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With the now almost certainty of a further reduction in federal rates of 25 basis points next week, the CAC 40 held the bar at the heart of its technical navigation zone between 7,340 and 7,465 points, ending slightly up by 0.39% to 7,423 points on Wednesday, on the eve of the outcome of a new Council of Governors of the European Central Bank.
“Political decisions will remain dependent on data, but the deterioration of economic indicators, notably weak European growth, argues in favor of continuing this easing. Despite political tensions in France and Germany, it is unlikely that the ECB will “deviates from its line of conduct”, anticipates David Zahn, Head of European bond management at Franklin Templeton.
The consensus is clear, for a 25 basis point drop in the main key rate in the Euro Zone on Thursday. The margin is indeed comfortable for Christine Lagarde. “No economic data currently seems to indicate any rebound in activity, the French and German situations not helping. With 125 bps of key rate cuts expected by the market by next June, the ECB has the necessary weapons to put juice back into the machine”, commented Thomas Giudici, Head of bond management at Auris Gestion.
Operators took note of the main figure of the day, Thursday, namely the publication of consumer price indices perfectly in line with expectations. In particular, concerning the largest basket of products, prices increased by 2.7% in November at an annual rate. Enough to further confirm the probabilities around 85%, according to the CME Group’s FedWatch tool, of a 25 basis point drop in the remuneration of Fed Funds at the end of the last FOMC of the year, on December 18 . “This inflation report was decisive for closing the year 2024, particularly in view of a potential rate cut by the Federal Reserve,” notes Florian Ielpo, head of macroeconomic research at Lombard Odier Investment Managers.
On the values side, Publicis finished at the top of the CAC 40, gaining 3.7%. The advertising group is supported by an increase in recommendation from JPMorgan to “overweight” from “neutral” previously. Groupe ADP on the other hand, stumbled 1.1% as Deutsche Bank lowered its advice to “hold” from “buy”. GL Events gained 1.5% while the events group is in the home stretch to win the Stade de France concession.
On the other side of the Atlantic, the main equity indices ended in mixed order, the Dow Jones contracting by 0.22% and the Nasdaq Composite surging by 1.77% to close the highly symbolic bar of 20,000 points. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.82% to 6,084 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 $1.0510. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $70.00.
On the macroeconomic agenda this Thursday, to follow as a priority weekly registrations for unemployment benefits and producer prices across the Atlantic, at 2:30 p.m. A quarter of an hour before the ECB’s monetary verdict will fall and a quarter of an hour later the traditional press conference will be held.
KEY GRAPHIC ELEMENTS
The flagship tricolor index will have covered an old working band, entirely, on Friday 06/12, between 7,340 points and 7,465 points. It is this last level, constituting significant resistance, which will constitute the technical challenge of the week.
The session on Friday, December 6 is important in its construction, the length of the corresponding green candle materializing the definition of a new working framework, also upon crossing the key moving average.
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 7465.00 points would revive the buying tension. While a break of 7340.00 points would restart the selling pressure.
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