CAC 40: The 7,340 points under pressure again

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Weakened by the downgrading of the French sovereign rating by Moody’s, the CAC 40 began the week with a decline of 0.71%. With today’s lows at 7,339 points, the index further weakened the intermediate support level of 7,340 points. Its rupture would leave the field open for a surge in the direction of 7,200 points.

Investors are taking into account the downgrading of France’s credit rating by Moody’s which occurred overnight from Friday to Saturday. The agency lowered this rating to “Aa3”, against “Aa2” previously, with a stable outlook. The agency notably invoked the “political fragmentation” which should prevent the improvement of public finances, to justify its choice. At 78.1, the gap between the French 10-year OAT and the Bund of the same maturity increased slightly compared to last weekend.

Operators are also awaiting government appointments, particularly in finance, industry and public accounts, by E Macron on the proposal of the brand new Prime Minister, F Bayrou.

All eyes are now on the last major monetary event before the end of the year, namely the outcome of the FOMC on Wednesday, December 18.

“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.

“We believe the Economic Outlook report will show upward revisions to growth and inflation, lower unemployment, and three cuts next year. We maintain our baseline assumption that the FOMC will not cut its rates more than twice in 2025,” they add.

The CME Group’s FedWatch tool puts the probability of seeing the Fed validating this 25 basis point easing of the dollar’s rent at an overwhelming 97.1%.

Yesterday, investors took note, very early in the month, of the first estimates from the PMI barometers in the Euro Zone. The German industrial component, which came out below expectations at 42.5, weighs down the synthetic data for the entire monetary union. However, “if the manufacturing industry remains stuck in a sharp recession, the rebound recorded in the services sector is good news for the economy as a whole”, notes Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, who adds:

“Germany and France, the two main economies in the region, are currently in very uncertain political situations. This climate prevents the implementation, in the short term, of reforms necessary to revive growth and contributes to the persistent weakness of the two countries In the longer term, however, this strong uncertainty implies the possibility of an improvement in the situation: if the future governments of the two countries manage to draw up a road map, the year 2025 could hold some challenges. good surprises. In fact, the confidence of private sector companies in the euro zone regarding growth in their activity in the next twelve months has increased slightly compared to November.

Across the Atlantic, the Empire State index, revealing the health of the industry, fell (0.2) remaining symbolically in positive territory, but quite significantly below expectations (6.4).

On the value side, Vivendi closed sharply up 41.7% this Monday evening, to occupy the head of the CAC 40. The conglomerate split into four companies this Monday, with the introductions of Canal+ in London, Havas in Amsterdam , and Louis Hachette Group, on Euronext Growth. If Canal+ clearly suffered for its first steps on the London market, losing more than 20%, Havas gained 1.7% in Amsterdam and Louis Hachette Group jumped 26.9%.

Among the most pronounced declines were Stellantis (-4.50%) and Teleperformance (-4.03%).

On the other side of the Atlantic, the main equity indices ended the first session of the week in disorganized order, with the Dow Jones contracting 0.25% to 43,717 points, and the Nasdaq Composite gaining 1.24 % at 20,173 points, the S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, increased by 0.38% to 6. 074 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 Tuesday, to follow in priority the German ZEW (economic sentiment) at 11:00 a.m., retail sales across the Atlantic at 2:30 p.m. and the American monthly industrial report at 3:15 p.m.

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.

The 7,340 points are already under pressure. A clean break would quickly return the index to 7,200 points.

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.

Hourly graph

Daily Data Chart