CAC 40 index is stuck in a tight range: key levels to watch

August 30, 2023 08:42 PM AEST | By Invezz

CAC 40 index is stuck in a tight range: key levels to watch — Image source: Invezz

European and Chinese concerns remain

The CAC 40 index has been in a tight range in the past few months as investors remain concerned about the European and Chinese economies. Recent economic numbers showed that the Chinese economy is slowing at a faster pace than expected.

Chinese imports and exports have slumped in the past few months. Similarly, other parts of the economy like industrial production, manufacturing output, and retail sales have dropped recently.

Therefore, many economists have recently downgraded the estimate of the Chinese economy. UBS downgraded the country’s economic forecast to 4.8%, down from Beijing’s estimate of 5.0%. Similarly, JP Morgan, Citi, and Goldman Sachs also downgraded the outlook.

Watch here: https://www.youtube.com/embed/6woLkxmdKHI?feature=oembed

China is an important market for many companies in the CAC 40 index. For example, luxury brands like LVMH, Kering, and Hermes do most of their business in China. Similarly, other big constituents like Airbus, STMicroelectronics, Renault, and EssilorLuxottica have China as the biggest markets.

There are also concerns about the French economy as the economy slows. The most recent data shows that the economy is slowing as inflation remains high. As I wrote in the DAX index, the European economy is seeing higher liquified natural gas (LNG) prices because of a strike in Australia.

European companies are also facing a deep liquidity crisis as interest rates remains stubbornly high. Data published this month showed that money supply in Europe has dropped to a multi-year low.

The worst-performing companies in the CAC 40 index in August were Worldline, STMicroelectronics, Eurofins Scientific, Alstom, Stellantis, Renault, and Dassault. On the other hand, the top performers were Societe Generale, TotalEnergies, Credit Agricole, and Capgemini.

CAC 40 index forecast

The daily chart shows that the CAC 40 index has moved sideways in the past few months. It has remained between the important support and resistance levels at €7,070 and €7,508. The index has moved slightly above the 25-day and 50-day moving averages while the Stochastic Oscillator is approaching the overbought level at 80.

Therefore, the CAC 40 index will likely remain in this range in the coming days. More gains will be confirmed if the price moves above the resistance at €7,508. A break above that level will see it rising to the next level to watch will be at €7,600.

The post CAC 40 index is stuck in a tight range: key levels to watch appeared first on Invezz.

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