 Good morning. Welcome to CMC Markets on Friday the 12th of May and let's quickly look at the week ahead beginning the 15th of May with me Houston It's been a bit of a softish week for equity markets both in Europe as well as the US and I think a large part of that has been down to concerns about slightly Softish softish growth More aggressive central bank Tightening or further central bank tightening rate hikes. We've seen the Bank of England this week Follow in the footsteps of the Federal Reserve and the ECB by raising rates by 25 basis points We've seen obviously the various discussions the political theater of the debt ceiling people are blaming concerns about the debt ceiling for the slightly softish feel for equity markets this week and we're not we're not talking about significant weakness. We're just I Think seeing a little bit of a drift lower really on the fact on the back of There's not really been much in the way of positive factors helping to drive markets higher You bond bond yields are lower. So there's a little bit of us. I think there's a little bit of a haven feel To this week's This week's market activity If you look at the dollar over the course of the past few days The biggest gains have really come against the euro and the Canadian dollar and and a British pound and Australian dollar and and The Swiss franc and the Japanese yen which generally tend to act more of a haven in a slightly risk-off environment It's have been have outperformed slightly more If we look at the way What sees performed this week It's not really been much to write home about yes We've had a slightly more negative bias to it That's largely on the back of weakness in basic resources energy Copper iron ore that sort of thing and I think a large part of that has been down to I Think concerns about the fact that the Chinese economy is perhaps Not experiencing the type of enduring recovery The term had been expected When lockdown restrictions started to get eased Back in December last year if we look at the footsie 100 song cause for its third successive weekly decline Is a potential further weakness, you know, does the selling man go away and cliche Starts to kick in. I mean, I've never been a big fan of that particular cliche and it is a cliche I've overall we're getting a little bit a little bit of weakness, but as we can see from this chart here We do appear to be having finding a little bit of support anywhere between 76 70 and 76 90 so I don't really expect that to change in the short to medium term. I think the debt ceiling Issue will get resolved. It always has done I'm over the course of the past 15 years every time to top it comes up And I don't expect this time to be any different that there may be slightly more jeopardy But I think an awful lot of it is theater Rather than anything else We look at the if we look at the Dax again, we've drifted lower over the course of the past four days So we have seen a little bit of weakness this week We are getting a little bit of an end of week rebound But again, you know, if we look at this chart here 15700 it's a fairly decent support area and we have drifted a little bit off of peaks of Earlier this month, but certainly nothing to be overly concerned about Inspire all of the noise that we're hearing about and the big sell-off and stock markets coming It could well happen But talking about it is one thing until I actually see the price action confirming it I'm not going to be jumping back in and getting all bearish on equities. This is just, you know, the price action doesn't support that I'm again S&P 500 Still finding itself fairly toppy anywhere in an around 41 80 40 200 I'm finding a few bids anywhere down near the the may lows of 4,000 but even below that, you know, we're very much In a range and the big question at the moment I think which is Dictating sentiment is not so much how many more rate hikes are coming As I'm speaking right now to you. We've got Yoko Nagel, the chairman of the Bunders Bank Saying that more ECB rate hikes currently look necessary inflation is still much too strong Can't expect core inflation to slow quickly. Well, you know, that is true Certainly headline inflation does appear to be coming down quite rapidly Um, and I think that's where we need to focus our attention. We also need to focus our attention over what is happening in China because This week we saw Chinese factory gate prices contract By 3.6 percent and headline inflation only rose by 0.1 percent. So there are deflationary trends playing out in China's economic data And when we looked at the ppi numbers out of the us this week They fell to the lowest levels um in over two years ppi final demand fell to 2.3 percent And that was a much bigger fall Than markets were pricing in so certainly on the headline numbers you ask we are seeing evidence of slowing demand in the us slowing demand in china Which is acting as a lag on inflation not only in terms of cpi But also in terms of factory gate prices And generally what happens in china doesn't stay in china China tends to export its inflation or deflation problems to the rest of the world So we are certainly seeing evidence Of deflationary trends and while we saw the bank of england this week talk about the potential For further rate hikes another 25 or another 50 um There is a decent chance if these trends that we're starting to see play out not only in china, but also in the us Start to impact Here in the uk and in europe more broadly now We've got uk cpi out in a couple of weeks time And we could well see a sharp fall In headline cpi then but i will cover that In next week's video for the here and now we've seen the pound slip back in the wake of yesterday's rate hike It's this candle here And we've also seen first quarter gdp coming at 0.1 percent, which was broadly in line with expectations But what was surprising is we did see a much bigger contraction in monthly gdp for march and an awful lot of that reason for that Was as a consequence of strikes Which depressed activity in the services sector, but we also saw um We also saw a little A little bit of a slowdown in retail as a result of the really wet weather that we saw then as well, so We could well see we could well see some revisions to that first quarter gdp number, but for the time for the here and now We saw a 0.4 0.1 percent Expansion in q4 And it's been followed by a similar expansion In q1 cable Ran into resistance from this trend line that i drew all the way back from the highs back in