 Good morning. Welcome to CMC markets on Friday the 17th of December and this quick look at a week ahead beginning the 20th of December and this last week ahead of 2021 It's certainly been another Interesting week. We haven't really seen an awful lot of direction after the gains of The last week when we saw a fairly decent rebound albeit tempered towards the back end of the week over concerns of a new travel restrictions new restrictions More broadly, but nonetheless We've managed to hang on to most of the gains that we saw from last week And obviously we're also coming off the back of some important central bank meetings this week And I think one of the key takeaways From this week's events and the central bank meetings is that there is rising concern amongst central bankers of the the effects of inflation and the durability of Inflation and I think no, you know, no, no better was that borne out By this week's decision by the Bank of England to finally pull the trigger on That naught point wife naught point one five percent rate rise that they should have done in November And finally did in December and you know, maybe that the IMF's criticism of them to get on with it Was just a shot across the bowels that the bank needed But the timing was still curious because we had in a number of policymakers earlier this month and at the end of last month talking about the fact that Now was not the time to even think about raising interest rates So and that was Catherine man who actually came out and said that in a speech at the end of November She says now's not the time to think about Raising interest rates let alone the timing of An interest rate rise and then we had Michael Saunders Earlier this month talking about the fact that he was starting to become a little bit Uncertain about the wisdom of perhaps raising rates given what's happening With the Omicron variant and yet here we are on a Friday Here I am talking to you in the aftermath of a Bank of England rate rise and Perhaps that CPI print of five point one percent was another nudge that the Bank of England needed to get on with it because ultimately you know what's the downside of Nudging rates higher it basically boosts the bank's credibility in terms of It's inflation mandate And the fact that CPI hit five point one percent now Against the banks expectation the central banks expectation that it would hit it in April next year Was maybe the smack in the chops But they needed to jolt them out of their complacency. It's certainly welcome and Certainly the you know the the sky didn't fall in when they did it in fact, you know, it was a relief that they actually finally decided to bite the bullet and You know raise interest rates and as we can see from the FTSE 100 hasn't had any significant effect the pounds Been fairly solid. I think the bigger question now in the wake of that and obviously the Fed's decision to taper his asset purchase program more aggressively from January 30 billion dollars From 15 means that the Federal Reserve Will cease its bond buying program by the end of March next year and now the big question is How many times are they going to raise interest rates and the dot plot suggests three next year three the year after however While that may be their intention if you look at UK and US Bond yields five year yield or two year yields rather Markets don't believe them. Let's look at the US two year. Okay, so we've got a very sharp rise since September From 0.2 to 0.6. Obviously the Fed funds rate is between 0.0 0.25 percent The upper bound is 0.25 percent The Bank of England's base rate is now 0.25 percent Yeah, if we look at the two year yield We're talking the markets are only pricing in another 30 or 40 30 or 40 Basis points over and above Where we are now in terms of the upper bound. So I think The market is skeptical that the Federal Reserve will be able to hike by three times next year and ultimately So am I certainly six six six great hikes in the next two years? We look at the five year that tells an even Stalker story and then if we look at the tenure is it the same this looks to me Like a potential topping pattern the US five year yields, you know, we're talking about 1.3 percent 1.2 percent That looks like a potential less shoulder. That's ahead as a potential right shoulder We've got a little bit of a neckline through here and people will say to me Why are you using technical analysis on you know bond yield charts? Well, you know bond yield chart is just representative of a price chart. It's just basically inverted Why would you not it certainly gives you an indication of market pricing when you look at a five-year yield if you look at a two-year yield on Different markets and if you look at the two-year yield on the UK again We've got lower highs and then we've got a very decent support level in and around 0.4 percent So certainly the bond markets aren't pricing an aggressive rate hiking cycle when it comes to the Bank of England and The Federal Reserve and that would probably suggest why equity markets are still fairly resilient Despite this week's hawkish turn from central banks saying that you're going to look to raise rates Three times next year is one thing being able to do it is something completely different So at the moment central banks are looking past no micron Cases are surging. Yes, it's true. But so far hospitalizations are still at a fairly low level and the only death that we've had here in the UK was from an unvaccinated That was from someone who was unvaccinated and was in their 70s. So At the moment Despite the high infection rate despite the increased restrictions which have seen obviously hospitality and leisure The leisure sector get another hit this week You know the the the omens If I can use that word Or the outlook, you know that there are there are signs of encouragement In terms of what it may look like as we head into January But of course, it's very very early days as I sit here in my home office talking to you Right now. So what are we going to be looking forward to in the week leading up to Christmas? Well, there's not an awful lot on the docket and what is there is likely to be fairly confirmatory if you like in terms of what we already know about the UK and the US economy Obviously, we've got final GDP numbers from the UK third quarter That's expected to see no change to the previous adjustment of 1.3 We may see a slight upward revision We may not Obviously, the third quarter