CAC 40 forecast after the ECB meeting

European stocks weakened on Friday as investors sold growth stocks amid concerns after the European Central Bank left the door open for interest rate hikes this year and mounting tensions in Ukraine.

European Central Bank had a monetary policy meeting on Thursday, and ECB president Christine Lagarde signaled on Thursday for the first time that interest rate hikes this year were not ruled out.

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Monetary tightening is usually seen as a drag on stocks, and higher interest rates could pressure the stretched valuations of tech stocks.

Deutsche Bank expects a 25 basis point rate liftoff in December 2022, and investors will continue to pay attention to the European Central Bank commentaries looking for any clues.

Before this meeting, Christine Lagarde explicitly said that a rate hike this year was very unlikely, but policymakers finally concluded that inflation had spread more than previously expected and that the risk of persistent inflation had risen. Susannah Streeter, an analyst at Hargreaves Lansdown, added:

Inflation concerns are looming ever larger with the cost of living squeeze intensifying, as monetary policy tightening ramps up and no let-up in soaring energy prices insight.

France’s CAC 40 index has weakened below 7,000 points while French Finance Minister Bruno Le Maire said that the French economy is “doing well” thanks to a rise in consumer spending.

French economy rebounded back above pre-pandemic levels of output with a growth of 7% in 2021, the country’s fastest expansion for 52 years. Bruno Le Maire, finance minister, added:

The French economy has rebounded spectacularly, and that’s erased the economic crisis. There are still some sectors that are having trouble, like tourism and hotels, but most are recovering very strongly, and that’s creating jobs.

France’s resilient performance suggested the eurozone is likely to avoid recession which is certainly good information for President Emmanuel Macron, who is expected to seek a second term in April’s elections.

On the other side, France continues to fight with high numbers of new daily infections, which leads to staffing issues across industries. The battle against coronavirus is still not over, but the positive information is that French Prime Minister Jean Castex said that France would remove some restrictions this month.

Technical analysis

France’s CAC 40 index has weakened below 7,000 points, and if the price falls below 6,800 points, it would be a strong “sell” signal.

The upside potential remains limited for now; still, if the price jumps above 7,100 points again, the next target could be at 7,200 points.

Summary

European Central Bank left the door open for interest rate hikes this year as policymakers finally concluded that price pressures were not just transitory. France’s CAC 40 index has weakened below 7,000 points while French Finance Minister Bruno Le Maire said that the French economy is “doing well” thanks to a rise in consumer spending.

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