Jerome Powell should be crucial for the CAC 40 ahead of a macro-busy week
Markets are on edge awaiting Jerome Powell’s speech this afternoon (4:00 p.m. CEST) from the Jackson Hole symposium. The Fed Chairman could echo his various Fed colleagues who have spoken since the last monetary policy meeting at the end of July by indicating that the markets are underestimating the Fed’s willingness to curb inflation. Jerome Powell could adopt a particularly hawkish tone given the rise in the markets and inflation expectations (breakeven inflation) on the bond market.
Particularly hawkish rhetoric would be detrimental to all financial assets. Bond rates would rise, putting pressure on gold and equity markets. The risk of a bearish closing of the CAC 40 on Friday therefore outweighs the risk of a bullish closing.
The Parisian index should also be volatile next week since several bankers will also speak since the Jackson Hole symposium, including the governor of the Banque de France, François Villeroy De Galhau, and the influential member of the ECB Committee, Isabel Schnabel.
Several economic statistics will also be likely to influence sentiment next week, including the ISM indices, flash inflation in the eurozone, PMIs in China and the monthly US employment report.
In the medium and long term, the risks remain on the downside for the CAC 40 given that the ECB and the Fed are not about to stop tightening their monetary policy while at the same time the world economy continues to slow down and the outlook to deteriorate. Moreover, the energy crisis is worsening in Europe, with electricity prices reaching new records almost daily on the futures markets, which will weigh even more heavily on consumers and businesses.
Daily price chart of the CAC 40 (Turbo France 40) – key levels