 Good morning. Welcome to CMC Markets on Friday the 19th of November and Just quick look at the week ahead beginning the 22nd of November with me Michael Husson and it's been a Divergent I think the diverse week at the Virgin week for equity markets. We've seen under performance from the FTSE 100 for most of this week well at the same time also seeing record highs for the likes of the DAX And the cat current and obviously the wider euro stocks. Yes stocks 50. They did the the stock 600 as well and It's been a little bit of a strange one because I think one of the key takeaways from this week has been reports that have been basically trickling out from Europe the term infection rates there are rising quite sharply And yet for the most part of this week, we've seen German French and European shares maintain their resilience until today Today we've seen a little bit of a roll-off On the basis that lockdowns are returning. We've heard the Austrian government announced this morning that they're implementing a 20-day lockdown and even even more troublingly Imposing mandatory vaccines from the 1st of February Next year and that is a really significant change and if it's followed by other governments who seem to be really struggling to Get infection rates down. I think it's going to make it a very very difficult winter For European markets and certainly I think what we're seeing at the moment with respect to the way Markets in Europe are behaving today appears to be Indicative of that if we just look at the daily candle here for today in the DAX We've seen incremental rises all of this week markets rising Or slowly drifting higher More on a lack of a lack of interest. I think than anything else and then today. I think the reality is hit home Governments are struggling high energy prices supply chain disruptions I think there are concerns that even with the ECB Maintaining their fairly loose monetary policy. It's going to be a very difficult winter For Financial markets as well as for the rest of us and the FTSE 100 which has been in pretty much full risk-off mode all week Is also Heading lower even though at one point this morning. It was actually Performing so let's look at this week's key markets And as we can see from this chart here or this this this watch list here FTSE 100 has Shows a completely different picture to what's was being shown on the DAX and the cat Caron we've seen since Friday a Daily decline every single day this week And we're heading back to that key support level that I've been talking about have been mentioning for several weeks now or several days now That's 71 90 area 71 80 90 area coincides with the low on the 29th of October And we've also got the 50-day moving average coming in as well now at the moment here in the UK It doesn't appear to be any sign that the UK government is leaning towards Further restrictions the booster campaign Is running quite nicely currently running around about 13 million people have had their booster jab Which probably means that the vast majority of more vulnerable cohort of the population Are as are as protected as they possibly can be What we've also seen This week as we look at look at US markets is again, we've seen more record highs the S&P 500 as well as The NASDAQ as well, so certainly think going forward into November and December the air is starting to get a little bit thin given the fact that if we actually look at the year to date gains For so for example the S&P 500 We haven't haven't done too badly and you've really got to ask yourself Even allowing for the fact that the Fed is now starting to take possessive purchase program How much juice there is left in the tank for? 2021 We've had a whole host of central banks. Sorry. It's not central banks investment banks revise higher Their projections for next year for the S&P 500 of a goldman's talking about five thousand one hundred for the S&P 500 which Yeah, I think if you'd if you'd said that to me Last year at this time last year. I would have said was completely unrealistic But now we're at four thousand six hundred you saw you saw question. Well, actually maybe this is a distinct possibility We could see that So what's what's happening? You know, what's happening today? Well, obviously travel and leisure is getting here hard On the back of these these these lockdown headlines and Mandatory vaccination headlines Maybe this is just a little bit of end of week collie wobbles and things will settle down as we head into next week which is also Thanksgiving week in the US and If we look at that if we look back at some of the data that we've seen this week by and large It actually hasn't been that bad. We've seen some very decent earnings announcements. We've seen Some fairly positive economic data going forward. So when you look past all of these Dark headlines and actually look at the actual numbers themselves things are still Better than they were say for example This time last year. So I think sometimes it's important to When you have when you absorb these sorts of headlines take a little bit of a step back Try and not get caught up in The noise of the headlines and actually look much more dispassionately What's happening with respect to the actual price action itself? So obviously oil prices have taken a step back on the back of these renewed lockdown fears Which in some respects actually might be a blessing in disguise because it certainly does take some of the heat out of the inflation Discussion