CAC 40: In the heart of a side canal, not without nervousness

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In the absence of a benchmark from Wall Street, closed due to a public holiday (Labor Day), the Paris market ended in balance the first session of the week (+0.05% at 7,707 points), in discreet volumes.

The CAC 40 lost 3.34% on the whole of the past week, as a vote of trust approaches on September 08, engaging the responsibility of the Bayrou government. A vote which, arithmetically speaking, is lost in advance.

Among the scenarios that the market envisages, a resignation of the government, followed by an appointment of a new Prime Minister, to the different political color. Unless a new dissolution of the National Assembly rebuts the cards. A scenario whose probability is estimated at 65% by Wilfrid Galand, Director – Strategist at Montpensier Finance.

“Volatility could then be strong, according to the various surveys and up to the elections (which must be held within a minimum of 20 days and 40 days maximum after the dissolution decree. It could affect all the assets of the euro zone including the single currency, with France always on the front line. An output of the yield at 10 years from the OAT to 4% is a risk.”

It is currently exceeding 3.51%, compared to 2.72% for its German counterpart and 3.43% for Greek …

“The announcement of a vote of confidence on September 8, has been blowing a wind of concern about French assets (high increase in the rate 10 years, spreat of the Spread Oat-Bund and decrease in CAC 40), while opposition parties have already announced not to trust the government, whose fall thus seems likely, which could lead to a degradation of the French debt note by Fitch on September 12 Chapon, from Arkéa Asset Management.

The most penalized values ​​over the whole week are linked to domestic issues, massively depend on public expenditure or hexagonal taxation. This is the case with construction, concessions, bank, air. Among the strongest social declines Société Générale (-8.85%), ADP (-9%), Vinci (-10.1%) and Eiffage (-14.6%).

In the statistical chapter, with the support of a German component in constant progress, the industrial PMI in final data for August has slightly exceeded the first estimates, standing at 50.7. As a reminder, a score greater than the 50 -point mark means an expansion of the sector considered.

“If the recovery is real, it is nonetheless fragile. Stocks continue to decrease and the slight acceleration of the decrease in current work reflects the maintenance of a climate of uncertainty in the sector, which is not surprising given the customs policy of the United States and geopolitical tensions. In this context, the rebound in production and the increase in new commands recorded in August constitute signs of Resilience, “commented Dr. Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank.

In addition, the unemployment rate in the euro zone fell into July, at 6.2% of the active population, against 6.3% in June, according to Eurostat data.

Still on the statistical front, the week will be under the sign of American employment, with many indicators in the second half of the week, and in high point the NFP report (Non farm payrolls), traditional and always very followed federal report on private employment health (excluding agriculture) in the United States. Economists interviewed expect a slight increase in unemployment on an average of 4.3% of the active population, and 74,000 net of positions.

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 $ 1,1700. The barrel of WTI, one of the barometers of appetite for the risk on the financial markets, was exchanged around $ 65.00. THE Treasuries 10 Yearsyield of federal sovereign bonds due to 10 years, was negotiated slightly above 4.25%. As for the Vix, it was worth 16.15 at the last fence of the S&P500.

At the macroeconomic agenda this Tuesday, to follow the first GDP estimates in the euro zone at 11:00 am and the American manufacturer at 4:00 p.m.

Key graphics elements

The vast tidy (lateral canal), whose amplitude was once again redefined on July 31 and August 1, retains meaning, and the discharge of courses on Monday August 25, in contact with the high terminal confirms it. The 7,500 points are reinforced in their support role as much as the 7,940 points are in their role of resistance. They are therefore intervention areas to favor, in this clearly bipolarized market.

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