CAC 40: Nervousness is expressed in a well-defined range

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Another session of volatility yesterday on the Paris Stock Exchange, where the CAC 40 experienced a significant gap between its high points of the day and its low points, to end with a very slight increase of 0.21% at 7,586 points, in the heart of a well-defined trading range, between 7,465 and 7,700 points.

The session was marked by the outcome of a meeting of the Governing Council of the European Central Bank. Unsurprisingly, it left its key rates unchanged, after having made an initial reduction at the beginning of June. Ultimately, the impact on prices was very limited, “because the ECB kept its rates on hold, as expected, and did not give any new indications on the future trajectory of interest rates”, as Francesco Pesole, analyst at ING, points out.

“The monetary policy communication highlighted that recent data show weaker growth, lower headline inflation, but persistent core and services inflation,” added the analyst, who believes that “the ECB is balancing reputational risk with concerns about overly optimistic inflation forecasts. We continue to expect two more rate cuts from the ECB before the end of the year.”

In terms of statistics, across the Atlantic, housing starts and building permits, as well as monthly industrial production and the rate of utilization of productive capacities, have exceeded expectations. The target was exceeded even more, and by far this Thursday on the Philly Fed index (manufacturing index of the Philadelphia Fed), which jumped to 13.9 points, its second best score since April 2022. On the other hand, weekly unemployment benefit registrations missed the target, coming out close to 240,000 new units. A figure which nevertheless reinforces the idea of ​​a more flexible monetary policy from the start of the school year.

In the value segment, Publicis, which gained more than 5% at the peak of the session, managed to maintain a +3% lead, in the wake of an annual target increase. Essilorluxottica ended up 1.50%, after climbing 7.2% early in the afternoon, on information from the Financial Times according to which Meta was considering acquiring a stake in the Franco-Italian optical group. Finally, the highly volatile automotive equipment sector showed great strength, as did OPMobility (+2.94%), Forvia (+3.78%) and Valeo (+459%).

On the other side of the Atlantic, the main stock indices ended Thursday’s session in the red, like the Dow Jones (-1.29%) and the Nasdaq Composite (-0.70%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.78% to 5,544 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 Friday, to follow as a priority a speech by Mr Williams (Fed of NY) on the occasion of an event in Peru, the 15th Bretton Woods conference, on the theme: “A new era for monetary policy”.

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 it approaches. The probabilities of a bottom exit from the tidy are stronger than those of an exit upwards, due to the volumes and volatility at the entry on June 13 and 14.

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