 Good morning, welcome to CMC Markets on Friday the 10th of September and this quick look at the week ahead beginning the 13th of September with me Michael Euston It's been a little bit of an odd week this week because while we've seen some fairly decent gains for markets in Asia The picture has been slightly more bearish When it comes to European markets while the US markets while having a slightly softer tone Having come back from a long weekend I'm also finding upside progress a little bit trickier to navigate and that is obviously raising some questions about the sustainability of the current rebound or the current moves higher And we've been seeing over the course of the past few weeks if we can start with I'm just going to get rid of that. We're going to start with the the Nikkei 225 because we've seen some fairly decent gains there over the course of the past two weeks and I think one of the reasons for that big push higher At the end of last week was the resignation of the Japanese Prime Minister and the prospect of a Japanese election that's really given the Nikkei which had been underperforming and has been underperforming Over the course of the past few months a really big lift Over the past few days. We can see that in these daily candle charts here. This was Friday's strong move higher followed by the Monday move and Generally speculation that any new government will embark on a Massive new fiscal stimulus program and obviously the Bank of Japan will continue what it always does and does very well With respect to its very loose monetary policy. So That's why we've seen The Nikkei 225 outperform over the course of the past few days But we've also seen a slightly more resilient tone come from Chinese markets Or be it it has been just as just as choppy, but we have seen a little bit of a stabilization I'm over the course of the past few weeks as Investors mull the prospect of whether or not and we will see a further regulatory crackdown on The part of Chinese regulators Think the key the key level for me on the hang saying is obviously the series of this these two bases here In and around the 24 24,700 level If I just draw in a horizontal line there That'll give us what we would like to call my line in the sand For the hang saying and actually probably drawing a downtrend line through these peaks here to Get an idea of the extent of any potential rebound and obviously there's this there's this peak There's this resistance level here at 26,700 Which was resistance back in August and was the key support level in July. So It's only fairly straightforward there China trade numbers earlier this week were much better Than expected and obviously that gives us a potential insight into this week's up-and-coming China retail sales numbers Which are due out on the 15th? We've also had to absorb a big miss on US payrolls 235,000 jobs Against an expectation which was well below the lowest expectation of around about 400,000 And obviously the highest expectation which was over a million and now previous month the previous months Reports the the July report was upgraded to just over a million jobs from 940,000 but nonetheless that payrolls report was very disappointing and Given the fact that it was 500,000 below expectations We have to look at what the main culprit was with respect to the slowdown and hiring trends and it was primarily in Leisure and hospitality sector which came to a shuddering halt in August Now there can be any number of reasons for that The Delta variant the rise in the Delta variant was probably a key factor Staff shortages still remain very much prevalent This week's jolt's numbers came in an almost 11 million So there's 11 million vacancies in the US economy and yet The workforce is only five million people below its pre band pre-pandemic level Unemployment fell to five point two percent. So what does that mean in terms of a Potential timeline for a taper? Well, it's become increasingly clear from the data particularly in August the US economy has hit a bit of soft patch In terms of confidence and demand That's largely as a result of the surge in Delta variant cases, which is prompted a slowdown not only in consumer confidence, but also in terms of traveling United Airlines American Airlines Southwest they're all reported lower bookings numbers in August and September and October are also slightly Below expectations as well. So what does this mean for the taper? Well, essentially it probably pushes it back to the end of this year But I think a lot will depend on the September payrolls report Which is during the 8th of October now weekly jobless claims are still falling came in at three hundred and ten thousand So that would suggest with the expiry of the additional stimulus benefit measures unemployment benefit measures on the 6th of September you should See a pick up in hiring trends as we head into Q4 so Certainly be keeping an eye on That over the course of the next few weeks But in terms of other US data that I've got my eye on we've got US retail sales Now US retail sales is given the declining consumer confidence that we've seen over the course of the past month or so It's going to be very very key And that comes out on the 16th of September now they've been very patchy this year retail sales You know up very strongly one month down quite sharply the next in June We're expected to see a decline of 0.5% and we ended up with a gain of 0.6 So we saw a 1.1% decline now the expectations are for another decline in August And certainly that wouldn't be a surprise given some of the other survey data that we've seen for the month of August But we've also got the fact that You will have had some element of back to school spending In August which may well have kept afloat under US consumer spending, but certainly prices are also a concern We have US PPI later on Friday later today Obviously, I don't have visibility of those numbers, but they could certainly give us an indication of whether or not price pressures in the US economy are starting to diminish because They have been very very high. They've been leading indicators for a move higher in inflation and with US CPI For August you out on the 14th of September They could be a decent leading indicator as to whether or not CPI price pressures have started to peak We've seen prices paid numbers in the latest ISM surveys start to come off their highs. That is encouraging But that's not really borne out by the recent PPI data. So that is a concern going forward So what is what essentially does that mean in terms of CPI expectations? Well, I suppose it really depends who you look at but certainly I think the expectations are The headline CPI is going to come in unchanged from the levels that we saw in July around about five point three five point four percent And core prices are expected to remain the same at four point three percent now that does seem a little bit optimistic But that remains to be seen in the short to medium term. We've seen a little bit of Rebound in the US dollar at the beginning of the week, but we are now starting to see that Move starting to run out of steam