CAC 40 index: death cross nears ahead of Safran, Danone, Campari earnings

The CAC 40 index has moved into a technical recession after falling by over 10% from its highest point this year. It retreated to a low of €7,440 on Monday as focus remains on key earnings by some of the biggest French companies.

Luxury sector demand woes

The main reason why the CAC 40 index has tumbled is that most luxury brands have come under pressure as the industry’s slowdown accelerates. 

Kering, the parent company of Gucci, has been one of the worst-performing companies in the index this year. It dropped to €271 last week, its lowest point since 2017 and over 61% below its highest point in 2022.

Kering, which also owns Bottega Veneta, Balenciaga, and Saint Laurent, has tumbled because of its dependence on Gucci, which accounts for over 50% of its revenue. Just last week, the company said that its Gucci sales dropped by 20% in China.

Other big luxury brands are not doing well either. LVMH, the biggest company in France, has dropped to €650, down by over 26% from its highest point this year. It has also formed a double-top chart pattern, pointing to more downside ahead.

Worse, even Hermes, the best-performing luxury brand, has also dropped for four straight months. It has dropped to its lowest point in February and slipped by over 15% from its all-time high.

Other top laggards in the CAC 40 index

Many other companies in the CAC 40 index have also tumbled in the past few months. Stellantis, the parent company of Chrysler and Jeep, has tumbled by over 26% this year as concern about the industry continued. 

Stellantis’s revenue dropped by 14% in the first half of the year to over €85 billion while its net profit was €5.6 billion, down by 48% from the same period a year earlier. Adjusted operating income was €8.5 billion. The company is now considering selling its Maserati brand as sales dive.

Pernod Ricard, the parent firm of Jameson, Ricard, and Malibu, has also dropped by over 20% this year. The company is seeing strong challenges in China, one of its most important markets this year. 

The other top laggards in the CAC 40 index are STMicroelectronics, ArcelorMittal, Dassault Systemes, and Edenred.

On the other hand, some of the best-performing companies in the index are Safran, Publicis Groupe, Renault, Schneider Electric, and Saint Gorban.

Top CAC 40 earnings ahead

The CAC index will be in the spotlight this week as other constituent companies publish their financial earnings. 

L’Oreal, one of the biggest companies in the index, will release its numbers on Tuesday. Its stock has dropped by over 12% this year as its growth drops and as competition in the industry continues. 

Airbus, the biggest aircraft manufacturer in the world, will release its results. These will be important numbers since its production has been under pressure in the past few months. The other top companies that will publish their results are Remy Cointreau, Safran, Danone, Legrand, Schneider Electric, Leonardo, and Campari. 

Central bank decisions

The other important CAC 40 index news is the actions by central banks. In Europe, the European Central Bank (ECB) has already started cutting interest rates. While it did not cut rates this month, analysts expect the bank to resume in its next meeting.

The Federal Reserve will start its monetary policy meeting on Tuesday and deliver its decision on Wednesday. Economists expect the Fed will point to a rate cut in its September meeting. 

The Bank of England is expected to start cutting on Thursday. In most cases, the CAC 40 index does well when central banks are cutting rates.

Across the pond, more American companies like Amazon, Microsoft, Apple, and Meta Platforms will publish their results this week. These companies are so important such that their earnings send ripple effects around the world. Besides, Apple, Microsoft, and Nvidia are all bigger than all companies in the CAC 40 index combined. 

CAC 40 index analysis

CAC chart by TradingView

On the daily chart above, we see that the CAC 40 index has tumbled in the past few weeks. It has moved below the important support at €7,630, the 23.6% Fibonacci Retracement point. 

Most importantly, the index is about to form a death cross pattern as the 200-day and 50-day moving averages are about to form a bearish crossover. In most cases, this is one of the most dangerous patterns in the market. 

The index has also broken below the bearish pennant pattern that has been forming. It also moved below the Ichimoku cloud indicator. Therefore, the index will likely continue falling as sellers target the next support point at €7,200, the 38.2% retracement point.

The stop-loss of this trade will be at €7,630, the 23.6% retracement level. A move above that level will point to more upside.