 Good morning. Welcome to CMC markets on Friday the 3rd of March and this quick look at the week ahead beginning the 6th of March With me Michael Houston Finish slightly more positive week for equity markets this week after the declines of last week And I think the extent of it appears to be that we're in a bit of a range when it comes to equity markets Less so I think when you actually look at what bomb markets have done this week We've seen a significant sell-off yields of popped higher and the dollar has slipped back a touch on the back of Slightly firmer inflation readings from various economies across Europe we've seen CPI in Spain France Germany all come in slightly above Expectations and us that's fueling a narrative that ultimately inflation is likely to be an awful lot stickier for The euro area and probably globally if I'm honest over the course of the next six to twelve months And that's no better. I think illustrated then in how we've seen US bond markets behave over the course of the past few days We've got a little bit of weakness today in the US 10 year, but it's notable that we're back We're back above 4% for the first time since November and I think that is significant But what's more significant? I think it's the fact that the US two-year is it's bucket levels last seen in 2007 close to 5% I mean think about that for a minute just two-year yields US two-year yields within touching distance of 5% Which suggests that ultimately the market is slowly coming to the realization that all this talk of rate cuts in 2023 is Pie in the sky and I would even go further than that and suggest that rate cuts in 2024 are potentially becoming a little bit less likely Then was perhaps thought to be the case say for example at the end of January before that payrolls number that 517,000 payrolls number On the on the on the on the third of on the third of February, so I Think as we look ahead What has been significant? I think over the course of the past few weeks is that equity markets are still hanging on To the idea that we will start to see rate cuts at some point The only difference is they're probably looking to price them in into 2024 No, obviously that presupposes that inflation will start to fall back to target of 2% Within the next six to 12 months Certainly, I think on the basis of some of the data that we've seen this week that doesn't look particularly likely We've seen French inflation jump up to 7.2 percent We've seen Spanish CPI also jump quite sharply in the flash numbers for February And if we actually look at what core prices have done in the euro area earlier this week They jump to a record high of five point six percent well above expectations German CPI jumped to nine point three and EU CPI fell from eight point six to eight point five percent so I think one of the things that we've seen this week is a significant uptick in Core inflation and Inflationary pressures even though they're easing on the headline level They are starting to show Increasing signs of picking up and obviously the PC numbers from the US that we saw last week I've shown a similar pattern playing out when it comes to Core inflation in the US and certainly I think what we've seen also over the course of the past few days is various Fed officials are More are open are more openly talking about a Fed funds rate of around about five point four five point five percent Which suggests that we're probably going to see Another three twenty five basis point rate hikes In the coming months there has been some chat that the Fed might decide to to up tick Do an up shift from 25 to 50? I think that's unlikely because that would suggest to the markets that the Fed is panicking I think what we will see at the meeting in a in a couple of weeks time in just over two three weeks time There's another 25 basis point rate hike, but a much more hawkish Narrative coming out from Fed officials So they'll hike by 25 But they'll draw bone in a much more hawkish way suggesting that we will probably see a Terminal rate of around about five point two five to five point five percent by the middle of the summer What comes after that is obviously going to be very key in the context of what happens next But what we have seen this week is both the SNP and The NASDAQ hold above their 200 day moving averages We have seen a little bit of a test lower But we've managed so far to hold above those very key support areas the S&P 500 there It's held its 200 day moving average and we've seen a similar sort of Situation play out with respect to the NASDAQ as well What's important was notable on the NASDAQ was we also managed to hold above The 50 day moving average so even though we tested below it We were able to close Significantly above it. So I think what's likely to happen over the course of the next Two weeks and I am talking in terms of two weeks because they won't they won't be a video next week and I Also won't be around to do the non farm payrolls webinar because I will be out of the office on business Doing an event in Ireland But overall what we're seeing here is fairly decent support coming in these two moving averages starting to turn a little bit more positive They're starting to post they're starting to evolve and Start to slope upwards so we can certainly argue that there was a degree of support building in in the NASDAQ in and around These sorts of levels here, but that's not to say that we're going to go Shifting aggressively to the upside. We've still got a massive barrier on the NASDAQ around about 12,850 so while I think this there is potential for this area to hold If we do break below it then we could well see a retest towards the downside But I think at the moment markets are going to consolidate the gains or Or or or the areas that we've cut there. We're currently seeing with respect to what's going to happen next when it comes to the yield story We've seen a move in yields over the course of the past week or so The big question is is whether or not we hang on to these moves higher in light of the data That's coming up over the course of the next couple of weeks And that data will be key in terms of the overall narrative when it comes to a the direction of the dollar Be the direction of yields see the direction of equity markets We've got non farm payrolls on the 10th of March And then we've got US CPI on the 14th of March the following week and those two indicators there Obviously, we've got the services ISM later today That was also a very decent number in the January numbers. The big question is does that Continue in February. Do we get a decent payrolls number in February? I think that's going to be key as well Obviously, I think the payrolls number still needs to be set in the context of February of the January numbers And next week's payrolls report Could well further could