CAC 40: A welcome addition of oxygen above 7,500 points

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An impeccable copy of the Swiss Richemont will have made Paris shine on Thursday, due to the weight of the luxury sector in the CAC 40, which, on gap then bullish extension during the session, soared by 2.14% to 7,634 points, in volumes increasing. Major technical fact: the crossing of the pivotal threshold of 7,500 points, which provides a moment of breathing space for the Paris Stock Exchange. L’Oréal gained 2.85%, Hermes 4.91%, Kering 6.18%, Christian Dior 8.59% and LVMH 9.15%. The largest capitalization of the Paris Stock Exchange benefited, in addition to an increase in recommendation from Bank of America which raised its opinion to “buy” from “neutral” previously.

The market also remained on a pleasant feeling, the relief linked to the publication earlier in the week of lower than expected American inflation in terms of consumer prices. The CPIs in the United States, last month, excluding food and energy, will have progressed “only” by 0.2%, against 0.3% expected. Enough to allow a welcome relaxation on the American 10-year, close to 4.70%. It exceeded 4.80% as a reminder at the end of last week following the publication of a very solid report on employment.

These price figures, although reassuring, will not however revolutionize the monetary policy strategy of the Fed, which remains “forced” to be patient, against a backdrop of impressive resilience of the largest economy on the planet. However, these figures allow us to hope, and not to bury, the prospect of two reductions of 25 bps this year, for the remuneration of Fed Funds. Instead of only 25 bps.

“This is data for the month of December, so well before the future administration and Donald Trump apply new tariffs. The market does not seem to have paid attention to it…but several members of the Fed these last few days have however placed emphasis on this point”, tempers Alexandre Baradez (IG France), who warns: ” the fight against “sticky” inflation is not over for the Fed, and the tone of the monetary institution’s communications should not change until, at least, the month of March and the next quarterly projections.”

Yesterday, investors took note of two indicators indirectly linked to inflation: on the one hand, weekly registrations for unemployment benefits, which stood at 217,000 new units, but above all, on the other hand, monthly retail sales, which missed expectations in December (+0.4% against 0.5% anticipated). Enough to participate in the easing movement on 10-year yields.

On the other side of the Atlantic, the main equity indices took a hit yesterday, such as the Dow Jones (-0.16%) and the Nasdaq Composite (-0.89%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted slightly by 0.21% to 5,937 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 $1.0290. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $79.20.

On the macroeconomic agenda this Friday, priority will be given to consumer prices in the Euro Zone at 11:00 a.m. and the monthly report on American industry at 3:15 p.m.

KEY GRAPHIC ELEMENTS

We witnessed a major technical and graphical event on Thursday January 16 with the crossing of the gap and then extension during the session of the pivot threshold of 7,500 points, which regains its support attributes. The current working base therefore becomes a band between 7,500 and 7,690 points, within which a certain form of volatility is far from being excluded.

FORECAST

Considering the key graphical factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.

This bullish scenario is valid as long as the CAC 40 index is trading above support at 7500.00 points.

Hourly graph

Daily Data Chart