CAC 40: Technical test of 7,500 points

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After an increase of 2.24% on Monday, the CAC 40 gained a few additional points on Tuesday (+0.59%), in contact with a resistance zone at 7,465/7,500 points. As a reminder, the Parisian market was driven on Monday by information from the Washington Post reporting that the universal customs duties wanted by Donald Trump could be limited to certain sectors. The American president-elect may have described the article as “fake news”, but the market did not care.

“The Paris stock market tends to overreact to good news lately. That’s what happened yesterday. The possibility of the Trump administration implementing more targeted and smaller tariffs was the opportunity for investors to buy securities at a discount”, explains Christopher Dembik, of Pictet AM.

“At this stage, however, it is likely that the increase will not be sustainable. French political risk, low liquidity and macroeconomic uncertainties in Europe will certainly encourage caution,” adds the market specialist.

In terms of statistics on Monday, inflation in the Euro Zone, as a first estimate for the month of December, was stable at +2.7% at an annual rate, excluding food, energy, alcohol and tobacco.

“The weak economy is increasingly giving some central bankers a tough time. Moreover, leading indicators show that companies are finding it increasingly difficult to impose price increases due to weak demand therefore we believe that in 2025, the inflation rate will stabilize around the 2 percent target set by the central bank. We continue to expect the deposit rate to fall by 25 basis points. January”, commented Ulrike Kastens, European economist at DWS.

Across the Atlantic, the ISM services stood at 54.1 points, an even more pronounced increase than the consensus would suggest. “The price component of the ISM Services, which rebounds to its highest level since February 2023 (64.4 vs 58.2 the previous month), is not good news for the Federal Reserve and its president Jerome Powell who had already warned , in December, that a continued slowdown in inflation towards the target was the necessary condition for further rate cuts Knowing that underlying PCE inflation, in annual data, has not. not made any further progress towards the objective for two quarters…” commented Alexandre Baradez (IG France).

“The rebound in the number of available jobs (JOLTS figure) will also push the Fed to be patient because it removes possible fears linked to the job market, the Fed’s other mandate.”

On the other side of the Atlantic, the main equity indices fell sharply, such as the Dow Jones (-0.42%) and especially the Nasdaq Composite (-1.89%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted by 1.11% to 5,909 points. Note that the American markets will close tomorrow, due to the national day of mourning in tribute to J Carter, former President of the United States who died at the canonical age of 100.

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 $1.0350. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $74.70.

On the macroeconomic agenda this Wednesday, to follow as a priority producer prices in the Euro Zone at 11:00 a.m., and across the Atlantic, weekly registrations for unemployment benefits and the ADP employment survey at 2:30 p.m., as well as the traditional Minutes of the Fed at 8:00 p.m.

KEY GRAPHIC ELEMENTS

The CAC 40 index came to test an important graphic level on Monday at the close, 7,465 points, the solidity of which will be tested. The general working base remains, until proven otherwise, a vast band between 7,200 and 7,465 points, within which an indecision marked by nervousness is expressed.

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 7500.00 points.

Hourly graph

Daily Data Chart