CAC 40: Two risk factors under the radar…

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The mood remains heavy on the Paris Stock Exchange, whose flagship index, the CAC 40, lost 0.98% in the first session of the week, falling back below the important graphic threshold of 7,465 points.

The statistical calendar was deserted yesterday, and operators continued to rely on the quarterly copies of the large groups to make their decisions.

Some publications caught the market’s attention, including that of Emeis, the former Orpea, which fell by 18.9% after lowering its outlook for the current financial year.

The listed furniture groups are doing much better. Maisons du Monde gained 4.15% after its half-year results, while Miliboo gained 12.9%, the group is returning to profit at the end of its staggered 2023-2024 financial year ending at the end of April.

Excluding corporate publications, Stellantis fell 3.3%, weighed down by a downgrade from Deutsche Bank to “hold”, the institution judging that the manufacturer’s difficulties are only just beginning.

The statistical calendar will be expanded starting today, and for the rest of the week. Moreover, this Tuesday, growth figures will be published in Europe, as well as the closely followed consumer confidence index (Conference Board in the United States). On Wednesday, it will be the turn of the survey by the private human resources firm ADP to set the tone on the health of American private employment, before the publication on Friday of the monthly NFP (Non Farm Payrolls) report. In the meantime, on Thursday, traders will focus on weekly unemployment benefit registrations and the ISM PMI manufacturing index.

While the Fed is expected to complete an interest-free FOMC meeting this week before lowering rates in September, two central bank meetings will be under scrutiny this week: the Bank of England and the Bank of Japan.

Two risk factors identified, while many events can pass under the radar during the summer period

1) The Chinese banking sector: As Christopher Dembik, investment strategy advisor at Pictet AM, compiles, “The situation in China is causing cold sweats among investors around the world. This time, it is the banking sector that is the main focus. In one week, 40 banks have disappeared. The country is facing a silent banking crisis. Nearly 3,800 small local banks – mainly located in rural areas – are in difficulty. This is the equivalent of 13% of the Chinese banking system.”

2) Raw materials: “Algorithms have taken over the oil market. Last week, the price of a barrel fell below $80, close to its June lows,” notes Christopher Dembik, investment strategy advisor at Pictet AM. “The decline accelerated when intermediaries and brokers decided to liquidate their long positions. High volatility on copper as well. The market consensus had predicted that its price would reach stratospheric levels. The opposite is happening. Since its recent high, copper has collapsed by 15%. The cause: weak Chinese demand. And it’s not expected to improve…”

Across the Atlantic, major stock indices ended Monday’s session in mixed order, with the Dow Jones contracting slightly by 0.12% to 40,539 points, and the Nasdaq Composite gaining some 0.07% to 17,370 points. The S&P500, a benchmark barometer of risk appetite in the eyes of fund managers, ended very close to balance at 5,463 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 $1,0820. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $75.10.

On the agenda this Tuesday, to follow as a priority the preliminary data of the GDP of Q2 in the Eurozone at 11:00 a.m. and for the United States, the S&P CS real estate prices at 3:00 p.m., the Conference Board of consumer confidence at 4:00 p.m., as well as the new job offers (JOLTS).

KEY GRAPHIC ELEMENTS

The leading index of the Paris market has broken the graphic level of 7,465 / 7,500 points, a floor weakened since June 14. The selling energy released is significant, in light of the inability to fill the opening gap, and in light of the increasing transaction volumes. The message delivered is negative. For the time being, the index remains magnetized by the 7,465 points.

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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