- Summary:
- The CAC 40, made up of blue-chip France stocks has continued to rise this month, adding 20% as hopes of a Covid vaccine rises.
The CAC 40 index is joining the rest of European indices in a major rally even as risks remain. The index, which is made up of the biggest companies in France, is up by more than 1% and is trading at €5,430. It has risen by 20% this month.
France blue-chip stocks are rallying even as France continues to release high number of Covid cases. Yesterday, the country recorded more than 27,000 new cases, bringing the total number of people who have been infected to more than 1.98 million.
The number of deaths increased by 302 to more than 44k, making France a major epicentre of the pandemic in Europe. For example, Germany, has had just 12,573 deaths in total.
Therefore, while the French government has only announced minor restrictions, there is a general fear that it will announce major restrictions if the trend continues. That will be a bad thing for CAC 40 constituent companies that do a lot of business in France.
The CAC is therefore possibly rising because of two main reasons. First, as a major developed country, France will be among the first ones to receive a vaccine when the immunisation starts. The same is true with countries where the constituent companies do a lot of business like the United States and Germany.
Second, the index is rising because of the impressive economic numbers from China and Japan earlier today. The number showed that the Chinese economy continued to outperform at the start of the fourth quarter while Japan exited its recession in Q3.
All but five members of CAC 40 are in the green today. The only laggards are Legrand, Schneider Electric, Teleperformance, Saint Gobain, and Dassault. These firms are all down by more than 0.25%. On the other hand, the best performers are Societe Generale, Renault, Safran, and Airbus Group.
CAC 40 technical outlook
On the daily chart, we see that the CAC 40 has been rising this month. The upward trend has seen it move above the important resistance at €5,200, which was the highest point in June. The price has also moved above the 61.8% Fibonacci retracement level and is just a few points below the 78.6% retracement. Also, we see that the bull run has started to consolidate.
Therefore, as I wrote last week, the index will possibly continue rising but it will find strong resistance at the 78.6% retracement at €5,590. On the flip side, a move below €5,200 will invalidate this trend.
CAC technical chart