may 2021 June 2021 2021 And has been rebuffed at that trend line from this move here 126 80 it was slightly higher I had that line around about 127 and we have started to slip back And we could see a little bit of sterling weakness play out over the course of the next few days simply on the basis of the fact that we've had a hostess Investment banks come out and admit that they got their cable calls wrong Um at the end of last year predicting a move towards parity So they've thrown in the towel on their negative sterling view Think on sterling positive Which generally tends to be a decent signal to go short sterling In the same way that when everyone went bearish sterling The pound went up. I think the reverse Could be true here and we could start to see a little bit of sterling weakness that sees this drift back to the 50 day moving average On the basis of this particular move down move that we saw On thursday Looking at the weekly chart would appear to confirm that we've seen some fairly decent gains over the course of the past few weeks Which would suggest we are due a little bit of a pullback And a little bit of a rebound in the dollar Which has started to play out Over the course of the past Few days despite the hawkish rhetoric from the bank of england this week I think we could well be done when it comes to bank of england rate hikes for all the the potential that The bank of england kept another rate hike on the table and certainly we've seen investment banks pricing in at least another two 25 basis point rate hikes between now and The middle of the summer i'm i'm i'm a little bit dubious about that. I think we could well struggle Um to do that a lot would depend on the inflation numbers. We could see a sharp drop From the 10.1 percent that we saw in march To around about eight eight and a half percent when the april numbers are released in just under a couple of weeks time for that We've got the latest unemployment and wages data for march Unemployment did tick higher in february to 3.8 percent which was back to the level that was in the second quarter of 2022 We're currently In february wage growth has remained resilient It remains steady for the three months to february at 6.6 percent But if you look across a regional basis on wages Some what some some you're seeing some wage growth in excess of between 10 and 15 percent So that would suggest that perhaps the bank of england might have room for another rate hike But I think you have to put the the wage growth that you're seeing in the context of where rpi is where ppi is and where cpi is ultimately Real wages are still negative So when people talk about a wage price spiral I sort of roll my eyes into the back of my head because you're not getting one. Yeah wages are going up between You know seven eight nine ten eleven twelve percent But why shouldn't they you know headline inflation Is is trending in and around those levels as well So all people are doing and you can't blame them for that Is trying to regain some of the purchasing power that they've lost over the course of the past 12 to 18 months That is not inflationary in my opinion You know, you'll have probably many economists argue the contrary to that But I would argue that's nonsense um, because essentially but you don't You do you do you do a road inflation by diminishing purchasing power, but it's certainly not a long term Strategy for getting the economy to rebound Quite strongly. So there's a it's a delicate balancing act. Anyway, I'm digressing and I'm You know sort of rambling a bit. So There is potential for us to drift back towards these series of lows around here in april around about 23 and a half but I think as long as we're able to retain the trend that we've been in since september and october there is no reason why we can't go towards 130 cable No, there's no reason not to at the moment the dollar's rebounding on the basis of the fact that Obviously, it's a little bit oversold um We could see a little bit of dollar strength as people realize the fed's not going to be cutting rates anytime soon But neither is it going to be hiking rates anytime soon At the moment the market is pricing in the prospect of fed rate cuts Um, I think that's way too premature. We're certainly not there yet um, if we look at euro dollar similar sort of weakness last week uh over the last few days drifted back below this 109 40 50 area We're currently trend trading below that brings us back to around about 108 70 which is this low here So we have broken down a little bit So again euro dollars telling me that we could be starting to see a little bit of dollar strength And the short to medium term and we could drift back down to The low to mid 108 Over the course of the next few sessions on the basis of that particular chart euro sterling is a bit of a snoozeville But then again, it always has been Um, once again range trading pretty dull pretty boring. Not really much. There's nothing to see here dolly in Dolly ends tricky one. Um, but again, I think Dollar strength is likely to be limited to these peaks here We've seen a double tap there at around about 137 80 Um, so 137 90 Yes, we are trending a little bit higher here But what we really need to do to signal further dollar gains is for us to move significantly through 138 at the moment I think the dollar's trying to find its range against the yen Does appear to have found it but there does appear to be a cap at around about 138 that will continue I still think there's potential for dolly end to go lower On the basis of a tweak to monetary policy by the bank of japan um, so Um, next week as I say, we've got uk unemployment and uk wages wage growth I think is it will will continue to remain resilient which Should help to support the pound unemployment should remain steady at around about 3.8% so I really don't think that unemployment is going to tick up significantly The the labor market still looks fairly tight. It still looks fairly resilient and wage growth still looks fairly strong We've got chinese retail sales coming out in the coming week and we've got us retail sales coming out this coming week and it could I think it's likely to show Bit of a contrasting picture chinese retail sales are likely to see a really strong rebound in april We saw in the wake of chinese new year in march a rise of 10.6 percent Which was the highest number since june 2021 As optimism increased that the chinese consumer would help support the global economy in the wake of easing of covid 19 