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The CAC 40 index (-0.50% at 7,565 points on Wednesday) partly nibbled away at the upward gap recorded the day before, with investors trying to interpret the series of Chinese public measures to support consumption.
“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 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.
Because in the immediate future, “despite this latest initiative on the part of the Chinese authorities, investors remain skeptical,” tempers Grégoire KOUNOWSKI, Investment Advisor at Norman K. “Indeed, for many of them, the country’s economic problems remain deep, with a property market running out of steam, domestic consumption falling, rising youth unemployment, a return to price deflation and distrust of foreign investors stronger than ever.”
In addition, renewed tension was observed on bond rates. Yields on 10-year bonds increased by 3 basis points (0.03 percentage points) for Germany and by 5 basis points for Spain and Italy. For France, the yield on the 10-year Treasury bond rose by 6 basis points, the largest increase of the major European countries.
The gap with Germany on the 10-year rate (the famous “spread”), a gauge of market confidence in the signing, reached 80 basis points during the session. This renewed tension came after Laurent Saint-Martin, the Minister for the Budget and Public Accounts, said he feared a public deficit of more than 6% in 2024.
In terms of statistics, there was little to sink our teeth into on Wednesday; it is true that operators are already waiting for the publication of PCE prices on Friday, the Fed’s preferred measure in its assessment of inflation. Let us nevertheless mention new home sales, which happily crossed the 700,000 mark in August, beating the target.
In terms of values, Air France-KLM finished at the top of the SBF 120 (+6%) carried by JPMorgan, which raised its advice on the stock by two notches to “overweight” from “underweight”. The bank believes that the company’s results will improve in 2025, which is not reflected in the share price, which is at historic lows. Conversely, Ubisoft fell by 4.5%, with the market fearing all day that the release of its game “Assassin’s Creed Shadows” would be delayed, following certain press reports. Information finally confirmed by the group in a press release published after the close in Paris, acknowledging a three-month postponement for the last game in its flagship license.
On the other side of the Atlantic, the main stock indices ended in a mixed order, with the Dow Jones losing 0.70% and the Nasdaq Composite managing at the last minute to symbolically climb into the green (+0.04%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.19% to 5,722 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 $1,1150. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $67.70.
On the agenda this Thursday, to follow as a priority across the Atlantic the quarterly GDP and weekly unemployment benefit registrations at 2:30 p.m., as well as a speech by J Powell, Chairman of the Fed at 3:20 p.m., at the opening of the Conference on the American Treasury Market, in New York.
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.
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