includes July August and September and obviously in August we had the pandemic Obviously that then rolled off in September. So you might see you might see a little bit of an upward adjustment In that as the pandemic restrictions got relaxed and people were able to return to some semblance of normal on the schools went back Private consumption still expected to remain resilient on that Manufacturing particularly new car production is likely to continue to remain a drag Certainly only today European new car registrations fell to another record low We've got third quarter GDP from the US and again, this is likely to see A reiteration of what we saw a few weeks ago an upward revision to 2.1 percent This isn't expected to change in the final adjustment this week It's a significant weakening from the 6.7 percent annualized number that we saw in q2 But nonetheless, it's not really expected to sort of Shine anything new in terms of what the US economy looks like and we also have The the fed's preferred measure of core pce inflation core pce deflator and this is expected to move higher In november I'm expected to see that move up to 4.5 percent and levels last seen in 1990 and obviously this week we saw UK retail prices It's 7.1 percent and obviously that seven number Is one particular figure that's probably going to resonate in the public finances UK public finances numbers Which are due to be released on tuesday morning Despite the end of furlough in september public sector borrowing has continued to remain high It has dropped sharply from the levels that we saw at the end of the first and second quarter But in october We fell back to 18.8 billion pounds From, you know, 2.0 down 2.9 billion from the same month a year ago So that's still fairly high despite the fact that furlough To all intents and purposes had ended and I think one of the reasons this number was as high as it was In october was because of higher interest payments Due to higher rpi inflation rpi is around about 6.6 percent Then it's now 7.1 percent now Higher spending on vaccine booster doses. It's also likely to boost the The amount of money that the uk government borrowed in november. So I'm not expecting To see any significant change in that number Should expect to see number in the region of around about 20 billion pounds and to say that's that's due out on the Tuesday, but again, you know this high public sector borrowing uk us Europe Everybody's doing it. So, you know, we're not exactly an outlier in that regard So what does this mean for the markets overall in general? Well, we do appear for the moment in cable to be carving out a base In around 130 160 132 we can see that on this chart here This is the same cable chart that I've been using for the past few weeks And regular viewers of my videos will know that Um, you know, I've been talking about this 130 160 132 area For a while now We've hit the bottom of the channel. We need to break through 134. Why 134? Well, obviously we this is when the bank of england hiked rates yesterday We weren't able to get above 134. It also coincides With this this these two lows here Around about 134 10 back in september. So between 134 134 20 We really need to see A break to the upside from there And I think the only way that we're probably going to see that pan out Is if we see a significant weakening in the us dollar and certainly I think one of the key takeaways that I've Seen from some uk policymakers bank of england policymakers is whether or not we get a rate hike in february Certainly hu pill the new chief economist Does appear to be one of the more hawkish members of the mpc and he's certainly Um laid his cards out on the table earlier today with some comments which suggest That if inflation continues to go higher and the likelihood is that it will Um, the bank of england is projecting six percent by april Which is not that far away when you consider that only two or three months ago We're around about three percent and we're now at five point two. So and we're at four point two A month before that so four point two to five point one Now those are pretty exponential rises and while you can argue that um, those energy price rises Will eventually drop out The fact that the matter is we've still got potential Further upside pressure in the weeks and months ahead judging by what ppi Has been doing and ppi generally tends to be a fairly good leading indicator the cpi going forward So 134 10 20 this sort of line here Um, if we can get back above here, then we could well head back towards 136 But i'd want to see a significant weakening in the dollar and at the moment We have seen a bit of a weakening in the dollar which is encouraging despite the more hawkish tone Um, and certainly um euro dollar Um, doesn't look at the moment as if it's showing any inclination of breaking out of its recent range Again, we can look at this chart here 113 85. That's that peak there Um, it's still struggling to get back much above that and we've got 111 85 on the downside If we go all the way back here, we've also got this series of lows through here Which is around 111 60 So big big level at 111 60 111 80 Um, you know if we do break below this series of lows here We I think we'd really need to break below 111 50 to suggest um the potential for further downside If we can get back through 114 20 Then we could well head back towards this downtrend line from the peaks that we've seen back in june But as we head into year end I'll be surprised if we see much in the way of significant moves in currencies either Euro sterling We did see marginal spike lower Yesterday um coincided with those lows back in august around about 84 50 um, but as a big big top at 86 86 20 And I don't expect that to change anytime soon. I still think the likelihood is we are range trading at the moment With a slight bias to the downside given legards comments on thursday that um the ECB Won't be looking to raise rates in 2022 whereas the bank of england and the federal reserve probably will Um, probably by not as much as the market's surprising But certainly there is a higher likelihood of a rate hike from the bank of england federal reserve next year Then there is for the ECB And I think that's that's that's the way I tend to look at currencies at the moment in terms of what Those three central banks are likely to do going forward We've also got US personal spending Um, next week on the 23rd That's likely to just bear out