CAC40: vulnerable, fall of -1% with the W-Street pullback

CAC40: vulnerable, fall of -1% with the W-Street pullback
CAC40: vulnerable, fall of -1% with the W-Street pullback

(CercleFinance.com) – The Paris Stock Exchange clearly increases its losses: the CAC40 goes in 1 hour from -0.2% to -1% to 6,500Pts.

To be reassured, the ACC is falling into a vacuum with trading volumes which remain desperately low (less than 1.5bn traded 1 hour before the close).

The ‘highlight’ of this Tuesday is also the sudden pullback of oil (-2.2%) with a barrel of oil (Brent or WTI) which flirted around 2:30 p.m. with $ 77 (at the highest for 3 years ) and which clearly sinks into the red 2 hours later: it is a ‘saloon door’ sequence after a false bullish signal.

The procrastination of the United Arab Emirates is blocking the OPEC + decision-making process in favor of an increase in production quotas.

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As a result, a barrel of Brent peaked at $ 77.5, WTI towards $ 77 (the highest since 2017) before severely trapping buyers.

Wall Street is struggling to get back on track after a 3-day bridge: apart from the Nasdaq which grabs 0.1%, the S & P500 drops -0.4% and ends its streak of 7 consecutive records.

There was still a chance to turn the tide around 4 p.m. but the publication of the ISM (Institute for Supply Management) index of ‘services’ in the United States is disappointing: activity in the tertiary sector has contracted significantly, from 64 around 60.1 in June in the United States.

‘Difficulties related to material shortages, inflation, logistical issues and employment resources continue to hamper business conditions,’ explains the ISM.

However, the component of prices paid by service providers edged down to 79.5 last month, from 80.6 in May.

In Europe, investors took note – without emotion – of retail sales in the euro zone and the German ZEW business climate index.

The morale of German financial analysts measured by the ZEW institute showed a much sharper drop than expected in July: -16.5 points to reach 63.3 this month against 79.8 in June, while economists expected a more limited decline around 75.

The current conditions component, however, rose six points to 30.4.

May CVS retail sales rose 4.6% in the euro area and the EU, compared to April 2021, according to estimates by Eurostat, the statistical office of the European Union .

In April 2021, the volume of retail trade fell by 3.9% in the euro area and by 3.6% in the EU. In May 2021, compared to May 2020, the calendar-adjusted index for retail sales increased by 9.0% in the euro area and by 9.2% in the EU.

From a technical point of view, the sequence of passive evolution in which the Parisian market is inscribed in no way modifies the short-term uptrend, analysts believe.

At Indosuez Wealth Management, we talk about an environment that is still conducive to opportunities on the equity markets, but also an appetite for ‘moderate’ risk in the immediate future.

‘In the short term, a certain tactical caution is required, especially in view of the enthusiasm of certain investors for unprofitable technological stocks,’ said Julien Descombes, the head of Indosuez’s investments in Switzerland.

‘But we believe that it is appropriate to remain positioned on stocks offering a strong’ pricing power ‘and which benefit from the recovery while it is still too early to return to defensive stocks,’ he concludes.

The CAC40 is weighed down (around 6,500) by Renault (-4.5%), BNP-Paribas and Crédit Agricole (-2.8%) then above all Alstom (-7 to -8%, heavier decline in the SRD) which reveals that the absorption of Bombardier will be long (3 years) and will dry up its ‘cash flows’.

Otherwise, Alstom is targeting revenue growth at an average annual growth rate of over 5% over the period 2020/21 to 2024/25, which is significantly higher than market growth.

The conversion ratio between net income and free cash flow will reach more than 80% from 2024/25, however a short-term priority on the stabilization of historical Bombardier Transportation projects will impact free cash flow in 2021 / 22.

EDF (-5%) is updating its estimate of nuclear production in France for 2021 upwards. ‘Given the good progress of the first half of 2021, EDF is raising its estimate of nuclear production for the whole of 2021 by 330 TWh – 360 TWh to 345 TWh – 365 TWh ‘indicates the group.

‘The production hypothesis for 2022 remains unchanged at this stage with a range of 330 TWh – 360 TWh’.

Saint-Gobain has finalized the sale of two distribution brands in Spain, La Plataforma de la Construccion to the BigMat group, as well as Discesur to Group Jorge Fernandez in association with Group Terrapilar. These two brands achieved a turnover of around 140 million euros in 2020.

 
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