earlier this week. We thought we saw UK CPI Hit the hit its highest level and you know in in over 10 years at 4.2 percent I think what was particularly notable Was and it didn't really get widely reported was that retail prices the RPI Moved above six percent now. It's not been above six percent since 1990 31 years ago. So that gives you an indication of how hot Inflation is running at the moment now For the time being it doesn't appear to be affecting consumer confidence Any more badly than say for example the lockdown headlines of 18 to 20 months ago And I think that's largely because a large part of the UK population has probably still got quite a bit of disposable income as a consequence of the fact that They weren't able to spend as much money this year because they weren't allowed to go on overseas holidays. They stayed at home probably took more short breaks and rather Longer breaks and the fact that Unemployment is once again returning to the levels of that it was pre-pandemic and there are over 1 million vacancies So looking past all of the bleak headlines. There are certainly pockets of optimism to be found So certainly relief in oil prices is welcome We've fallen below the 50 day moving average The big thing now is for us to fall below this low here to get some sort of semblance as to whether or not We could well see further declines in Brent crude prices I think also these reports of a coordinated SPR release strategic petroleum reserves from The US China and Japan is also Weighing on the price as well as concerns about a drop in demand for oil products in the event that Europe does go down Or good parts of Europe go down a full lockdown route Certainly they're talking about the prospect of a full lockdown in Germany. We're not there yet but if that does happen and Certainly the pressure on health services there does appear to be rising then that could well Help to keep a lid on Brent crude prices But obviously that is also dependent on the fact that We don't get a cold snap if we do get a cold snap of weather that could muddy the picture Even more than it already has done. It's been a good week for the pound this week by and large Struggling to get above 135 at the moment but against the euro is had a really solid week The big level on cable at the moment is around 133 and a half seen a bit of a sell-off from the 135 1015 area if you've been following my daily notes on the chart forums You'll know that there is a bit of resistance around about 135 135 20 and for us to to make progress back towards the top of this Channel we really need to see a break of that 135 20 area there more importantly. I think Being long the sterling If we look at euro sterling that has continued to come under pressure and the fact that Christine Lagarde earlier today Suggested that the ECB is in no rush To right raise interest rates and doesn't see the prospect of a rate rise next year That is also putting pressure on the euro and that with with the wider question I think being whether or not the Bank of England will raise rates when it meets in December certainly they They haven't Historically been minded to push rates up just before Christmas But there's a there's always a first time for everything but as with Andrew Bayley and and the Motley crew at the MPC Who knows what they're going to do? My hunch says they may hike rates that certainly the markets are cautiously pricing Some form of move on rates in December, but given the shambles earlier this month. I certainly wouldn't put my mortgage on it so but at the moment the the And stars are aligning for a possible 0.15% interest rate rise when the Bank of England meets In mid-December so that should Broadly support the pound Going into the end of the year probably more so against the euro than anything else So as we look ahead to next week, we're fairly light on The data front if we look at the way the dollar is performing once again, that's breaking out to the top side I don't think that is going to change and certainly I think in terms of Fed policy speak The likelihood is the dollar is probably going to continue to make gains and push up towards The 1000 level on the CMC dollar index This this level here and these these peaks all the way back here in September Why do I say that? Well, we've got third quarter GDP out of the US on the 24th of November We've also got PC deflator Which is corporate quarter flater, which is the Federal Reserve's preferred inflation measure and that is likely to move above Move above 4% From 3.6% and to levels last seen in 1990 with the Fed minutes place Fed minutes also due out I think it should create for an interesting dynamic when it comes to The tone of the conversations that were being had About the tapering of asset purchases. We all know that the Fed is tapering 10 billion dollars in treasuries and five billion dollars in mortgage-backed securities starting this month The bigger question I think for me is whether the discussion deviated into a higher monthly Taper amount and how many people or how many NPC? Members were calling for a higher amount certainly recent comments from the likes of James Bullard of The St. Louis Fed who is a voting member next year He's not a voting member this year, but he is a voting member next year And he's been calling for a faster taper of asset purchases When we head into 2022 and it'll be interesting to see whether or not there are any other members Raphael Bostic has also been a policy a Fed