(News Bulletin 247) – This article, freely accessible, is produced by the News Bulletin 247 stock market analysis and strategy research team. To not miss any opportunity, consult the full analyses and discover our portfolios by accessing our Privileges area.
The renewed volatility is confirmed on the Paris Stock Exchange, whose flagship index, the CAC 40, came to test again a fragile floor at around 7,465 points, which corresponds precisely to the lower limit of a former very wide upward gap, on January 26. LVMH then published an excellent quarter. But the market now has its eyes elsewhere, and in particular on the still largely undecided composition of the next National Assembly. Voters are called to the polls this Sunday, for the second round of the election.
The first round last Sunday, at first sight only, averted the danger of an absolute majority of parties whose programmes pose a risk to already shaky public finances.
As a reminder, the RN (+ Les Républicains 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 “Ensemble” (20.76%).
“Even if the probability of an absolute majority for the National Rally is not completely zero at this stage, the first declarations of the different political parties on possible withdrawals and therefore the opening of negotiations with a view to the second round will make the scenario of an absolute majority difficult”, explains Alexandre Baradez (IG France).
A period of negotiations thus begins, which will materialize at the level of the rest of the vote, by the withdrawal of numerous candidates, in the case of “triangular” or “quadrangular”, that is to say when 3 or 4 candidates are in a “ballot”.
“These negotiations will also probably allow for smoothing over the most radical political proposals formulated during the campaign by certain political parties, these radical measures which are typically those which frighten the markets.”
Nomura analysts believe that “the French elections could cloud the inflation narrative at the upcoming ECB conference in Sintra this week. The ECB will try to bring the inflation narrative back, but market attention will likely be entirely focused on the elections.”
Second focus of the week, the ability of the American economy to land smoothly. A working hypothesis further supported yesterday by the ISM manufacturing, which came out below expectations at 48.50. Employment, which is the statistical thread of the week, will further validate, or not, the quality of the landing. New job openings (JOLTS) exceeded expectations, and investors will take note of the ADP survey tomorrow, before weekly jobless claims on Thursday and the NFP report on Friday.
In the eurozone, inflation did indeed slow in June, reaching 2.5% over a year compared to 2.6% in May. But core inflation, excluding food and energy prices (and alcohol and tobacco) rose by 2.9%, more than the 2.8% anticipated by economists surveyed by Reuters. And this while the most influential central bankers in the world are meeting at the annual Forum organized by the European Central Bank in Sintra, Portugal.
According to Deutsche Bank, Christine Lagarde said the ECB still faces several uncertainties in its fight against inflation, including the evolution of wages, productivity and profits. The ECB president also added that the institution would need time to gather enough data to be sure that the risks of inflation above its target have been averted.
On the stock front, Michelin fell 3.10% to 34.98 euros, as the company held a conference call in which it said its sales volumes were lower than expected. Sodexo fell 4.73% to 81.65 euros after reporting third-quarter like-for-like growth that was slightly below expectations and announcing the loss of a major contract.
On the other side of the Atlantic, the main stock indices ended Tuesday’s session in the green following J Powell’s comments, such as the Dow Jones (+0.41%) and the Nasdaq Composite (+0.84%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, rose 0.62% to 5,509 points. Note that Wall Street will only open for half a session, on the eve of the 4th of July (Independence Day).
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 $1,0740. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $82.70.
On the agenda this Wednesday, to follow as a priority the survey by the private firm ADP on American employment at 2:15 p.m., the ISM services in final data at 4:00 p.m. and the traditional Fed Minutes at 8:00 p.m.
KEY GRAPHIC ELEMENTS
The shoulder, head and shoulders graphic pattern drawn since April 16 is in the process of breaking its neckline, which corresponds more or less to the gap of February 22, completely filled on June 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. 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 for week 24 shows a strong and continuous mobilization of the selling camp throughout the time unit.
Week 25 was the scene of a timid wedge reaction, without consistency or conviction, neither in terms of participation (volumes) nor that of sectors (no federation). A wedge that abruptly turned into a range (lateral channel), between 7,465 points and 7,690 points.
FORECAST
Considering the key graphic factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.
It should be noted that a crossing of 7690.00 points would revive buying tension. While a break of 7415.00 points would revive selling pressure.
The News Bulletin 247 council
Hourly data chart
Daily data chart
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