well go further in reinforcing The the the tight nature of the US labor market jobless claims are still below are now below 200,000 trending at around about 190 590,000 per week But We will you know any num any payrolls number in and around 200,000 Even though it's going to be below the 570,000 it's still a decent number You know, let's not get away from the fact even if we get a downward revision To the January number and we get a lower February number It's still fairly decent and let's not forget the unemployment rate in the US is still 3.4 percent It's the lowest level since 1969 and what was particularly interesting about that Fall in the unemployment rate was the fact that the participation rate rose to 62.4 percent Which was which is a 12 month high So people are coming back into the workforce unemployment is falling and Wages are starting are still looking fairly sticky. So Non-farm payrolls is going to be significant. We're starting to see better China data Obviously, that's feeding in to a much more positive narrative that we've seen this week despite Concerns about stickier inflation and I think that's probably helping to some extent Support equity markets and the bounce back That we've seen this week after the declines of the previous week. So non-farm payrolls is obviously going to be a very key Data point in the coming week What's also going to be a key data point in terms of the dollar direction Is the Bank of Japan rate decision now currently We're finding resistance on dolly end at the 200 day moving average And that's around about 136 90 137 We've got the bank of japan rate decision on the 10th of march same day as non-farm payrolls and this will be Corotas last meeting as the mouthpiece of japanese monetary policy He is being replaced by kazuo ueda And a lot of the commentary around the way to has been seen in paint a fairly neutral stance when it comes to the prospect of possible policy tweaks Now this would suggest That the current policy of yield curve control is unlikely to see any changes in the short term but japanese inflation is at 4.3 percent and Given the fact that it's going to be corotas last meeting as central bank governor It does beg the question As to whether or not he might start to lay the groundwork For a policy tweak in the coming months japanese inflation as I said It's already well above target 4.3 percent And it looks set to continue rising given the weakness of the yen from those lows that we saw in january at 127 25 we're now 136 137 So that's quite a significant decline in the yen And obviously it's wilting against the strong dollar given the fact that interest rate expectations In the u.s. Is starting to edge higher again We're seeing very strong economic data and the Fed is probably likely to have to continue to raise rates At a much higher level than was the case three or four weeks ago the terminal rate We were looking at it around about You know five percent five point two five now the terminal rate is around five point five And again, it's really about When will the fed Start to look at cutting rates markets are still pricing in potential rate cuts in 2024 I still think that is premature, but again, we'll have to wait and see how that plays out We've also got china trade numbers Next week and these will be The first trade numbers for this calendar year And that'll also be the first trade numbers since lockdown restrictions were eased back in december So looking at dollar yen Fairly decent support in and around 134 80 and this is the kumo cloud here 200 day moving average at 137 if we break higher could go to 138 But at the moment these are the key levels 137 on the top side 134 80 on the downside as we look at china trade It's inevitable that we'll see a pickup in terms of Imports and exports having seen exports finish 2022 with a nine percent decline And imports declined by seven point five percent. We will see a pickup I think the biggest I think the biggest thing will be how much of a pickup Will we see? And I think that's the key I think that's the key question 12 months ago year to day exports saw a gain of 16.1 Now we're unlikely to see that sort of gain In the early export numbers the china trade But we will see again the big question will be by how much more importantly in terms of internal demand What sort of imports number will we see? When we look ahead to those february trade numbers and leaves that those are due on the 7th march We've also got the bank of canada rate decision On the 8th of march and you won't need reminding that the last Bank of canada rate meeting the bank of canada signaled that they would be pausing Their current rate hiking cycle to evaluate how current How current rate hikes were affecting the canadian economy Now unless we look at these series of highs through here We can see that there's fairly decent resistance at around about 137 So it'll be interesting to see how the bank of canada guides in light of Much stickier inflation, but also They had a fairly decent payrolls report Back in january They saw a huge jump of 150 000 with most of these gains being in full-time employment The participation rate also surged to 65.7 from 65.4 so Even though no changes are expected to rates on the bank of canada We could see Some hawkish guidance to try and basically offset the weakness that we've seen in the canadian dollar over the course of the past few weeks So those are those are the four key Indicators in terms of all the two key economic announcements that we've got over the course of the next few days Non-farm payrolls bank of japan china trade and the bank of canada. Let's look at some of the key technicals Also, there won't be a video next week. So what i'm quickly going to do is also have a quick look ahead to a week after that Because we've got an ecb rate meeting coming up The week after that Where we're likely to see a 50 basis point rate hike from the ecb in light of that big jump that we saw In core cpi earlier in the week What we've seen is a little bit of weakness in euro dollar over the course of the past few days, but what we did see is a bullish daily candle On the monday Now, obviously tuesday wednesday thursday friday We are starting to There is potential for a little bit of a base in an around 105 30 here We're also seeing Halos coming in so potentially we could be starting to see a little bit of a car a base carve out In expectation that The ecb might Have to be an awful lot more hawkish the moment 50 basis points for marches priced in The likelihood is we could get 50 basis points in may Markets are starting to price a terminal rate of around about four percent for the ecb And the coming weeks We've had we've had bundersbank president jocke nagle Indicate that he is in favor of much more aggressive rate hikes even accounting for the fact that the german