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Without a bad pun, the ECB opted for a new cut in key rates on Thursday – it was very widely expected – without letting down its guard. The ECB proceeded to a cut of 25 basis points, that is to say of a quarter of a percentage point of its main key rate, the deposit rate. The comments of its president Christine Lagarde did not, moreover, hold any major surprises.
“Christine Lagarde’s remarks did not surprise the market. The central banker emphasized the issue of growth and the need to support it with quite a few references to Mario Draghi’s recent report,” reacted Alexandre Baradez, head of market analysis at IG France.
“Although the rate cut has been anticipated, market participants are eager to see what the ECB will do next. On this subject, the Governing Council warned that nothing was set in stone at this stage, stating that it was not committing to a specific path on rates and that it would continue to assess the economic data meeting by meeting,” comments Grégoire KOUNOWSKI Investment Advisor at Norman K.
The powerful pan-European monetary institution has lowered (slightly), but for 2024, 2025 and 2026, growth.
The CAC 40 ultimately reacted little after the press conference, ending the session with a timid increase of 0.52% to 7,435 points, below a major resistance zone at 7,465 points.
In terms of statistics, operators have taken note of American producer prices, up 0.3% on a monthly basis, excluding food and energy, i.e. a dynamic slightly higher than expected (+0.2%) and in July (-0.2%).
As a reminder, on Tuesday, investors took note of the consumer price indices across the Atlantic for the month of August, whose dynamics increased by 0.3% excluding food and energy, against a target of +0.2%. No surprises, however, regarding prices in the broadest product range, which slowed very markedly on an annual basis, to +2.5%, in line with expectations. Enough to leave the door open to a first cut in federal rates of 50 basis points on September 18.
On the value side, Legrand (+2.9%) benefited from a recommendation upgrade from Deutsche Bank to buy. Valeo advanced 3.8% Thursday evening while Bank of America switched to buy, estimating that its financial results will start to align with its commercial successes. Conversely, Eiffage (-3.3%) and Vinci (-1.6%) fell at the end of the session, in reaction to the decision of the Constitutional Council which validates a new tax on motorways and certain airports.
On the other side of the Atlantic, the main stock indices closed in the green, like the Dow Jones (+0.58%) or the Nasdaq Composite (+1.00%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.75% to 5,595 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 $1,1080. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $68.70.
On the agenda this Friday, to follow in priority the industrial production in Euro Zone at 11:00, and the consumer confidence index (U-Mich), in preliminary data at 16:00.
KEY GRAPHIC ELEMENTS
The key short-term chart levels were precisely hit: Friday, August 30 at 7,645 points, followed by a failure; and Wednesday, September 4 at 7,482 points, a handful of points from the 7,465 points below which a new bearish leg would form. This last level experienced a first alert on Thursday, September 5.
The fact that the leading French index ended at the lowest level of week 36, just after breaking the threshold, is decisive. It sends a message of short-term weakness.
The key threshold to watch is 7,465 points, below which the opinion will remain negative.
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 7465.00 points.
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