France’s CAC 40 rose on a weekly basis despite S&P Global downgrading France’s outlook from “stable” to “negative”.
The slowdown in the country’s economy and the government’s measures to bail out households and businesses amid energy inflation will continue to put pressure on France’s public finances, according to S&P.
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The downgrade comes on the back of France’s already large public debt, and it’s important to note that S&P believes that the rise in energy prices after the Russian-Ukrainian war could be a much more lasting shock for many European countries than a temporary drop. demand driven by the COVID-19 pandemic in 2020.
Bruno Le Maire, France’s economy minister, also said high energy prices continue to pose a “serious risk” to French industry and that many factories could cut production and lay off tens of thousands of employees.
This situation could accelerate the path to a recession, and the outlook for short-term risk appetite does not look bright.
It is also important to note that inflation in France unexpectedly remained at a record high in November, despite a slowdown in other parts of the eurozone.
Consumer prices rose 7.1% year on year, coinciding with an increase in October and suggesting that France has not abandoned its efforts to reduce inflation. Bloomberg reported:
A report from France showed an acceleration in food and manufactured goods prices, while the cost of energy for households fell, even as the government cut the discount on diesel and fuel. Rising prices are hurting consumers, who cut spending on energy, manufactured goods and food in October.
Upside for France’s CAC 40 index remains limited, and the short-term fate of the country’s economy will depend on how it offsets the headwind of geopolitical uncertainty, supply chain disruptions and rising costs of living.
Technical analysis
The CAC 40 index has risen more than 15% since October 3, 2022 and closed the week at 6742 points. The price has also stabilized above the 10-day moving average, which is definitely a positive sign; However, investors should keep in mind that the risk of another sell-off is unlikely to be ruled out.
Data source: tradeview.com
If the price breaks below the 6500 pips support, the next target could be around 6000 pips or even lower. On the other hand, if the price jumps above 6800 points, the next target may be the resistance located at the level of 7000 points.
Conclusion
France’s CAC 40 rose on a weekly basis despite S&P Global downgrading France’s outlook from “stable” to “negative”. Upside potential for the French CAC 40 index remains limited and if the price falls below 6500 points, representing the current support level, 6000 points could become the next target.