CAC 40 Sheds 0.90% With 37 Constituents in The Red
The CAC 40 index is down by more than 0.90% today as the rout in global stocks accelerates. The index is trading at €5,465, which is about 1.25% below this week’s high of €5,520. Other global stocks are also falling, with the MSCI World Index down by 0.60%. In Europe, CAC’s counterparts in Germany and the UK are all down by almost 1%.
The CAC 40, which is made up of the biggest companies in France, is falling partly because of the challenging EU budget issue. The concern is that Poland, Hungary, and possibly Slovenia will not bulge on their demands. These countries have opposed clauses that tie their funding to democracy, governance, and migration.
The index is also eying the ongoing Brexit talks after it emerged that the two sides are having significant differences, especially on fisheries. Therefore, while analysts believe that the two sides will do a deal ultimately, there are concerns about key issues.
France stocks are also falling because of the worsening situation in the United States, where the number of Covid cases is soaring. The country confirmed more than 172k cases, prompting more states to implement strict stay-at-home measures. This is an important factor for the CAC 40 because most companies in the index do a lot of business in the US.
All but 3 CAC constituents are in the green today. These are Alstom, Peugeot, and Louis Vuitton. The three are up by less than 1%. On the other hand, the worst-performers are Societe Generale, Total, ArcelorMittal, Safran, and Michelin that are all down by about 3%.
CAC 40 technical outlook
On the daily chart, we see that the CAC 40 index has been in a strong upward trend that has seen it rise to its highest level since March. The price has also moved above the important resistance level at €5,135 and is slightly below the 78.6% Fibonacci retracement. However, the rally has started losing steam, leading to what seems like a bullish flag pattern.
Therefore, despite the current weakness, I believe that the index will resume the upward trend. But, a drop below the now support at €5,135 will invalidate this trend.