CAC French Stocks Markets Ease as Fitch Downgrades Outlook

The credit rating company lowered the outlook for France from stable to negative, while the government bond rating remains AA-.

The rating agency cited a deteriorating outlook for the country’s public finances. Tax revenue has been smaller than expected and government spending has exceeded it creating fiscal slippage. Fitch expects national debt to increase significantly through 2028, reaching 118% of GDP.

The recently approved budget is also a reason of concern. The national assembly approved a plan to increase taxes on the richest and large corporates and cut spending. However, the rating agency is doubtful that the government will be able to deliver on its promise to close the fiscal gap.

Fitch also pointed to the fragmented political scenario in the French national assembly. Expressing concerns as to whether the newly formed government will be able to legislate. The numbers needed to form a majority will oblige them to join forces with one of the political parties at the extremes of the political spectrum.

The CAC is underperforming today, down 0.22%, compared to its peer the DAX which has rallied 0.34% on the day.

Technical View

The day chart above for the CAC shows a market undergoing a bullish leg as it attempts to break above the Ichimoku cloud. The last 13 candles have traded above the cloud, but we can see the lagging line (yellow line) is still to break above the cloud.

For confirmation of a bull market, we need to see that lagging line also above the cloud. So far, the market has given indications of strength, its last retracement from the recent high of 7,804 (grey line) bounced off the cloud.

The previous retracement found support on a previous dip and rallied higher. Simply put, we can see a series of higher highs and lows indicating a bullish trend. The next major resistance level is at 7,804.

To the downside, the market will find support on the cloud, and immediately below it at 7,339 (black line), which coincides with support from 3 dips to that level.