(CercleFinance.com) – The Paris Stock Exchange should start without much change on Monday morning, investors seeming to hesitate to take too outspoken positions before the new series of company results and economic indicators expected this week.
Around 8:15 a.m., the ‘future’ contract – October delivery – climbed 10.5 points to 5,942.5 points, announcing an opening around equilibrium, or even a very slight increase.
Consumer price figures released last week in the United States brought the inflation crisis back to the fore, suggesting that central banks would continue to hike interest rates and at the same time heightened fears of a marked slowdown in activity.
Fears about government bond yields – which continue to climb to worrying levels – seem to be keeping equity markets in particular in a fragile position.
The trend for bargain buying that had driven the start of the fall has recently subsided, a sign that investors could soon give up in a market that is once again running out of steam.
“The risks of deterioration are numerous, with in particular the persistence of high inflation which feeds the aggressive policy of central banks”, estimate the teams of Pictet Wealth Management.
The asset manager is also alarmed by worries about the political situation in the United Kingdom, the escalation of the war in Ukraine and the endless negotiations on the cap of energy prices in Europe
From a graphical point of view, the proximity of the major support of 5750 points retains a strong power of attraction on the CAC and destroys the bullish tendencies of the moment while waiting for tangible signals suggesting a reversal movement, warn the technical analysts.
Investors are now waiting to hear if US companies have any good surprises in store.
According to FactSet, 66 companies in the S&P 500 – including eight components of the Dow Jones – are due to report results in the coming week.
While the market is asking many questions, investors will need solid figures to temper the impression that inflation is ravaging everything in its path.
In addition to a flurry of results, the week will be marked by the publication of the latest data on inflation in Europe, the United Kingdom and Japan.
Another important meeting, the European Council to be held on Thursday and Friday will address issues related to the war waged by Russia against Ukraine and its impact on the energy crisis and the economy in Europe.
Stakeholders will have to follow, in parallel; debates of the 20th National Congress of the Communist Party of China (CCP).
In any case, even if valuations are now below long-term averages in Europe and seem to be pricing in a downward revision of corporate results, it is probably too early to return aggressively to equity markets, experts judge.
Gilles Guibout, head of European equities at AXA IM, points out a certain number of unknowns, starting with the lack of visibility linked to the evolution of the conflict in Ukraine and the winter temperature which, according to him, will condition gas needs as well as the importance of the economic slowdown in Europe.
In this uncertain context, to which is added the uncertainty about the next political choices in the United Kingdom or Italy, the strategist considers it “important” to maintain good diversification.
‘We remain faithful to our investment strategy by focusing on companies combining: ability to adjust prices, visibility and/or growth prospects through exposure to long-term themes, as well as a solid financial structure’ , he recalls.
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