Um, what retail sales data has been telling us has been an awful lot of brought forward spending Not only in the us, but also in the uk. We saw uk retail sales this morning coming at 1.4 percent for um, November um With all the various restrictions that we've seen kick in over the course of the past week or so December is probably likely to be disappointing in terms of high street for high street footfall In terms of online, we may see a little bit of a pickup But I can't I can't I can't imagine that Um, there'll be much in the way of a decent number for December retail sales in the us or the uk I think an awful lot of consumers brought forward their Christmas spend Into the october and november numbers and that has been borne out by both prints in Um us and uk retail sales terms of earnings. We've got nike. That's about the only item on the docket Shares have done pretty well over the course of the past two quarters Factory shutdowns in vietnam hit production earlier this year meaning that the company wasn't able to meet demand Um, how that share price low proved to be fairly short lived And we've hit record highs for the share price in november revenues in q1 came in at 12.2 billion dollars They were slightly short of expectations and sales in china has slowed as the economy there has slowed But since q1 the vietnam factories have reopened the chinese economy. It's picked up a little bit of speed And nike is also looking to get into the metaverse, which is probably one of the most hyper hyper Most hyped ideas I've ever come across but nonetheless Profits are still expected to come in at a fairly healthy 62 cents a share However, given the way this price action has been trading over the course of the past few days I would suggest the highs are in and we could well head back towards the 200 day moving average when these numbers are released on monday Okay, so um, let's have a quick look. Let's have a quick breeze through the various indices because I've left that till last Um, footsie 100 continues to look fairly resilient. We had a little bit of a spike lower Um earlier this week didn't last very long Still of the opinion that while we're above the 50 day moving average in this line here The line of least resistance is for further gains going forward um, obviously airlines And travel and leisure have taken a bit of a hit This week that's not surprising but let's say for example omicron basically behaves like a um, a high powered firework and basically blows up in the short term in terms of infections, but then fizzles out very very quickly because of the milder nature of the disease even if it is more transmissible Maybe january um, we might see We might see a bit of a pickup. I think an awful lot will depend on the politicians response To the events of the next two or three weeks For cast your mind back to january last year. It was some particularly great starts of the year for equity markets We actually fell quite sharply But if we look where we are now In terms of the market, you can see this is january We went up and then we came crashing back down to earth again But since that, you know since february We've made some fairly decent gain gains And as we can see from this line through here Um, there's a pretty decent floor on the footsie 100 around about 6800 We can draw if we can link these lows through here. Then there's probably a low A decent support around about the 50 day moving average So i'm still constructive when it comes to the footsie 100 probably less so On the s and p but having said that Despite the fact that um, we've seen an awful lot of choppiness in recent days Again, we're still above the key support levels and while this is rolling over You know, i'll be surprised to see us move much below the 200 day moving average um, we did make a slightly new intraday high on the futures In the wake of the fed decision. We've given an awful lot of that back In fact, we've given pretty much all of it back As we head into the weekend, but overall we're still pretty much well above the lows For this month What has been notable has been The volatility in the nasdaq but again We're still above the lows for this month if we take out those lows And obviously we could well drift back down Towards the 200 day moving average But again, you know the trend is still fairly positive. So nothing to get too anxious about Um, you know when when you hear an awful lot of narrative about stocks being in a bubble so on and so forth Yeah, it is a little bit concerning But you know trade what you see not what you hear and for me At the moment, we are still very much in a fairly decent range for the dax We have made obviously new highs in november But the floor is very much around the 15,000 level until such times as we take that out You really do have to remain constructive But I would imagine that we're likely to continue to trade In the various ranges that we've been in for quite some time now one notable Factor has been Gold prices which appear to have broken out to the top side But again still within the wider range that they've been in over the course Of the past few weeks and fairly decent support in and around 1760 as for Brent crude Um, that does appear to be still in its sweet spot I talked about this last week The sweet spot. I think for opec is 65 75 That's pretty much where we are And I think it's very much where we're likely to continue to be so, you know, I think in terms of Brent crude it's going to pretty bit. It's going to be pretty much More of the same So don't expect to see any significant changes there So as I say, this is probably going to probably going to be my last video for this year I might do a quick one next week. I'm also publishing a whole host of Written content which will be going out over the course Of the next few days looking back at the year And looking ahead to next year. I'll be doing a piece on uk banks be doing a piece On oil and gas and renewables. I'll be doing a piece on ipos I'll be doing a piece on the footsie Um 100 the outlook for stock markets and I'll be looking to doing doing a piece on currencies as well and the outlook for The outlook for the the outlook for the for the pound So all in all, um, if I don't get to speak to you guys before I'd like to wish you all a merry christmas Happy new year. Thank you for your company this year. It's been a pleasure and Hope to see you all in the new year. Thanks very much for Listening to my musings this year