(News Bulletin 247) – While the largest nuclear power plant in Ukraine (Zaporijia) was targeted by the Russian army, causing a fire in its immediate surroundings which has just been brought under control, the conflict in Ukraine continues to weigh on risky assets, with the notable exception of crude, whose barrel of WTI is now camped very well above the symbolic threshold of $100, at $109 immediately. The vagueness that reigns as to the outcome of the conflict and its lasting consequences penalizes the markets and puts the major central banks in a dilemma.
Emmanuel Auboyneau, Associate Manager Amplegest, distinguishes “to date two possible scenarios [qui] clash. The scenario first of a short war, followed by negotiations with a gradual return to normal. Tensions and resentment will not diminish anytime soon, but a certain pragmatism, at least economically, will prevail. This scenario would ultimately weigh relatively little on the global economy. Commodity prices should fall quickly and our 2022 scenario would be little changed. The second scenario, that of an escalation both military and economic, is much more unfavorable and could lead to a very penalizing situation of stagflation for our economies.
It must be said that this question of the potential slowdown in global growth, in a high inflationary context, energy in mind, completely reshuffles the cards for the big money-makers of the planet.
“In this context, central banks should be more cautious and more accommodating, particularly in Europe, in the face of the risks weighing on growth. At the same time, inflation therefore appears to be less under control knowing that it could increase significantly case of an acceleration of sanctions on the energy front, again leading to the risk of a slowdown in activity”, explain Jean-Marie MERCADAL, Director of Investment Strategies and Eric BERTRAND, Deputy CEO and Chief Investment Officer at OFI AM.
In any case, and especially since the hearing of J. Powell in front of the Parliamentarians this week, the probabilities of seeing the Fed Funds go up from the next FOMC by 50 bp all of a sudden have collapsed, clearly paving the way for a rise of only 25 bps.
Regarding the main statistical release yesterday morning, at 55.5, the IHS Markit synthetic service PMI for the whole of the Euro Zone came out very close to expectations. The “composite” data (industry + service) are mechanically available for February, at 55.5. Chris Williamson, Chief Business Economist at IHS Markit, provided the following insights: “Although it is still too early to assess the consequences of the conflict, increasing risk aversion as well as new sanctions will most certainly impact the business outlook. , thus hampering the post-pandemic recovery. The conflict in Ukraine, which heightens inflationary risks and darkens the outlook for activity, thus adds to the headwinds that households and businesses were already preparing to face and makes the task even more difficult challenge of the ECB to control inflation while supporting a strong economic recovery.”
Note that the US PMI Services (ISM) clearly disappointed by completely missing expectations. On the other hand, registrations for unemployment benefits for the past week came out in contraction at 215,000 new registrations.
On the values ​​side, the automotive sector remained under strong pressure, a victim of concerns about global automotive production: Renault, which also suffers from its exposure to Russia, lost some additional 5.87% to 24.195 euros. The equipment manufacturers Plastic Omnium (-4.93% to 16.60 euros), Valeo (-6.75% to 16.37 euros), and especially Faurecia (-8.53% to 27.01 euros) were heavily penalized.
On the other side of the Atlantic, the main equity indices ended Thursday’s session in the red, with a little more resistance for Value, Industrials and Banks in the lead. While the Nasdaq Composite lost 1.56% to 13,537 points, the Dow Jones contracted only 0.29% to 33,794 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.53% to 4,363 points.
A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.1010. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $109.00.
To follow in priority, on the agenda this Friday, the federal report NFP (Non Farm Payrolls) on American employment in February.
KEY GRAPHIC ELEMENTS
The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap, opening the way to a new market phase. Recall that the index traced from February 16 to 18 a combination of candles in three crows. This combination was immediately followed by a very significant bearish engulfing structure, accompanied by volumes that were far from timid for a session, let’s not forget, without American benchmarks due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive. Friday’s pullback was surgically precise. A phase of high volatility begins. The school marubozu drawn on Tuesday 01/03 is a first step.
FORECAST
In view of 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 6760.00 points.
Hourly data chart
Chart in daily data
©2022 News Bulletin 247
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