Market: Towards a directionless start to the week

( – The Paris Stock Exchange should start without a clear direction on Monday morning, the recovery observed over the last four weeks gradually starting to run out of steam.

Around 8:15 a.m., the ‘futures’ contract – expiring in December – on the CAC 40 index nibbled a tiny point to 7303 points, suggesting a little changed opening.

After having rebounded by 6.5% since the end of October, will the Parisian market be able to launch into the famous ‘end of year rally’ despite the persistence of economic risks?

The reassuring trend in inflation – which suggests an end to the cycle of monetary tightening by the major central banks – caused a strong rebound on global equity markets this fall.

Over the past week, the CAC 40 gained another 0.7% and now seems comfortably above its major resistance of 7,250 points.

From a technical point of view, this favorable dynamic above all allowed it to re-cross several major resistance thresholds which had been abandoned for many months.

According to the Kiplink chartists, the Parisian index can project itself above the symbolic level of 7300 points and reach, as its main target, the top of the long-term moving average at 7375 points.

But do equity market valuations remain sufficiently attractive and is market sentiment still strong enough for this rebound to hold?

The end of year period is usually a good opportunity for stock markets to gain ground, but with an increase of almost 13% this year, compared to an average annual gain of 4.6% per year over the last ten years, the Paris Stock Exchange seems to have already been well ahead of the call.

In this context, it would be logical to see market enthusiasm decline a little, knowing that the good news of the moment seems fully integrated into prices.

Over the past 20 years, S&P 500 valuations have averaged 15.4x P/E, but that multiple is significantly higher today, with a P/E of 20.4x for the U.S. managers’ benchmark. .

In addition, growth is slowing more in Europe than in the United States, which is why operators could be tempted to underweight stocks from the Old Continent, despite their more attractive valuations.

Investors will closely monitor the indicators forecast this next week, just to confirm or not the scenario of the end of the cycle of rate increases which has so far driven the trend.

Highly anticipated, inflation in the euro zone – the publication of which is scheduled for Thursday – should decline further compared to the previous month: the consensus expects a decline to 4% in basic data, against 4.2% in October.

American statistics will also be analyzed carefully because they will reflect, among other things, the state of consumer spending, which remains the main engine of growth across the Atlantic.

Household spending in the United States, also expected on Thursday, will give an overview of the consumer’s propensity to spend at the end of the year, while retail sales fell in October.

This publication will be accompanied by the PCE ‘core’ index for the month
of October, which remains the preferred measure of inflation as defined by the American Federal Reserve.

More generally, a new estimate of American growth – expected tomorrow – then the ISM manufacturing index which will appear on Friday will allow us to know whether the economy continues to hold up well.

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