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CAC 40 Under Pressure After Bank Stress Test Results – Shorts Look Profitable - Capital Street FX

13:59 IST

Following the rise in Asian markets, France’s CAC 40 opened 0.6% higher at 4,467.29 on Monday. However, the index soon reversed course to lose 0.42% and is currently trading at 4.439.68 on the back of the results of the bank stress-tests released on Friday, and a tepid French manufacturing PMI released earlier today. The results of the bank stress tests, released on Friday by the European Banking Authority, reported that Europe’s banks are in a better condition than two years ago. However, the results are unlikely to reassure investors as there are visible problems in Italy and Ireland’s banking systems, apart from bad loan concerns and falling earnings.

The amount of non-performing loans (NPLs) on the balance sheets of EU banks, is close to 1 trillion euros, which will weaken the strength of those banks when tackling a new crisis. Meanwhile, low-to-negative interest rates are weighting on banks’ revenue and has caused many of them to reduce headcount and sell off less profitable parts of their business.

In a report on Monday, Markit Economics reported that the French manufacturing sector remained in contraction for 5 consecutive months. The figures came out unchanged at a seasonally adjusted 48.6, in line with expectations.

Trade suggestion

Sell Stop at 4403.20, Take Profit at 4336.60, Stop loss at 4454.00

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