economy Is likely to fall into a technical recession having contracted in q4 And could well contract again in q1 But it's clear that german policy makers see inflation as enemy number one and given historical Backdrop in germany. It's not hard to see why so getting a little bit of an uptrend Building here. So let's just just just drill down into that And draw a little bit Of a trend line through there It's a bit rough that trend line. It's not ideal. But if we change it to so for example a daily chart Let's go and change that It's not a particularly good chart. Let's go and drill it out again and now on this time There we go. That's better Always helps if you pick the right low When you're drawing your trend lines, there we go Let's draw that in So there's a little bit of a trend line coming in from these lows here Coming in around about 105 70 105 80 So it'll be interesting to see whether or not We continue to push higher On euro dollar had this little correction lower a little bit of a bullish reversal there So the 50 day moving average at around about 107 20 is still the key resistance level I outlined that In my chart forum updates on a fairly regular basis. So certainly keep an eye out for them On the spread back platform for updates there But certainly looking at euro dollar. There is potential while we're above the recent lows for further gains And similarly when when it comes to cable We are still trading in that range between the 200 day moving average And the 50 day moving average is pretty uneventful, but it's also Um pretty consistent fairly decent support in and around 19 20 As we can see here Here here here and here The the pound has managed to find a fair degree of buying interest But at the same token the 50 day moving average is acting as a fairly decent cap So that appears to be a bit of a range trade. We've obviously got the spring budget coming on the 15th of march That's going to be key Going forward will the chancellor drop The corporation tax rise from 19 to 25 Um, he'd be well advised to do so. He's certainly got the headroom to do so given the fact that borrowing Has actually come in 30 billion pounds below Where the obr thought it would be this time in october once again the obr has proved to be Way off beam when it comes to it's um estimates of where the uk economy Has or is likely to have been as has been the bank of england as has been the imf so The chancellor has room to um Cancel that tax rise the big question is will he do so? I think he should certainly looking at the uk economy Um, it could do with a little bit of a or businesses could do with a little bit of a lift And certainly I think interest rate expectations when it comes to euro sterling I've seen the pound lose ground against the euro. But what's interesting is we've managed to reject This trend line resistance from the recent peaks and are now starting to to drift back down So that 88 90 89 area decent area of resistance around there could see a start to drift back Towards the 200 day and the 50 day moving average and continue to range trade in the same way that we've been range trading Over the course of the past few days. So in terms of company announcements for the coming week We've got harbour energy. We've got dark trace. I'll be particularly interested in harbour energy given the fact that we've seen significant declines in that share price because of the windfall tax um, an awful lot of that is Lightly to be priced in guidance for 2023. This is the harbour energy's four-year numbers um fairly fairly fairly decent numbers expected But obviously guidance for 2023 is forecast to be lower at between in terms of production 185 to 200 000 barrels of oil equivalent per day in terms of its output Now the decision to rethink its uk investment plans is not surprising they this harbour energy have decided not to bid for the new oil and gas licenses Even though they've recently upped their contribution to uk energy security for 5 percent of uk gas output 90 percent of this uk production takes place through five key hubs the latest one to come online being the toll mount oil and gas field But the decision to implement the windfall tax has obviously influenced its future production plans fairly decent support in and around 270p Any any any decent probability of new output overseas is likely to prompt a little bit of a rebound in the share price I think an awful lot of bad news is priced in there dark trace Bit of a nightmare for them an awful lot of questions about their accounting practices Is that all of the bad news priced in you know, do their fault do their first half numbers? Bear up to scrutiny given the fact that they've got a short seller quintessential capital management expressing skepticism over the validity of its financial statements while taking an active short position so I think dark trace management have got to a lot of convincing to do when it comes to encouraging shareholders that their business model Stands up to scrutiny in terms of The the germany 40 or the dax fairly decent support In and around this trend line support through here But if we also look at this series of loads through here, we've got a fairly decent Area of support and in around 15,220 200 level holding support there. We've also got the 50 day moving average As well acting as a fairly decent area of support, but also on the top side We are again appearing to be range trading when it comes to Where where we are likely to go to next and I think that's the big I think that's the big question when it comes to European equity markets. We've started to trend in a little bit of a range when it comes to The recent progress a little bit of a consolidation phase. I think if you like It's a similar. It's a similar thing for the footsie 100. We look at the footsie 100 We can also see that we're starting to Solidate with fairly decent support in and around 7,850 Double lows there, but we've also got a low through there Also coincides with those peaks through there if we drop out that 7903 and we put in another resistance line or support line through there We've got 7850. Let's try and extend that line back and see whether or not it takes in those peaks through there Probably doesn't But it's pretty close to it. It's a fairly decent support in and around 7,850 7,875 That's probably likely to be the way of things over the course of the next few days and weeks so Summing that up. I think more or less that's it for this week as I say there won't be a video next week As I will be away on business And the week after I have a week off So I will be on leave because I have tried to cover As many things as I can for the weeks that I'm not here and Hopefully you have A a good week or a good couple of weeks and I'll speak to you same time same place in two or three weeks time Thanks for listening