CAC 40: The bitterness of the great Barnier…

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While the pedal is still pressed hard on risk-on in the United States, driven by the “semi” sector, and while the DAX has crossed 20,000 points for the first time in its history, the CAC 40 ( +0.26% Tuesday) at 7,255 points, barely remaining far from its historic highs (8,259 points), in a political climate that is admittedly not very conducive to risk-taking.

Already considered the new bad student of the European Union in terms of budget, France is viewed with greater suspicion by the financial markets, while the Prime Minister, M Barnier, has taken down the constitutional card of article 49.3, engaging the responsibility of its government. This procedure, provided for by the Constitution, makes it possible to adopt the social security finance law without a vote from the National Representation. The other side of the coin is that if a majority of MPs vote for one of the two motions of censure tabled, the government falls, and the President is tasked with appointing a new Prime Minister, with a view to constituting a new government, with political balances. different… In short, it is the specter of chronic political instability that worries market operators.

Christopher Dembik, investment strategy advisor at Pictet AM, wants to put the situation into perspective: “The budget for 2024 will likely be renewed and possible adjustments will be discussed in January and February by the interim government or a new government. there is no risk of a shutdown and even less of a financial crisis or speculative attack from France, as has been mentioned here and there.”

“The spread is expected to remain within the range observed in recent days over the coming weeks, depending on political developments, with a significant risk that the market will test the 100 basis point threshold from January, when trading activity financing will resume”, for Mauro VALLE, Head of Fixed Income at Generali Asset Management (Generali Investments). This spread, that is to say the difference in basis points between the Bund and the 10-year OAT, had risen to 190 basis points in November during the crisis in the Euro Zone. We are still very far from it.

In a note written this Tuesday, Morgan Stanley bank strategists nevertheless estimate that if the government finds itself censored, and therefore the various budgetary texts are not adopted, this gap could exceed 95 basis points.

In terms of statistics, we took note of data relating to the job market for the month of October which highlighted an increase in job offers. According to the US Department of Labor’s JOLTS report, the number of job openings reached 7.74 million in October, compared with 7.37 million in September. This week will also be under the sign of American employment, with, among other publications, job cuts, weekly registrations for unemployment benefits, the investigation by the ADP firm, and as a highlight the federal NFP report Friday.

On the value side, Stellantis regained 1.9% after losing 6.4% the day before following the announcement of the resignation of Carlos Tavares. Excluding the CAC 40, Forvia and Valeo fell by 4.8% and 2.3% respectively, the two automotive suppliers having also been downgraded to “neutral” from “buy” by UBS. OPMobility, which can be considered in certain aspects as an automotive supplier, fell by 3.15%. Wordline fell by 10.40%. The stock had soared 14% the day before, driven by a return of speculation after Reuters reported that private equity funds had begun examining potential buyout offers.

On the other side of the Atlantic, the main equity indices ended Tuesday’s session in mixed order, with the Dow Jones contracting 0.17% and the Nasdaq Composite gaining 0.40% from historic highs. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended on a stable note at 6,050 points.

An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0520. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $70.20.

On the macroeconomic agenda this Wednesday, to follow in priority the final data of the Services PMI in the Euro Zone at 10:00 a.m., the ADP firm survey on American employment at 2:15 p.m., the ISM services at 4:00 p.m. and a speech by J Powell , Chairman of the Fed, at 7:45 p.m. during an event organized by the NY Times.

KEY GRAPHIC ELEMENTS

With a candle with a long red body on Tuesday, November 12, the index defined the amplitude of a new working base, between 7,200 points on the one hand and 7,340 points on the other hand, which we switch to chart resistance zone. The thick volumes of this key session, combined with the opening gap, give meaning to the threshold break.

The 7,200 points constitute an increasingly fragile harassed floor. It was preserved last week, allowing the index to begin this week at the heart of the working band mentioned above. But on Tuesday, it was undermined once again, before breaking on gap on Wednesday. Weekly confirmation would have unfortunate consequences, since below, there is no branch to catch up on before the psychological threshold of 7,000 points, which has not been visited for a year.

The CAC managed to save 7,200 points on Monday, after opening well below like Friday 29/11.

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 7340.00 points would revive the buying tension. While a break of 7000.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart