(News Bulletin 247) – The CAC 40, the benchmark barometer of the Paris Stock Exchange, gained 1.75% yesterday to 6,369 points, in falling volumes, with the support of the decline in crude oil prices, mitigating (for how long?) somewhat the inflationary threat, with the approach of the outcome, tomorrow, of a new meeting of the Fed’s Monetary Policy Council (FOMC). The barrel of WTI, which was flirting with the highest of the year with $140, fell back below the symbolic bar of $100, to around $97 this morning. The confinement of Shenzhen, nicknamed the “Silicon Valley of China” for its essential role in new technologies, paradoxically contributes to the easing of oil prices insofar as these new restrictions could slow down Chinese energy demand.
It is in this complex context that the Fed is approaching a meeting of its Monetary Policy Committee this week. While the Federal Reserve is faced with squaring the circle (“fighting galloping inflation without the economy experiencing a crash landing”), it “has no other choice, it must intervene”, for William Gerlach, France Director of iBanFirst. “On the other hand, it will certainly try to intervene with caution, hence a rise of only 25 basis points.”
J. Powell clearly brushed aside the option of a double hike (ie 50 bps at once) on March 16, when he raised the issue last week, in a semi-annual hearing before Parliamentarians.
“Too much uncertainty remains about the war in Ukraine. In addition, US consumer confidence has fallen sharply. The last two times it was so low and the central bank started a cycle of monetary tightening, it led systematically into a recession. That was in the 70s and early 80s.”
Recall that on Friday, the preliminary data for the consumer confidence index (U-Mich for University of Michigan) contracted more than the consensus had predicted.
“Investors will remain attentive to the central bank’s sentiment towards inflation and the economy, as well as its projections for future rate hikes,” adds Eric Lafrenière (Richelieu Gestion). “Powell called the Russian invasion of Ukraine a “game changer” that could have unpredictable consequences. how central bank officials view the Ukraine crisis and how that might affect their outlook and the path of interest rates.”
On the stock side, the banking sector regained momentum with the rise in bond yields. Crédit Agricole rose by 0.96% to 10.06 euros, Société Générale by 3.92% to 23.075 euros, and BNP-Paribas by 4.04% to 51.01 euros. The automobile in general also regained attractiveness, but it was Stellantis (+3.90% to 14.016 euros) which benefited the most, while Carlos Tavares does not rule out seeing the group catch up Tesla in the next few years in the electric vehicle market.
On the other side of the Atlantic, the disaffection was marked for technology, the Nasdaq Composite losing 2.04% to 12,581 points amid fears of a decrease in activity of key suppliers in the context of a upsurge in Covid cases in China. The Dow Jones for its part ended the session on a neutral note at 32,945 points and the S&P 500 will have fallen only 0.74% to 4,173 points.
A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0980. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $97.00.
To follow in priority, on the agenda this Tuesday, the German ZEW index of confidence in the economy, and across the Atlantic, the producer price index and the manufacturing index of the New York Fed (Empire State Index) at 1:30 p.m.
Please note that the East Coast of the United States has switched to daylight saving time this weekend, which means that, in the two-week interval before we also go there, Wall Street will open at 2:30 p.m. ) and the statistical appointments, some of which are usual at 2:30 p.m., will be published at 1:30 p.m.
KEY GRAPHIC ELEMENTS
The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap on Thursday 02/24, opening the way to a new market phase. Recall that the index traced from February 16 to 18 a combination of candles in three crows. This combination was immediately followed by a very significant bearish engulfing structure, accompanied by volumes that were far from timid for a session, let’s not forget, without American benchmarks due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive. Friday 25/02’s pullback was surgically precise.
A phase of high volatility has thus begun. The school marubozu drawn on Tuesday 01/03 is a first step. Second stage Friday 04/03 with a candle of the same type (opening on the high points, closing on the low points) in even more fed volumes. A new bearish leg would open under 6,000 points, already broken on Monday 07/03, before the formation of a dispute rebound. On Wednesday, March 09, we witnessed a first phase of an explosive protest rebound, which pushed the index back to its 100-hour moving average (in orange in hourly view), a curve that retains a marked downward bias. The bearish harami plotted on Thursday is hardly engaging.
FORECAST
In view of the key graphic 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 trading below the resistance at 6385.00 points.
Hourly data chart
Chart in daily data
©2022 News Bulletin 247
I am currently a news writer for News Bulletin247 where I mostly cover sports news. I have always been interested in writing and it is something I am very passionate about. In my spare time, I enjoy reading and spending time with my family and friends.
