CAC 40: Trade war against Beijing, beyond excess

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The CAC 40 (-0.07%) this time remained a spectator of the unbearable leaflet of the trade war waged by Trump against the rest of the world. Last episode to date, Washington has imposed new restrictions on the exports of American semiconductors to China. Including those of AMD and NVIDIA which are direct victims … These new commercial retaliation measures logically feed the tensions between the two world superpowers. Donald Trump has also opened an investigation to import importance from so -called “critical” minerals, such as cobalt, lithium and nickel, rare earths as well as products, part of the manufacturing requires the use of these resources.

“Even if the inflation of Mars has proven to be lower than expectations, the cyclical perspectives remain fragile. The average active customs duties in the United States has been at its highest level since the post-second world war. The retaliatory measures taken by China, in particular the new restrictions on imports of the United States, accentuate the risk of marked slowdown in the coming months” Seema Shah, responsible for global strategy at Principale Asset Management.

It is in this context at least nervous that the European Central Bank should provide a moderately Dovish message on Thursday, the outcome of a council of governors. A drop in the main key rate (the Euro “rent”) is widely awaited by the market. This drop in rate, the magnitude of which can go up to 25 PDB, is widely acted, faced with the risk on growth, while remaining prudent for the future, in a route in roller coaster on the markets. Visibility in terms of rate of drop in rates will be greater in June.

Patrick Barbe, Head of bond investment Investment Grade in Europe at Neuberger Berman, provides the following lights: “The negative consequences of the American trade war on the European economy lead to a broad consensus on the fact that, at its meeting on Thursday, the ECB will continue its drop in guidance rate of 25 bp to 2.25 %. We think that the ECB is residing more in its analysis of the disruptive policy Trump for Europe, in terms of security, activity and inflation.

“Tensions in the United States should encourage governments of the euro zone to increase their public spending, when they can, and not only those of Germany, in order to support their companies confronted at the cost of higher customs duties linked to the trade war. A proactive monetary policy of the ECB, resulting in a drop in borrowing yields, should prevent governments from reacting this year.”

In the statistical chapter, the principal returning on Wednesday was the publication of retail sales, emerged up 0.5% monthly, slightly beyond expectations.

On the values ​​side, LVMH (-0.71%) failed to get your head out of the water on Wednesday (-7.82% the day before) in the wake of the publication of a disappointing quarter.

“LVMH could reduce its costs, especially in terms of marketing, but in reality it should not be material. Personal and rent expenses represent two thirds of operating costs, and (Asia asia) The latter are not indexed to turnover. The layoffs are not part of the culture of a family business, in particular due to the importance of the development and training of employees. Structure of the company’s costs, the weakening of sales should be reflected in the profits, “commented Kevin Thozet, member of the investment committee at Carmignac.

The technological sector was shaken by the announcements of the Trump administration but also by the disappointing orders of ASML, which lost 5.2% in Amsterdam. Soitec (-1.85%) and Stmicroelectronics (-1.3%) restore land, in the wake of the Batave group’s title.

On the other side of the Atlantic, the main shares on shares finished in the red, like the Dow Jones (-1.73%) or the Nasdaq Composite (-3.07%). The S & P500, a reference barometer of appetite for risk in the eyes of fund managers, contracted 2.24% to 5,275 points.

A point on the other asset classes at risk: around 8:00 am this morning on the exchange market, the single currency was treated at a level close to $ 1,1350. The barrel of WTI, one of the barometers of appetite for the risk on the financial markets, was exchanged around $ 62.80. THE Treasuries 10 Yearsyield of federal sovereign bonds due to 10 years, was negotiated slightly above 4.30%. As for the Vix, it was worth 32.60 at the last fence of the S&P500.

At the macroeconomic agenda this Wednesday, to follow in priority the monetary policy decision of the ECB at 2:15 pm (press conference at 2:45 pm), as well as weekly registrations for unemployment benefits and the “Philly Fed” index, across the Atlantic, at 2:30 pm.

Note that the Paris Stock Exchange will be closed tomorrow (Good Friday) and Monday (Easter Monday).

Key graphics elements

The technical framework is upset, with a break in the psychological pivot threshold of the 8,000 points at the end of the week 13. Rupture which was followed by intense clearances, in powerful volumes. The GAP of January 16 is now fully filled, without any reaction from the courses. Worse, a crossing part (7,552 – 7,585 points). In two sessions, Thursday 03 and Friday 04 April, the flagship index lost nearly 520 points, and switched to the red for its assessment since 01/01. Monday April 07, once again showed the extreme psychological tension of a market at the heart of a wave of intense clearances. Abdication is close.

In the immediate future an attempt to rebalance, not without nervousness, constitutes the privileged scenario. An outing for the bottom of a bevel figure would cause an increase in volatility, in terms of the nervousness known at the inlet of the graphic figure.

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 downward scenario is valid as long as the CAC 40 rating index below resistance at 7390.00 points.

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