CAC 40: Sino-American standoff and French political cuisine

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At the end of a volatile session, the CAC ended, in discreet volumes, near the upper limit of a vast range between 7,500 and 7,940 points. Technical corridor whose reintegration, or not, is the main issue in a week dominated by French domestic politics and the resurgence of customs issues.

On French politics, the rapid announcement of a Lecornu 2 government rules out, at least for the moment, the hypothesis of a return to the polls.

“If the markets do not show panic, the rise in long rates reflects a clear expectation: that of a credible budgetary trajectory. The challenge is now twofold: stabilizing the budgetary trajectory to restore market confidence, while freeing up political and financial space to address the real drivers of long-term growth — reindustrialization, competitiveness, employment…”, summarize the Asteres economists.

Mr. Lescure remains at the head of Bercy and Ms. de Monchalin in public accounts. Note the notable entry of M Farandou, boss of the SNCF, into the Ministry of Labor. An explicit signal for the markets, for a possible renegotiation of the pensions file?…

“But a lasting easing of the risk surrounding France on the financial markets seems improbable because the initial problem, before the political instability, was that of the budgetary trajectory with an unsustainable deficit. And a temporary suspension of the pension reform would not provide any concrete solution from this point of view. It would only shift the problem,” analyzes Alexandre Baradez (IG France).

Remember that Moody’s will update its rating on France (Aa3) on October 24 and Standard & Poors (Aa-) on November 28.

The new executive is supposed to present a finance bill for 2026 on Tuesday morning after which Sébastien Lecornu will hold his general policy speech in the afternoon. The National Rally (RN) and La France insoumise (LFI) have already warned that they will censor the new government.

On the standoff between Beijing and Washington, remember that on Friday, the American president threatened to reestablish “massive” 100% customs duties on Chinese imports. This projection then served as a response to Beijing’s announcement the day before of restrictions on access to its rare earths.

As is often the case, Donald Trump then added water to his wine. On Sunday, on his Truth Social network, he posted the following message: “Don’t worry about China, everything will be fine! The highly respected President Xi has just gone through a bad patch. He doesn’t want depression for his country, and neither do I. The United States wants to help China, not harm it!”

“The two economic giants, caught in a modern Thucydides trap which plays out on value chains, technological standards and strategic alliances, are thus resuming commercial hostilities, each with its flaws,” observes Sébastien Grasset (Auris Gestion). “On the one hand, the United States, a dominant power losing its momentum – and soft power – with a Donald Trump who dreams of being a hegemon, is showing signs of slowing down” […] On the other hand, China, a rising power in structural imbalance, is posting solid but mixed growth (+5.3% in H1 2025), driven by its exports to Asia and Europe even if domestic demand remains weakened by a prolonged real estate crisis and creeping deflation, with falling consumer prices and pressure on industrial margins.

On the value side, cyclical stocks rebounded like STMicroelectronics which gained 3.1% or Stellantis which regained 2.8% after dropping 7.3% on Friday. Excluding the CAC 40, Nexans returned 9.3% after announcing that it would part ways with its general director, Christopher Guérin, the architect of the company’s recovery. Exosens gained 10.5% while around 10% of its capital will change hands, at a price reflecting a premium of 24% compared to its price on Friday. Medincell rebounded more than 21% as its product Uzedy was approved to treat bipolar disorder.

On the other side of the Atlantic, the main equity indices ended Friday’s session up significantly, like the Dow Jones (+1.29%) and the Nasdaq Composite (+2.21%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.56% to 6,654 points.

An update on other risky asset classes: around 8:00 this morning

> On the foreign exchange market the single currency was trading at a level close to $1.1570.

> The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $59.30.

> THE Treasuries 10 years, yield on federal sovereign bonds maturing in 10 years, were trading slightly above the 4.02%.

> As for the VIX, it was worth 19.03 at the last close of the S&P500.

On the macroeconomic agenda this Tuesday, follow the ZEW confidence index in the German economy at 11:00 a.m.

KEY GRAPHIC ELEMENTS

While the CAC had just overcome major resistance, on a wide gap (October 2), the session of October 6 changed the situation. The gap mentioned, although ample and formed on either side of the 8,000 points, can no longer be described as a rupture gap (breakaway gap). Which strongly calls into question the scenario of an immediate bullish extension towards 8,260 points.

The session of Friday, October 10, with its acceleration in prices and its closing at its lowest, even suggests the scenario of a false exit, and therefore a reintegration of the range between 7,500 and 7,940 points.

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 8116.00 points.

Hourly graph

Daily Data Chart