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Against a backdrop of optimism about the trajectory of American rates, the CAC 40 ended Thursday’s session up 0.83% at 7,695 points, at the top of a range concentrating very volatile oscillations since President E Macron’s announcement of a dissolution of the National Assembly. It is precisely this Sunday that the markets will be fixed on the balance of power in the Assembly, following the second round of the legislative elections.
In the meantime, they will be presented with the NFP (Non Farm Payrolls) report on American employment at 2:30 p.m., which will be the highlight of the session, the day after a public holiday in the United States (4th of July, Independence Day). The unemployment rate is expected to be stable at 4.0% of the working population, and job creation in the non-agricultural private sector is expected to fall, below the 200,000 mark, at 194,000. This last indicator, and especially its gap to the target, will be scrutinized.
Earlier in the week, several major indicators, such as the ISM Services or the ADP survey, showed reassuring signs of cooling of the American economic machine, allowing the scenario of a reduction in key rates to cross the 70% mark for the September FOMC, according to the CME Group’s FedWatch tool. The Fed Minutes, published on Wednesday, as well as J Powell’s intervention at the monetary forum in Sintra, Portugal, converged in this direction.
Despite the current political context, France has successfully passed a new test on the debt market. The Agence France Trésor, responsible for raising debt on the markets to finance the needs of the State, carried out a global auction of 10.5 billion euros of bonds this Thursday. This has allowed a slight easing on the bond market, the yield on the French 10-year debt is trading at 3.277%, after having moved around 3.30% at the beginning of the week.
Which reduced the gap compared to the German reference. ‘This easing of the spread in recent days offers a small breath of fresh air to investors, allowing the CAC40 to extract itself from its low zone,’ notes Alexandre Baradez (IG France).
Banks were mechanically popular, like BNP-Paribas (+1.90%) or Société Générale (+2.48%). Outside the CAC 40, Pluxee fell by 9.3% after revealing its third-quarter activity. Overall growth is in line with expectations, but the company is showing a slowdown in Europe.
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 $1,0820. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $83.20.
On the agenda this Friday, to follow as a priority the federal NFP (Non Farm Payrolls) report on the health of American private employment, at 2:30 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 reaction in a wedge, without consistency or conviction, neither in terms of participation (volumes) nor that of sectors (no federation). A wedge which abruptly turned into tidy (lateral channel), between 7,465 points and 7,690 points. The market’s nervousness is expressed erratically.
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 7900.00 points would revive buying tension. While a break of 7415.00 points would revive selling pressure.
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