CAC 40: A note of caution following the Board of Governors

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The CAC 40, decidedly very volatile between 7,500 and 7,700 points, rose 1.22% to 7,583 points yesterday, while as expected, the ECB announced in the afternoon a new rate cut of up to 0.25 percentage points. This is the third reduction in its key rates this year, after that decided in June, followed by another in September. It is justified by the slowdown in inflation in the euro zone.

“Given still high domestic inflation, which largely reflects price pressures in the services sector, monetary policy will remain restrictive for the moment,” said Konstantin VEIT, portfolio manager at PIMCO. In other words, the pace of loosening of the monetary tap will be controlled. “We believe that the ECB will make a further reduction in December, and that the forecast of a terminal rate of around 1.85% for the second half of next year seems reasonable to us,” added the manager.

“Ms. Lagarde acknowledged that the outlook for economic growth was weaker than expected, while risks to the ECB’s inflation forecasts are tilted to the downside,” Nomura economists added.

In terms of statistics, across the Atlantic, if the weekly registrations for unemployment benefits were not surprising, at 241,000 new registrations perfectly within the target, the level of retail sales jumped, excluding automobiles over one month, by 0.5% , against a consensus of .01%. Finally, the Philly Fed manufacturing index soared to 10.3, up from 1.7 last month. This further illustrates the impressive resilience of the American economy after so many months of high rates. Furthermore, the final consumer price data in the Euro Zone came out in line with the first estimates for the month of September, at +2.7% on an annual basis, excluding food, alcohol, energy and tobacco.

On the value side, Airbus gained 3.93%. The aircraft manufacturer published pre-results information for the third quarter on Wednesday evening, which did not lead to a lowering of the outlook, as feared by some market participants. Publicis rebounded by 2.8% after publishing growth above expectations in the third quarter and raising its revenue growth target for 2024. Pernod Ricard advanced by 1.8%, despite a disappointing first quarter in terms of activity.

On the other side of the Atlantic, the main equity indices ended Thursday’s session at levels close to equilibrium, like the Dow Jones (+0.37% to 43,239 points) and the Nasdaq Composite (+0.04% to 18,373 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended on a stable note at 5,841 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 $1.0840. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $70.50.

On the macroeconomic agenda this Friday, to follow as a priority housing starts and building permits in the United States at 2:30 p.m. Note that, published overnight, Chinese quarterly GDP came out in line with expectations, at +4.6% on an annual basis.

KEY GRAPHIC ELEMENTS

The nervous oscillations will continue to be concentrated between two major levels, the 7,465 / 7,500 points on the one hand, and the 7,690 / 7,700 points on the other. A quotation band from which an exit would release additional energy. But in the immediate future, contrarian movements, in a clear direction, are still expected. The 7,500 points are under more pressure this week, a risk for the flagship index, which made a foray below on Wednesday October 16 before recovering during the session.

FORECAST

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

This bearish scenario is valid as long as the CAC 40 index is below resistance at 7690.00 points.

Hourly graph

Daily Data Chart