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Tuesday’s session was marked by contrary market sentiments, amid rich political news. Sébastien Lecornu presented his general policy elements to the deputies, and if there was one strong point to remember, it would be the suspension of the pension reform until the next presidential election. This was one of the demands of the Socialist Party.
Enough to probably push back the ax of censorship, and therefore to temporarily put aside this fear of markets that is instability. The CAC 40 had a very good second part of the session, finishing close to balance, on the upper part of a vast range. The explanation is clear: operators prefer the idea of adopting a budget, even an imperfect one, than no budget at all.
On the bond market, this announcement had its effect with a relaxation of rates. France’s 10-year borrowing rate rises to 3.40% compared to 3.47% at Monday’s close.
On the immediate statistical side, investors took note of the ZEW index of confidence in the German economy, which rose to 39.3 points, although the increase was less sharp than expected.
“Experts continue to hope for a recovery in the medium term. Despite continuing global uncertainties and the lack of clarity regarding the implementation of the public investment program, the ZEW indicator recorded a slight increase in October,” comments ZEW President Professor Achim Wambach on the latest survey results. On the scale of the entire Euro Zone, however, the results are less convincing, due to French budgetary paralysis.
“Penalized by the budgetary conflict in France, expectations for the euro zone show a moderate decline and currently stand at 22.7 points – or 3.4 points below the previous month’s value.”
On the value side, Michelin suffered the biggest drop in the CAC 40, plunging 8.9% after issuing a heavy warning on results. Publicis returned 1.75%, despite a robust publication in the third quarter, but which was not enough to allay market fears about AI. Excluding CAC 40, Soitec fell 17% while Oddo BHF lowered its forecast for gross profit for the next three financial years and net profit, ahead of the publication of its half-year results on November 19.
On the other side of the Atlantic, the main equity indices ended in mixed order, like the Dow Jones (+0.44%) and the Nasdaq Composite (-0.76%). The S&P500, the reference barometer of risk appetite in the eyes of fund managers, symbolically returned 0.16% to 6,644 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 $1.1630.
> The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $58.60.
> THE Treasuries 10 years, yield on federal sovereign bonds maturing in 10 years, were trading slightly above the 4.01%.
> As for the VIX, it was worth 20.80 at the last close of the S&P500.
On the macroeconomic agenda this Wednesday, to follow as a priority the Empire State manufacturing index at 2:30 p.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 identified, our opinion is neutral on the CAC 40 index in the short term.
We will take care to note that crossing 8116.00 points would revive the buying tension. While a break of 7682.00 points would restart the selling pressure.
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