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The CAC 40 index showed good momentum, gaining nearly 100 points on Tuesday (+1.28% to 7,604 points) following the announcement of significant support measures in China.
“The noise from sources “close to the discussions” has been intensifying since the start of the school year, suggesting the imminence of measures in the face of a slowing Chinese domestic economy,” notes Alexandre Baradez (IG France), who praises major announcements, “the lowering of the prudential reserve ratio for Chinese banks”, “the lowering of a short-term lending rate to banks (7 days)”, support for the stock markets and real estate.
“Even if it is not a “bazooka”, the measures taken by the Chinese authorities are relevant and targeted in relation to the difficulties that the country has been facing for several years.”
For many months, the market has been waiting for the Chinese government to deploy major resources to revive a flagging economy. The latest indicators published last week, whether retail sales or industrial production, have once again confirmed that the Chinese economy is slowing down.
The Chinese authorities finally decided to act with a first electroshock on Tuesday. The MSCI China index jumped by around 4.50%.
“The next wave of easing will likely come from fiscal and housing policy, which could change growth expectations and market sentiment, depending on the magnitude and effectiveness of the announcements,” economists at Allianz Global Investors said.
In the statistical chapter, investors took note of the IFO business climate index in the leading economic power in the Eurozone, which came out down at 85.4, without however moving significantly away from the consensus (86.1).
In the afternoon, they learned of an unexpected deterioration in consumer morale in September in the United States. The index measured by the Conference Board fell to 98.7 points in September, compared to 103.8 points for the consensus and after 105.6 points the previous month. Nothing new on the S&P Case Schiller index of real estate prices in around twenty representative agglomerations, up 5.9% on an annual basis, right on target compared to the consensus. Finally, there was marked disappointment regarding the Richmond Fed manufacturing index, which sank deeper into negative territory, at -19.
In the values ​​department, the strategic luxury sector was celebrating, propelled by the support measures of China, a crucial country for companies in the sector. Hermès gained 3.85% while Kering rose 3.2% as did LVMH. But the biggest increases of the day were to be found in cyclical stocks such as the steelmaker ArcelorMittal (+4.8%) or the mining group Eramet which gained 4.7%. The automotive equipment manufacturers Forvia (+2.7%) and Valeo (+1.9%), whose shares are experiencing a strong “Beta effect” also benefited from the momentum generated by this Chinese recovery plan.
On the other side of the Atlantic, the main stock indices ended Tuesday’s session in the green, within relatively narrow margins, like the Dow Jones (+0.20%) and the Nasdaq Composite (+0.56%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.25% to 5,732 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 $1,1190. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $71.10.
On the agenda this Wednesday, to follow as a priority for the United States, new home sales at 4:00 p.m. and crude oil stocks at 4:30 p.m.
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 7200.00 points would revive selling pressure.
The News Bulletin 247 council
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