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The CAC 40 index was pushed back by a resistance zone towards 7,690 / 7,700 points, a level which constitutes the upper limit of a range concentrating very volatile oscillations since Friday, June 14. It was also on this date, when the flagship French index melted by 2.66%, that the amplitude of this horizontal channel was defined.
It was clearly the luxury sector that weighed on the index on Monday. The sector, which is so strategic and weighted on the Parisian financial market, was badly handled, in the wake of the publication of poor results for the Swiss watchmaker Swatch and the British leather goods manufacturer Burberry. The Swiss group completely missed the consensus since analysts were expecting on average a 2% drop in revenues excluding exchange rate effects and an operating profit of 502 million Swiss francs. For its part, the British leather goods manufacturer indicated on Monday morning that for its first quarter its sales had fallen by 20% excluding exchange rate effects to 458 million pounds, far from the consensus of 486 million pounds according to UBS.
Fears about the sector have mechanically penalized emblematic files in Paris, such as L’Oréal (-1.53%), Christian Dior (-1.70%), Hermès (-2.58%), LVMH (-2.65%), Interparfums (-3.02%) and Kering (-5.28%).
In the United States, Republican candidate and former President Donald Trump was the victim of an assassination attempt, an episode that should, according to specialists, boost his popularity. Despite this tragic incident, the market reaction on both sides of the Atlantic is moderate. It should be noted that operators have taken note of the index Empire Statecontracting to -6.6, without much deviation from a slightly less pessimistic target.
As a reminder, the general framework remains the same: a volatile and nervous market, awaiting concrete developments on the formation of a new government. Joseph V. Amato – President and CIO – Equities of Neuberger Berman wants to be reassuring however: “the lack of parliamentary consensus raises longer-term challenges, but the immediate threat to France’s fiscal stability has dissipated. French and Italian government bond spreads are wider than five weeks ago and the French stock market has faltered, but European equities in general and credit spreads have held up well.”
And on the monetary side, it is now almost certain that we will see a first cut in federal rates in September. “The easing of inflation has strengthened the assumptions of a first cut in the Fed’s rates in September,” summarizes Alexandre Baradez (IG France). The CME Group’s FedWatch tool now puts the probability of such a scenario at 92.50%. As a reminder, this valuable tool allows us to analyze the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts.
This probability had already increased significantly the previous week with the ISM Services falling below the 50-point mark and the flat content of the NFP employment report. But yesterday’s inflation data turned the test on its head.
On European monetary policy, Nomura strategists expect that “the European Central Bank’s decision on July 18 should go smoothly.” [avec un statu quo sur les taux]And [s’attendent] that the guidelines are consistent with those of Sintra. The questions and answers should focus on the possibility of a further reduction in September or on the persistence of concerns about the maintenance of inflation in services.”
On the other side of the Atlantic, the main stock indices ended Monday’s session in the green, like the Dow Jones (+0.53%) and the Nasdaq Composite (+0.40%), with a strong technological coloring. The S&P500, a reference barometer of risk appetite in the eyes of fund managers, gained 0.28% to 5,631 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 $1,0890. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $80.60.
On the agenda this Tuesday, to follow in priority the ZEW index of confidence in the German economy at 11:00, retail sales across the Atlantic at 14:30, and the NAHB index of the American residential market at 16:00.
KEY GRAPHIC ELEMENTS
The technical situation remains extremely fragile in the short term, with volatile oscillations expressed in a tidy between 7,465 and 7,700 points. In the event of a break of this first threshold, which corresponds to the lower limit of a former remarkable gap, an additional “purge” movement, the second, would take shape. We are doubling our caution as we approach it.
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.
The News Bulletin 247 council
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