CAC 40: The scholarship hates political instability

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The last week of August will have started in bright red on the Paris Stock Exchange, the flagship index, the CAC 40, lost 1.59% to 7,843 points. Result on the technical level: a black Marubozu school candle, without any wick, therefore, by definition, restoring meaning to the vast range which has concentrated oscillations since the end of April.

However, the session had started well, the index digesting J Powell’s speech, delivered on Friday on the occasion of the Jackson Hole symposium, speech paving the way for a lowering of federal rates next month, causing a flambé of Wall Street, already on historical peaks. But polite news was invited on Monday, with a speech by Prime Minister François Bayrou, who will engage the responsibility of his government on September 08, to decide the “central question of mastering our finances”. In other words, the 2026 budget, to say the least, with 44 billion euros in reduction in the public deficit will be at the heart of the vote of trust. Dores and already, the RN (123 deputies), LFI (71), the PCF (17) and the Ciotists (15) have announced that they will not vote confidence.

A quick simulation makes it possible to conclude that the PS (Socialist Party) can play the role of arbiter. Now Olivier Faure, secretary general of the Rose Party, does not see how in the state, his deputies could vote confidence.

On the monetary level, the president of the Fed, without formally engaging his institution, paved the way to a drop in federal rates next month. What cause a short moment of euphoria to Wall Street, which was already camped on historical levels.

The United States is approaching the moment when the FED will have to lower its interest rates to support employment, said on Friday August 22, the president of the central bank Jerome Powell in a long-awaited speech, especially by Donald Trump. A “rapid” degradation of the American labor market is not to be excluded and could “justify” a relaxation of monetary policy, and therefore of interest rates, warned the boss of the institution from the meetings of Jackson Hole, in Wyoming (West).

He adds that the Fed is in a “delicate situation” because the new customs duties set up by the American executive begin at the same time to affect the prices paid by consumers at the risk of reviving inflation.

There Federal Reserve will complete his next monetary policy meeting on September 17. And the probabilities of decreasing a quarter of a base point of the main guiding rates are around 87%, according to the data provided by the Fedwatch tool of the CME Group.

In the statistical chapter on Monday, the operators learned of the IFO index of the business climate in Germany, the first economy in the euro zone. The index is rising at 89.0 points, slightly above expectations. A resumption of the German economy which, if it has the merit of confirming again, remains very fragile, under the terms of Klaus Wohlrab, director of IFO.

On the values ​​side, the announcement of the vote of confidence revived the fears of a political blockage on the side of investors. “This has clearly had an impact on the CAC 40. As we can see because the most penalized companies are those whose activities are most exposed to France and at political risk, such as construction groups and banks. There is clearly a Franco-French logic. We see it with BNP Paribas which lost almost 3% in a few minutes”, decorted Frédéric Rozier de Mirabaud France. The highest drops were accused by Vinci (-5.8%), Eiffage (-5.4%), Veolia (-3.8%), Bouygues (-4.5%) and BNP Paribas (-3.5%) and Société Générale (-3.5%).

On the other side of the Atlantic, the main shares on shares consolidated after their recent records, like the Dow Jones (-0.77%) and the Nasdaq Composite (-0.22%). The S & P500, a reference barometer of appetite for the risk in the eyes of fund managers, contracted from 0.43% to 6,439 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 $ 1,1630. The barrel of WTI, one of the barometers of appetite for the risk on the financial markets, was exchanged around $ 64.40. 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 14.79 at the last fence of the S&P500.

At the macroeconomic agenda this Tuesday, to follow in priority at 4:00 p.m. the confidence index of American consumer (Conf Board), expected in slight contraction at 96.3.

Key graphics elements

The vast range (lateral channel), whose amplitude has once again been redefined on July 31 and August 1, retains meaning, and the discharge of courses on Monday August 25, in contact with the high terminal comes to confirm it. The 7,500 points are reinforced in their support role as much as the 7,940 points are in their role of resistance.

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 7940.00 points.

Hourly data graphics

Daily data graphics