The price of the French CAC 40 Index continues its negative short-term trend according to data from Trend Intelligence. Traders remained focused on French assets this week as more than 210 candidates stood aside in a desperate bid to help Emmanuel Macron and a left wing coalition to block the far right.
Tactical withdrawals ahead of the next round of the French election, which occurs this coming Sunday, may help to blunt the far right’s momentum.
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Trend’s R* Momentum Indicator creates a clear visual representation of price trends in play across asset classes and financial instruments. In the CAC 40 chart, Trend Intelligence reports negatively trending R* and R* Signal lines, with both indicators operating below the critical zero line. This is, and has shown over time to be, a negative trend signal.
In addition to the R* indicator, the CAC 40 price currently trades well below all three of Trend’s moving averages and below the Japanese Cloud indicator, which is shaded pink.
The combination of these signals corroborates Trend’s negative short-term trend rating on the French index, with the price looking negative for the future days and weeks ahead.
Downside sentiment for the CAC 40
The Financial Times reports that in response to the first round of national elections that put the Rassemblement National in the lead, the gap between benchmark French and German 10-year borrowing costs rose to 0.85 percentage points (the highest level since the Eurozone debt crisis in 2012). The risk of this continued erosion of French sovereign creditworthiness, in addition to accumulating inflation, could also make French debt unattractive in the medium term.
IG Index’s Axel Rudolph recommends buying the CAC 40 at these levels, with the index expected to stay volatile until the second round of elections this coming Sunday.
CAC 40 trading activity soars
Spectrum Markets reported that trading activity on its platform on the CAC 40 index has boomed after the first turn of the French elections, which reignited the interest of retail investors on the main French index.
After the election day, trades related to CAC 40 peaked on Monday, with trades executed on July 1st almost doubling the daily average over the past weeks.
The results seem to have pleased markets, which reacted positively to first verdicts of the polls. SERIX data, the pan-European sentiment index elaborated by Spectrum Markets, related to CAC 40 reached the level of 115 on July 1st, reaffirming a sense of confidence towards the French benchmark.
Election results, however, did not seem to have taken retail investors by surprise. SERIX data ahead of the election day already showed a positive outlook: the SERIX value for the CAC 40 increased from 101 at the end of May to 106 in June, while the value for the FTSE MIB, which is important since Italy is the second market particularly exposed to the volatility caused by French turmoil, went up from 98 at the end of May to 102 in June.
“Investors do not seem to believe that the potential changes in the French government are going to determine significant modifications to the French economic policy,” said Michael Hall, Head of Distribution at Spectrum Markets.