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Weighted down by LVMH (-4.66%), which delivered a disappointing quarterly copy – in the market sense -, the CAC 40 lost 1.12% to 7,513 points. At the lowest point of the session, the leading French index further weakened a floor at 7,465 points, a break of which, most likely on a gap this Thursday, would announce the formation of a new bearish leg. In any case, the pre-opening suggests this gap, in the wake of a massive decline on the Nasdaq Composite (-3.64%), undermined by Tesla and Alphabet.
LVMH has therefore weighed down the CAC, due to its weighting, and has contaminated the entire luxury sector in Paris, such as Hermès (-2.07%), Kering (-4.54%) or Christian Dior (-4.70%). A cold snap even though this week has concentrated many publications from large groups. This morning before, it was Stellantis’ turn to generate concern, with a reduction in its margins. Total announced a significant reduction in its results.
In the statistical chapter, in the very first estimates for the current month, the industrial and services PMIs in the Eurozone, at 45.6 and 51.9 respectively, missed expectations. It is especially the German industrial component, at 42.6, which is of concern.
“While Germany is struggling to return to growth, the French economy is benefiting from the economic fallout from the Olympic Games. The companies surveyed indicated that they had taken advantage of the business opportunities offered by the hosting of the 2024 Olympic Games in Paris. Overall activity in the German private sector, however, suffered from the poor performance of the manufacturing sector, which survey respondents attributed to a weakening in demand,” commented Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
Investors are also keeping a close eye on the American presidential campaign, as Joe Biden’s decision not to run again could reshuffle the cards. If D. Trump remains the favorite, he will in any case have to adapt his strategy.
“This turnaround could allow the Democrats to regain some momentum. One thing is certain, however, the Republican candidate will be forced to change his tune, as his main angle of attack until now has focused mainly on the age and physical and mental capacity of Joe Biden,” explains Thomas Giudici, head of bond management at Auris Gestion.
On the other side of the Atlantic, red dominated on Wednesday, especially in tech, penalized by the quarterly copies of Tesla and Alphabet. While the Dow Jones contracted by 1.25%, the Nasdaq Composite fell sharply, by 3.64%. The S&P500, the benchmark index for risk appetite in the eyes of fund managers, fell back below 5,500 points (-2.31% to 5,427 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 $1,0840. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $76.90.
On the agenda this Thursday, to follow as a priority the very first estimates of the American quarterly GDP and the weekly registrations for unemployment benefits across the Atlantic at 2:30 p.m., and a speech by Mrs. Lagarde, President of the BCE at 5:00 p.m., on the occasion of a “Sport and Sustainable Development” summit, in Paris, on the eve of the opening ceremony of the Olympic Games.
KEY GRAPHIC ELEMENTS
A major technical event is expected on the CAC from the opening, which could see its fragile intermediate floor at 7,465 points break. A second consecutive bearish gap would fully validate the break, as would thick volumes. We will therefore monitor these two elements at the close, as will the weekly closing level tomorrow, while a very important figure (PCE price) is on the agenda.
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.
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