CAC 40: Growing tensions, the Fed begins its May FOMC

(News Bulletin 247) – The CAC 40 index, at the end of a very volatile session, which saw it break and then re-enter the technical safeguard zone of 6,380 points, lost 1.66% on Monday at 6,425 points. As if that weren’t enough, an input error by a Citigroup market operator caused a flash crash on the main European markets open on Monday, with the sharp one-off drop adding to the nervousness. Investors must continue to deal with an equation of great complexity, with 4 factors that influence each other: the very clear strengthening of monetary policies, the rising prices that are taking hold, the logistical problems of the supply chain and the war in Ukraine…

In terms of statistics yesterday, the manufacturing PMI activity index in final data for the month of April in the Euro Zone came out at 55.5, very close to expectations. Chris Williamson, Chief Business Economist at S&P Global commented on the PMI survey: “Strong inflationary pressures are likely to weigh on demand. shortages at suppliers, led to the largest increase in manufacturers’ selling prices in at least two decades of comparable data collection for this variable. difficult of falling production and soaring prices.

In addition, the week will be particularly busy on the American employment front, with a preview of the new job offers (JOLTS) on Tuesday, the survey by the private firm ADP on Wednesday, weekly registrations for unemployment benefits on Thursday and culminating in the federal jobs report for the month of April on Friday. Data particularly followed by the Fed in its assessment of the degree of tension in the job market.

Fed which will end a new meeting of its Monetary Policy Committee on Wednesday. A rise in Fed Funds of 50 basis points is on the table. Particularly in the face of the latest very disappointing figures on the growth front, “the chairman of the Federal Reserve could on the other hand soften the tone regarding the next rate hikes, although new ones are expected in the coming months”, for Vincent Boy (GI France).

On the values ​​side, within the flagship sample of the Parisian dimension, only the Carrefour action (+1.1% to 20.39 euros) managed not to end in the red, due to the deemed defensive nature of its activity. Thus 98% of the sample of the star index ended in the red, without distinction of sector or style: ArcelorMittal (-4%) suffered the largest drop, followed by Safran and Schneider (-3.5% ), and Teleperformance (-3.3%) or even Stellantis (-3%) and Veolia (-2.9%).

On the other side of the Atlantic, it was time for a timid rebound on Monday on the main equity indices, after a painful Friday. The Dow Jones gained 0.26% to 33,061 points and the Nasdaq Composite gained 1.63% to 12,536 points. The S&P 500, the reference barometer of risk appetite in the eyes of fund managers, for its part ended with a score of +0.57% at 4,155 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 $1.0500. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $105.10.

To follow in priority, on the agenda this Tuesday, the unemployment rate in the Euro Zone at 11:00 a.m. and the new job offers in the United States (JOLTS) at 4:00 p.m.

KEY GRAPHIC ELEMENTS

In just two sessions, the flagship Parisian index cleared up two remaining gaps, one bullish, from March 16, the other bearish, from April 25, again activating the scenario of a sideways drift around 6,500 points. . The volumes are placed under surveillance, especially on any rapid navigation from one terminal to another or on breaks, if any, of one or other of these terminals. The lower limit, around 6,380 points, is particularly threatened.

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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