CAC 40: Growth files struggling in the face of rising bond yields

(News Bulletin 247) – Amid fears of a much tighter monetary turn from the Fed, the Paris market lost ground yesterday (-2.21%), breaking 6,500 points, in volumes slight increase. Lael Brainard, not known to be particularly hawkish, had announced the color earlier in the week, before the Fed Minutes confirmed this offensive tone. An offensive tone that raises questions on this side of the Atlantic as well. “While inflationary tensions are expected to persist, the ECB will have”, according to Thomas Giudici, co-head of bond management at Auris Gestion, “no other choice than to accelerate the normalization of its monetary policy, probably more quickly than the market anticipates, with a rate hike starting in September.”

Moreover, while developments in the war in Ukraine and inflation have focused the attention of operators in recent weeks, rightly politics has resurfaced in the debates, while a victory for Mrs Le Pen (Rassemblement National ) in the second round of the presidential election now appears to be a credible hypothesis. “We cannot speak of “panic” linked to the approach of the French election but of heightened vigilance on the part of investors who must now integrate this potential risk with the geopolitical and monetary risks already present”, for Alexandre Baradez ( IG France).

The markets also remain attentive to the introduction of additional sanctions against Russia, in the context of the war in Ukraine. The European Commission proposed on Tuesday that the 27 countries of the Union cease their purchases of Russian coal, which represents 45% of EU imports, and that they close their ports to ships operated by Russians. The European Union will have to take sanctions on Russian oil and gas “sooner or later”, also declared Wednesday the President of the European Council Charles Michel.

In terms of statistics, little to eat on Wednesday. We should nevertheless mention a surprise increase in the levels of crude stocks in the United States (+2.4 million barrels).

On the values ​​side, growth files suffered from the new outbreak of fever on bond yields. The three largest drops in the star index are thus to be attributed to Dassault Systèmes (-5.1%), Kering (-4.7%) and Teleperformance (-4.5%).

On the other side of the Atlantic, the main equity indices lost ground on Wednesday, like Tuesday, with a technology sector particularly penalized by the start of the boiling over bond yields. While the Dow Jones contracted 0.42% to 34,496 points, the Nasdaq Composite lost 2.22% to 13,888 points.

A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0920. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $98.

To follow in priority, on the agenda this Thursday, retail sales in the Euro Zone at 11:00 a.m. as well as weekly registrations for unemployment benefits in the United States at 2:30 p.m.

KEY GRAPHIC ELEMENTS

The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap on Thursday 02/24, opening the way to a new market phase. Recall that the index traced from February 16 to 18 a combination of candles in three crows. This combination was immediately followed by a very significant bearish engulfing structure, accompanied by volumes that were far from timid for a session, let’s not forget, without American benchmarks due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive. Friday 25/02’s pullback was surgically precise. A phase of high volatility has thus begun. The school marubozu drawn on Tuesday 01/03 is a first step. Second stage Friday 04/03 with a candle of the same type (opening on the high points, closing on the low points) in even more fed volumes. A new bearish leg would open under 6,000 points, already broken on Monday 07/03, before the formation of a dispute rebound. On Wednesday, March 09, we witnessed a first phase of an explosive protest rebound, which pushed the index back to its 100-hour moving average (in orange in hourly view), a curve that retains a marked downward bias. The gap on Wednesday March 16 is not a signal to return to buying, and the high volatility phase is therefore not yet over. The configuration, in the form of a combination of candles, in three black crows over the last three sessions of week 12, calls for the greatest caution. As evidenced by the harami traced immediately after a reconquest of 6,760 points, for a single closing, that of March 29. Negative review offered.

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 bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 6760.00 points.

Hourly data chart

Chart in daily data

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