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The CAC 40 index, powered by luxury, automobiles and tech, signed its best session of the year on Thursday, gaining 2.33%, crossing a major graphic threshold (7,700 points ), in thick volumes, while closing exactly on the high points of the session… A weekly close above 7,700 points would give more credence to the scenario of entry into a new market phase, marked by the revenge of certain files mishandled in recent months in the sectors precisely mentioned above.
Operators are currently confident in Chinese public measures to support the economy, and are even considering the adoption of new packages of measures with confidence.
China’s official Xinhua news agency reported that the Chinese Politburo meeting on Thursday decided that new measures were required to support the economy and achieve the 5% growth target in 2024. The urgency to revive the real estate sector , which has been in decline for three years, was also highlighted. Some media also report measures to reduce youth unemployment, or even, like Bloomberg, capital injections into state banks. Enough to encourage the market to bet on new stimulus measures in the coming days. This would be in addition to a first package unveiled by the People’s Bank of China on Tuesday.
“The noise from sources “close to the discussions” has intensified since the start of the school year, suggesting the imminence of measures in the face of a slowing Chinese domestic economy”, noted after the first announcements Alexandre Baradez (IG France), who praises the announcements of scale, “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 encountered in recent years.”
In terms of statistics on Thursday, operators took note of the final data on American quarterly GDP, at +3.0% on an annual basis, with no deviation from the first estimates. New registrations for unemployment benefits over a week totaled 218,000, showing signs of chronic tension in the job market. Finally, orders for durable goods, excluding transport equipment, increased over one month by 0.5%, well beyond expectations. The scenario of a soft landing for the world’s largest economy is gradually taking shape.
The statistical high point will be reached this afternoon, at 2:30 p.m. with the publication of PCE (personal consumption expenditures) prices, the Fed’s preferred measure for its assessment of inflation.
On the value side, luxury files, particularly exposed to the health of consumption in China, soared by almost 10%: 9.10% for Hermès, 9.61% for Kering, +9.88% for LVMH. L’Oréal, the cosmetics giant, followed the trend, gaining almost 7%. Conversely, Teleperformance (-4.7%) suffered the biggest drop in the CAC 40, penalized by a cross-reading of the market following the poor results of its American comparable Concentrix. Excluding the flagship index Ubisoft fell 13.4% after postponing the release of its game “Assassin’s Creed Shadows” by three months and lowering its forecasts for the 2024-2025 financial year.
On the other side of the Atlantic, the main equity indices ended Thursday’s session in the green, like the Dow Jones (+0.62%) and the Nasdaq Composite (+0.60%). . The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.40% to 5,745 points.
An update on other risky asset classes: around 8 a.m. 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 the appetite for risk on the financial markets, was trading around $67.50.
On the agenda this Thursday, to follow as a priority the PCE price index (personal consumption expenditures) at 2:30 p.m.
KEY GRAPHIC ELEMENTS
On Thursday, September 26, the CAC index crossed 7,700 points, a major graphic threshold. Not only did he cross it, but he did so in technical conditions providing credit: increasing volumes, gap, closing at session highs, participation of at least 3 sectors, major economic news.
The next challenge is the ability to end the week exactly on weekly high points. If necessary, the bullish message would emerge reinforced.
FORECAST
Considering the key graphical factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.
This bullish scenario is valid as long as the CAC 40 index is above support at 7700.00 points.
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