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While the quarterly dance of large listed groups is in full swing, the CAC 40 once again tested a fragile floor (7,465/7,500 points), ending down 0.50% at 7,497 points on Wednesday. The statistical calendar, still empty, will be expanded over the last two sessions of the week with a battery of barometer activity indicators and the IFO business index in Germany. The opportunity to take a closer look at the disconnection of the European economy from the United States.
The day’s publications were, like the whole ball at this stage, mixed.
L’Oréal dropped 2.6% after delivering disappointing growth in the third quarter, penalized by China and dermatological beauty. Vivendi, Air Liquide and Thales, which each reported activity in line or even slightly above expectations in the third quarter, lost 1.7%, 1.1% and 1.1% respectively. STMicroelectronics, for its part, gained 1.8%, supported by the results of its American comparable Texas Instrument.
It was especially in the tensions on the American 10-year bond that we had to find the source of the market’s nervousness on Wednesday. 10-year Treasuries were close to 4.25%.
The resilience of the world’s largest economy calls for a flexible pace of federal rates. This pressure on 10-year Treasuries can also be explained by the suspense surrounding the outcome, in less than three weeks, of the presidential election. Budgetary questions, in particular proposals to reduce deficits, are not legion in the programs of the two candidates…
“The US elections are a significant event likely to increase market volatility: political uncertainty, and market reactions can create both risks and opportunities for investors. For example, policies favoring certain sectors – green energy under the Democrats or deregulation under the Republicans – can lead to significant fluctuations in these areas”, analyzes Andrea Tueni, Head of Sales Trading Saxo Bank.
“Investors are navigating a tangle of geopolitical tensions in the Middle East, a less accommodating Federal Reserve than expected and the sudden awakening of the “Trump Trade”’, underlines Stephen Innes of SPI Asset Management.
The “Trump trade” refers to market expectations regarding a potential victory for the Republican candidate in the presidential election on November 5. Due to several measures, such as corporate tax cuts, markets judge that his program could cause inflationary pressures and increase deficits. Which would result in a rise in rates, stocks and the dollar.
On the other side of the Atlantic, the main equity indices ended Wednesday’s session clearly in the red, like the Dow Jones (-0.96% to 42,514 points) and the Nasdaq Composite (- 1.60% to 18,276 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 0.92% to 5,797 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 $1.0790. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $71.50.
On the macroeconomic agenda this Thursday, to follow as a priority the PMIs in the Euro Zone, in flash data for October at 10:00 a.m., as well as new weekly registrations for unemployment benefits at 2:30 p.m.
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, contrary movements, in a clear direction, are still expected. The 7,500 points were more under pressure last week, a risk for the flagship index, which made a foray below Wednesday October 16 before recovering significantly during the session. New test on October 22, with a low wick on the corresponding candle.
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.
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