CAC 40: Hesitation waltz

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One step forward, one step back… The CAC reflects the hesitation waltz of the markets since the Fed’s decision last week to begin its monetary easing cycle with a 50 basis point cut in its main interest rate. After jumping 2.29% the day after this decision, on Thursday, the leading Parisian index lost 1.51% on Friday to 7,500 points, once again in the immediate vicinity of a pivot graphic threshold (7,465 points).

The market was weighed down on the one hand by the automobile sector, in the wake of the Mercedes warning, and by the technology sector. Among the biggest declines in compartment A of the stock market (large capitalizations), we found Stellantis (-3.42%), Teleperformance (-3.51%), CapGemini (-3.61%), Alten (-4.20%), Valeo (-4.54%), OVH (-4.72%), STMiceo (-4.88%), Ubisoft (-5.31%), Soitec (-5.37%), OPMobility (-5.92%), XFab (-6.31%), and Forvia (-8%).

The Fed decided on Wednesday, after two days of meetings, to “strike hard” by lowering the key rate by 50 basis points in one go, thus vigorously initiating the process of monetary easing. This is not a surprise, in the sense that the market was in any case divided between a scenario of -25 and another of -50 basis points.

The decision was accompanied by new economic projections: the powerful monetary institution headed by J Powell revised upwards its unemployment forecast to 4.4% for the current year and the next, and downwards its inflation forecast for 2025 to 2.1%.

The “dot plots”, that is to say the economic and monetary projections of the members of the Fed, showed that the central bankers anticipated, at the median level, another 50 basis points of rate cuts this year, when the market, itself, rather counts on 75 basis points.

On the other side of the Atlantic, the stock markets were in a state of consolidation on Friday, in the absence of any clear statistical indicators. The Dow Jones gained 0.09% to 42,063 points and the Nasdaq Composite contracted slightly by 0.36% to 17,948 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended on a neutral note near 5,700 points, not far from its historic highs.

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 $1,1170. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $70.90.

On the agenda this Monday, to follow as a priority the first estimates of the industrial and services PMIs. In synthetic data for the entire Eurozone, these activity barometers will be revealed at 10:00.

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.

Above, breathing is assured up to 7,690 points. Below, the resumption of bearish tensions is to be feared. Between the two (preferred scenario) erratic oscillations are envisaged.

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 7690.00 points would revive buying tension. While a break of 7465.00 points would revive selling pressure.

Hourly data chart

Daily Data Chart