CAC 40: An epidermal market

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Geopolitics came to the market’s fond memories on Tuesday, against a backdrop of fears of an escalation of tensions in the Middle East. The CAC 40 lost 0.81%, confirming its fall again below 7,700 points, weighed down by luxury and automobiles. Excluding the flagship index, Air France-KLM fell by 6.74%, while crude oil prices reacted violently.

“Israel’s elimination of several Hezbollah leaders on Lebanese soil rekindles tensions, especially since Iran has indicated that it will not leave its ally alone, which could lead to a widening of the conflict,” warned Monday Romane Ballin, bond manager of Auris Gestion in a note. “If, at this stage, the impact on the financial markets is contained, we must remain cautious: the geopolitical risk remains high.”

On Tuesday, the renewed tension came as several news agencies, such as Bloomberg and AFP, reported that the United States had indications that Iran was preparing to launch “an imminent ballistic missile attack “against Israel. Both agencies cited an unnamed senior U.S. official. According to AFP, Hezbollah, a Lebanese terrorist group supported by Iran, also claimed to have targeted an air base near Tel Aviv.

According to the Israeli army, Iran fired 180 missiles into its territory. A “large part” of its projectiles were intercepted by the anti-aircraft defense of the Jewish state, aided by the United States.

This information revives fears of an escalation of tensions in the Middle East with, as is often the case, fears over oil production. A barrel of light Texas crude (WTI) rose more than 4% to $71.

In the statistical chapter, which has taken a back seat, the first estimates of consumer prices in the Euro Zone came out perfectly in line with expectations for the month of September. Excluding food, energy, alcohol and tobacco, prices increased by 2.7%, compared to 2.8 in August at an annual rate. Furthermore, new job offers (JOLTS) exceeded expectations, while the week promises to be dense in employment figures. The climax will be reached on Friday with the NFP (Non Farm Payrolls) report.

“All the employment figures this week will be important because the Fed has mainly pivoted in relation to the signs of a small slowdown in the job market which appeared this summer”, warns M Baradez (IG France)

On the value side, the sectors with a strong current amplification effect (luxury, auto) suffered, like its main representatives on the Parisian stock market: Hermès (-2.67%), Kering (-2.86%) , Renault (-3.18%) and LVMH (-3.56%, bottom red).

On the other side of the Atlantic, the main equity indices ended in the red in reaction to geopolitical tensions in the Middle East. The Dow Jones lost 0.41% and the Nasdaq Composite, with its strong technological coloring, contracted by 1.53%. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 0.93% to 5,708 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 $1.1060. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $70.90.

On the agenda this Wednesday, to follow as a priority the results of the investigation by the private human resources firm ADP, at 2:15 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 bullish message was reinforced by the ability to finish on weekly highs thanks to Friday’s session. The participation, measured by volumes, over the whole week, will also have given meaning, as will the participation of several sectors in the increase, not just luxury. In particular, we have seen good recoveries in mining-type cyclicals, or leading players in automotive equipment.

Monday, September 30, with confirmation the next day, the index fell back below this level, hampering the chances of seeing it fall into lasting support. The next sessions will be decisive.

FORECAST

Considering the key graphical factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that crossing 7700.00 points would revive the buying tension. While a break of 7465.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart