of inflation, economic activity, durable goods orders and employment were published. As a reminder, the CME Group, which provides these probabilities via the Fed Watch tool, is based on the price dynamics of 30-day federal funds futures contracts.
Elsewhere, the Chicago PMI (47.4) as well as the revised U.S. Consumer Confidence Index (U-Mich) data at 68.2 both exceeded expectations.
On the stock market side, L’Oréal fell 3% after its CEO Nicolas Hieronimus downgraded its outlook for the beauty market on Thursday, Bloomberg reported. Air France-KLM lost 4.2%, hurt by a downgrade from Barclays to “in line” on the stock.
On the other side of the Atlantic, the main stock indices ended Friday’s session in the red, like the Dow Jones (-0.12%) and the Nasdaq Composite (-0.71%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.41% to 4,560 points.
An update on other risky asset classes: around 8:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0770. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $81.70.
On the agenda this Monday, to follow as a priority the final data of the PMI activity barometers in Europe (10:00 for synthetic data in the Eurozone). The ISM manufacturing PMI is expected at 16:00 for the United States.
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.
In quick succession, the flagship tricolor index failed two major technical tests: it exited the bottom of a channel on May 29, and as seen previously, it exited the bottom of a chart pattern on June 10. Below 7,900 points, the situation remains worrying.
The “LVMH” gap has been filled. Wide, it had been formed on January 26th in the wake of the publication of an excellent quarter from the luxury giant. Its lower limit at 7,465 points has been tested twice, and by this measure, weakened.
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, sideways reaction, without consistency or conviction, either in terms of participation (volumes) or that of the sectors (no federation).
The bearish engulfing pattern of Wednesday, June 26, suggests a possible exit from the bottom of this wedge.
In the immediate future, a sharply higher opening is expected this Monday.
FORECAST
Considering the key graphical factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.
This bullish scenario is valid as long as the CAC 40 index is trading above support at 7415.00 points.
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