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The CAC 40 index is hovering in the immediate vicinity of the graphic pivot threshold of 7,465 points, as the outcome of a historic FOMC meeting by the Fed approaches tomorrow.
historic in the sense that it will formally mark the beginning of the decline in federal rates. The Fed – this is a given unless there is a huge surprise – will therefore lower the remuneration of its Fed Funds. Yes, but to what extent? -50 basis points to clearly mark the occasion, before adopting a more flexible trajectory? Or -25 basis points, at the risk of disappointing part of the market? Verdict on Wednesday at 8:00 p.m. for the monetary policy decision itself, the new economic projections and the dot plots, and at 8:30 p.m. for the press conference.
“This will be the Fed’s mission at the end of the year: to ensure that the soft landing of the economy goes well…but also that inflation continues to slow down,” summarizes Alexandre Baradez (IG France).
“The question is no longer whether the FED will take action but rather to estimate how quickly this new monetary cycle will unfold against a backdrop of macroeconomic data suggesting a slowdown in the labor market and a slight deceleration in the economy,” according to Grégoire KOUNOWSKI, Investment Advisor at Norman K.
“The dot plot, economic projections and Powell’s speech will all be key, but we expect labor market data to ultimately dictate the shape of the cycle. If there are signs of weaker labor demand or rising layoffs, the FOMC will not hesitate to respond forcefully,” comments Xiao Cui, Senior Economist at Pictet Wealth Management.
The dot diagram referred to by the asset management decision maker, called dot plotsis a dot chart published quarterly. Its mechanics are simple: the 12 voting members, under cover of anonymity, record their feelings about the level of Fed Funds for the next deadlines.
In the statistical chapter, investors were informed of an overshoot of the target for the monthly surplus of the trade balance in the Eurozone, at +15.5 billion euros in July, against +17.0 billion euros in June. Published this Monday, the manufacturing index of the Fed of NY (Empire State Index) largely beat expectations, returning clearly to positive territory, at 11.5.
On the value side, tech was under strong pressure, like Dassault Systèmes (-1.83%), Cap Gemini (-1.55%), Ubisoft (-3.41%), Soitec (-7.67%) and especially Wordline (-15.22%), amplifying its losses after the departure of its CEO and a new warning. Conversely, Rexel (+9.06%) shone after having refused the purchase offer from QXO.
On the other side of the Atlantic, the main stock indices ended the first session of the week in a scattered order, with the Dow Jones gaining 0.55% for a new historical record during the session, and the Nasdaq Composite falling by 0.52%. The S&P500, a benchmark barometer of risk appetite in the eyes of fund managers, gained a symbolically low 0.13%, to 5,633 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 $1,1120. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $69.50.
On the agenda this Tuesday, to follow in priority the ZEW index of confidence in the German economy at 11:00, retail sales in the United States at 14:30, and still across the Atlantic, the federal report on the health of industry at 15:15.
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.
Above, breathing is assured up to 7,690 points. Below, the resumption of bearish tensions is to be feared.
FORECAST
Considering the key graphic factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.
It should be noted that a crossing of 7465.00 points would revive buying tension. While a break of 7200.00 points would revive selling pressure.
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