policymaker who's been calling for rate rises next year So the Fed is definitely tilting in a much more hawkish direction as we head into next year And that's likely to I think Keep it up with pressure on the dollar and that's essentially why I think cable is going to be very very difficult to call Because I think in terms of sterling sterling is going to be very much A play probably against the lower yielding currencies like the euro the Swiss franc and the Japanese yen Then it is against the dollar having said that I would be surprised if it drops much below 132 As we head into 2022 so we've got the Fed minutes on the 24th We've got us PC deflator on the 24th and we've got us third quarter GDP also on the 24th We're expecting a modest upward revision to that headline number two two point two percent We've also got flash PMIs They're likely to be modestly weaker for November from the UK Germany and France And we've also got the German IFO business climate survey given the recent Commentary about lockdowns supply chain disruptions and what have you I would be very surprised if we don't see further weakness in All of those flash PMIs and more particular. I think the German IFO business survey for November as well higher hospitalization rates localized restrictions rising factory gate prices German PPI it fought for the latest German PPI numbers 18 Point two percent year on year that is a record high. I think about that 18 point two percent I mean that is really difficult number to absorb If you're a German business, particularly a German business who's operating in the middle of that Yeah, how do you pass those increases on? in terms of do you absorb them in which case German equities could be starting to look a little bit frothy. What do you pass them on to the customer? in terms of Companies that are reporting next week Pretty thin on the ground owning season is sort of winding down There's been there's a number out there that might be worth keeping an eye on Zoom video communications given the lockdown headlines and the fact that Zoom is very much under performed so far this year and come well off its highs from last year Maybe that's due a bit of a rebound If new lockdowns are coming Certainly was a big winner in 2020 and less so This year so the big question I think is how how our revenues doing well that they're continuing to improve Company expects to see full year revenues of around about four billion dollars Which is a significant improvement on expectations at the start of the year and yet the shares are still lower and I think it really comes down to Revenues relative to overall valuation and the valuation is still pretty high even with the fact that revenues are an awful lot higher so This valuation is seventy five billion dollars Just in case you are wondering so four billion dollar turnover. It's not too shabby And probably more in keeping more realistic than it was say for example 12 months ago, so we're keeping an eye out for that. That's due on the 22nd We've also got Best Buy. Well from the numbers that we've seen from Walmart Target and Home Depot over the course of the past week. Those numbers have been fairly positive And certainly if we look at Best Buy's share price over the course of the past decade or so It's been pretty decent, but as with Target as with Walmart there are concerns about rising costs and Supply chain disruptions and if we look at Best Buy's share price, we have seen a bit of a bearish reversal here we haven't quite taken out these peaks through here and Rising costs as a result taking on extra staff and what have you the rise has been pretty parabolic Since the beginning of October, maybe it's time for a little bit of a pullback Given the fact that it's so far away from its 200 day moving average and Yes as I though those those those q3 numbers are out on the 23rd certainly they've been doing very well online q1 revenues very very positive 11.64 billion dollars q2 It was 11.85 billion dollars and the company expects to Return 11.5 billion dollars in q3. So keep an eye out for Best Buy Also got Johnson Matthews issued a profits warning earlier this month And we can see that in that in the share price movement on that particular On that particular chart there, let me just make the font bigger so we can actually actually see it here And we just get rid of the floating Voting value box don't want that Now you may have noticed there ladies and gentlemen that We now have a volume for shares So if you want to display volume for shares Underneath the chart you can do that from the settings menu right here just select the volume option It's right there and as you can see that drop down there saw a significant Sell off back towards the lows of earlier Of a year ago around about 30th of November so Johnson Matthews share price half first half numbers Said they were going to be exiting the battery materials business Net assets of the business are around about three hundred and forty million dollars And it seems a shame that they're exiting the batteries business just the time that electric vehicles are starting to take off But they go apparently the margins are too thin so they're looking to offload it So that's that's that's Johnson Matthews for you and That's pretty much it for this week's weekly market update once again Thank you very much for listening. Hope you all have a great weekend And I will speak to you all same time same place next week. Thank you very much for listening