restrictions We've seen a a plethora of positive updates from the likes of al-vmh hermes and caring reshmant today on the back of chinese consumer spending rebounding strongly, but these are all luxury brands So generally luxury brands tend to be less price sensitive than say for example the more middle-income brands So april retail sales We could well I think we're going to be seeing the best performance since march 2021 with a rebound of 22 percent But we also need to caveat that big rebound by the fact that in april last year Most of the chinese economy was in lockdown So 22 while it may seem a big jump It's not if retail sales a year ago were really poor because no one could go out and spend money So we need we need to set context around that Industrial production is also expected to see a strong pickup from 3.9 percent seen in march With a similarly strong number of 10.1 percent again Similar reasons a little bit of a rebound, but the baseline Again, you've got a weak baseline. So you have to take that into account us retail sales Been fairly resilient for most of this year Saw a strong rebound January 2.4 percent We slowed to zero percent in february while march was revised up from minus 0.8 to minus 0.4 Inflation has continued to slip back against the backdrop of a resilient labor market for us retail sales Recent earnings numbers have been broadly positive We've also got warm art and target earnings. So the us consumer is front and center when it comes to The us economy and and and and obviously consumer spending And we could well see a modest Gain of around about 0.4 percent in april retail sales after the decline in march Obviously the us banking regional banking turmoil may have prompted a little bit of pairing back of consumer spending But certainly looking at walmart and target And their numbers that are due out this week walmart has been the more resilient of the two When it comes to its earnings numbers But when it reported Back in Back in february the shells the the shares fell sharply in the days after before rebounding of five months five month lows and the 200 day moving average Um in march So we saw the numbers come out here. We drifted lower We rebounded off the 200 day moving average and we've seen some decent gains since then Walmart posted record revenues in q4 Really really strong number Just over 164 billion dollars on the outlook The the retailer was slightly more pessimistic But you know with with respect to the four-year picture Consensus forecasts appear to align with a slightly weaker quarter Revenues expected to come in around about 148 billion dollars But we have seen The shares rise quite nicely and they do still look fairly resilient So walmart expecting a fairly decent set of numbers Similarly for target although target has underperformed it's more It's much bigger peer But nonetheless We do appear to be a range Me in a bit of a range when it comes to target shares toppled out range 180 bottom and out range 140 I would expect with this week's q1 numbers Which are due on the 17th walmart's are due on the 18th I would expect targets numbers to So give a decent tea up if you like For how well the the US consumer is doing I think one of the big problems that target has had which walmart has hasn't has hasn't Or hasn't dealt with as well as costs targets costs have been A little bit of a problem. They were 82.2 billion over the course of last year So they haven't been as good as Getting a handle on their costs. So certainly keep an eye on target in the uk. We've got easy jet easy jets shares Had a really strong start to the year and since then we've run out steam Finding a little bit of a barrier in and around at 520 area and Airlines have been a strong performer so far this year, but As I say since march april we've pretty much traded sideways The airline says it expects first half losses to be less than expected about 400 million pounds It expects to exceed full-year expectations for profits 260 million pounds and yet to look at that chart Investors don't really seem That convinced about that seen a 35 percent rise in passengers in q2 a 43 percent rise in revenue per seat And a reiteration of its h2 guidance Of 56 million seats a rise of 9 percent an upgrade to easy jet holidays guidance to 60 growth year on year was also welcome When the company publishes q2 numbers And group revenue is expected to come in around about 2.7 billion dollars while costs Are coming in around about 3.1. Sorry 2.6 2.7 billion pounds Well costs expect to be around 3.1 billion pounds due to higher fuel prices I think the key thing for me is a load factor in q2. It was 88 percent With an expectation this will move into the mid 90s during h2 ryan air by comparison is already in the 90s So easy jet has quite some catching up to do in that regard We've also got burberry numbers four-year numbers out on the 18th along with A bt group i'm going to focus on burberry and obviously easy jet as well as on the 18th So we've got quite a busy day on the 18th burberry Again luxury retailer China it's china and greater china markets where it's weak spot for most of last year So will we see a strong rebound in its q4 numbers in the same way that we've seen Really strong numbers out of the likes of reshmael lvmh caring and hermes so I think that's pretty much It for this kind of a quick look at the burberry chart And we can see that reflected in this chart here Pretty much close to record highs on burberry share price So again, if we get a fairly decent certain numbers we could see another further kick higher um Have a quick look at Brent Oil prices are looking fairly weak Um, and that's really a demand story rather than the supply story. It's a demand story concerns about slowdown Um, we're seeing it out of china and in terms of the inflation numbers We're seeing it in the us in terms of the factory gate numbers These factory gate numbers are leading indicators or generally tend to be leading indicators of cpi so in terms of Decreasing inflation They're encouraging Because obviously it means prices are rising at a much lower rate But in terms of the global recovery, they are a little bit of a concern But certainly for consumers at the petrol pump They're good news and I don't think we can complain too much about that So that's it for this week ladies and gentlemen once again, thank you very much for listening This is Michael Houston talking to you from cmc markets, and I hope you all have a great weekend. Thank you very much for listening