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The CAC 40 ended on an almost stable note, symbolically in the red on Friday (-0.15% at 7,409 points), at the heart of its new technical working band, between 7,340 and 7,465 points, respectively support and resistance intermediate.
“A fourth consecutive drop in 2024 and a loosening of rates which should continue next year,” notes Grégoire KOUNOWSKI, Investment Advisor at Norman K. “Since the American presidential elections and the publication, in parallel, of poor economic indicators in the euro zone, the markets were pleading for a reduction in order to stimulate the economy of the Old Continent.”
The scenario of a drop of 50 basis points, which without holding the rope was part of the universe of possibilities, was therefore ruled out. This probability had in any case clearly “fallen due in particular to moderate statements by members of the ECB, including Isabel Schnabel, indicating that the measures taken by the central bank do not resolve the structural problems. “I would warn against an evolution too large, i.e. towards accommodating territory. I don’t think this is appropriate in the current perspective” she declared a few days ago in an interview with our colleagues at Bloomberg”, noted Alexandre Baradez (IG France).
However, Christine Lagarde did not avoid “the risk of increased frictions in world trade”, which could “weigh on the growth of the euro zone by reducing exports and weakening the world economy”. The ECB has also revised downwards its growth and inflation forecasts from 2024 to 2026.
“As expected, she did not make a commitment on a future direction of monetary policy and did not suggest that a further rate cut was planned for January. Given the high degree of political uncertainty and economic, the ECB maintains its dependence on data and its case-by-case approach for each meeting”, acts Ulrike Kastens, European economist DWS, who [continue] to think that the ECB is on a trajectory of rate cuts.
“Although growth forecasts have been revised downward, risks to the economy are not yet fully reflected in GDP projections. This is expected to be gradually corrected in 2025. We expect another rate cut in January and others will follow. We anticipate that the ECB will reduce the deposit rate to 2% in 2025.
“More importantly, in our view, the statement and press conference made it very clear that the monetary stance was still restrictive, with Christine Lagarde (the president of the ECB, editor’s note) stating that there was ‘no question on this subject'”, underlines Frederik Ducrozet director of Macroeconomic Research at Pictet Wealth Management.
“In addition, the wording on inflation and wages was also dovish. High domestic inflation remains a concern, but it was described as the adjustment of ‘certain sectors’ to the inflationary surge passed ‘with substantial delay'”, he continues.
Next major monetary meeting: the outcome this Wednesday, December 18, 2024 of the last FOMC of the year. “We expect the FOMC to cut rates by 25 basis points next week, but will indicate a more gradual rate path subsequently”, argue the economists at Barclays.
On the value side, the automobile sector had a good session, Renault gained 1.50% and Stellantis 1.1%. Note that the precision mechanics specialist Odyssées Technologies made a promising debut on the Paris Stock Exchange, ending up 19.6% for its first day of trading.
On the other side of the Atlantic, the main equity indices ended Friday’s session in mixed order, with the Dow Jones contracting slightly, by 0.20% to 43,828 points and the Nasdaq Composite nibbling 0.12%. at 19,926 points. The S&P500, the reference barometer of risk appetite in the eyes of fund managers, ended on a note of almost perfect stability at 6,051 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 $7050.
On the macroeconomic agenda this Monday, to follow as a priority a battery of PMI barometers for the current month, in “flash” data. Synthetic data for the entire Euro Zone will be revealed at 10:00 a.m. To follow at 2:30 p.m. the indicator Empire State health industry in the United States.
KEY GRAPHIC ELEMENTS
The flagship tricolor index will have traveled 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 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 7465.00 points.
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