That was Friday's payrolls report. It was pretty much priced in for a slightly lower than expected number We tried to go lower. We weren't able to we've rallied back up towards this resistance level here And now we're drifting back down again the outlook for the dollar Continues to look fairly uncertain. We've heard the ECB this week talking about reducing the Amount of their pet program. Just don't call it a taper because it's not the ladies not for tapering apparently but There is certainly I think the ECB is certainly becoming Having to become slightly more flexible when it comes to the size of Their bond purchase program and with a German election coming up on the 26th of September Maybe a modest taper was the least of what markets could expect and certainly the euro has found a little bit of a Bit around about the 118 level as can be seen from this pullback in the dollar CMC dollar index we can see that born out with this euro dollar chart here Daily chart finding support at the 50-day moving average and the 118 area So we could well see your dollar start to wedge back up, but I'm still of the opinion or of the mind That this 120 area 119 initially when 120 is a big big top at 119 10 That's a big level Obviously that was the highs that we saw in the wake of last week's payrolls numbers They weren't able to take out that 119 10 area that remains a very very key resistance level in the short to medium term So we need to keep an eye on that particular level the euro has had a slightly softer theme in recent days Certainly against the pound We have squeezed high this is a four hour chart we squeeze back to 86 10 that still remains a very very key resistance level Now we're below 85 50 the The current short squeeze that we've seen in euro sterling shorts does appear to be running out of steam 86 10 86 40 there are there abouts as a decent resistance level the next target now for euro sterling is 85 05 Obviously with that in mind and this week's disappointing GDP numbers out of the UK economy Attention will inevitably shift to how well the UK economy is doing Relative to the European economy and we've got a raft of UK numbers out During the week starting with UK unemployment data on the 14th followed by CPI data on the 15th And then UK retail sales for August on the 17th So what is essentially does that what essentially does that mean for sterling? well looking at This chart here. Let's remove some of the clutter Just gonna hide the drawings there and you can see the the the lines slightly more clearly The key level for me remains 139 then 140 Well, we we found a little bit of a top anywhere through 139 here So having held 137 25 137 20 earlier this week The next obstacle for a move back to 140 is this series of peaks around about 139 138 90 there are there abouts to take us back to the peaks that we saw then still very much a range trade On cable Certainly an interesting dynamic when it comes to monetary policy early this week an interesting revelation If you like from Bank of England governor Andrew Bailey when he talks about The the bar for some form of normalization of monetary policy Now the unemployment numbers have been coming down steadily over the course of the past few months Round about now 1.6 million people still on furlough. That is likely to come down Even further the big question is whether that gets added to the unemployment numbers or whether those furloughed workers who are not taken back Fill the vacancies that are currently outstanding Within the UK economy and certainly there is evidence of Some underlying wage pressure Starting to build when it comes to the UK Economy as well and that's something that we really do need to keep a close eye out for going forward In terms of the unemployment numbers expecting to see another fall in the headline rate to 4.6 percent Average weekly earnings are expected to fall back modestly from the levels They were in June from 7.4 to 6.8 percent as some of these furloughed workers come back into the workforce These furloughed workers tend to be in hospitality and leisure. So that is likely to bring the average fairly earnings number down slightly as these lower paid Salaried workers come back into the workforce We've also got core CPI and CPI and that is expected to see a big jump big jump in August You may recall that headline CPI fell back to 2% in July We're expecting to see a rise of 0.9 percent to 2.9 percent And that is likely to crystallize the debate on the monetary policy committee about the imminent removal of monetary stimulus not a rate rise not a rate rise but Any normalization or reducing of asset purchases will obviously start to stop the clock On a potential rate rise Maybe some time towards the end of next year core CPIs is also expected to rise Quite sharply from 1.8 percent to 2.9 percent as well So that's going to be hard for the Bank of England to ignore Particularly combined with the fact that wage pressure is also at elevated levels It doesn't mean that we're going to get a rate hike, but certainly you think in terms of a glide path For a normalization of policy it moves the Bank of England closer to a normalization Then it does the ECB and potentially the Federal Reserve as well in terms of retail sales on 17th of September which is the Friday I'm hoping to see an improvement after the two and a half percent decline that we saw in July That was really disappointing came despite the full relaxation of COVID restrictions But I think coinciding as it did with the so-called pandemic That caused an awful lot of people To withdraw from more the more discretionary type of spending that tends to boost the retail sales numbers now Obviously the relaxation of the pandemic restrictions on the 16th of August should give us a Slightly more positive number you would think and certainly the expectation is that we will see a big rebound in The we're not a big rebound, but certainly a decent rebound of around about 0.6 0.7 0.8% After the big decline that we saw in July particularly with the fact that we spoke to the school holidays We'll have back to school spending You'll also have increased domestic spending as people holiday at home So I'd be very surprised if we don't see a fairly decent rebound in UK retail sales going forward And hopefully that will be a catalyst For a much more resilient pound sterling going forward Certainly if I draw in this line here, we've got a nice little line coming in there, which hopefully will support Any bid tone to the pound more broadly? So covered UK unemployment recovered CPI and we've got retail sales We've also got so we talked about US retail sales For August and that's due on the 16th of September and as I say that will give us a good Indication as to whether or not the falls in consumer confidence. We're seeing In those numbers have been reflected in consumer spending patterns As I say the there is a expectation of a decline of 0.7 for US retail sales With your CPI expected to remain unchanged at 4.3 on core and 5.3 on Headline China retail sales China's economic data recent economic data for August Trade was actually slightly better than expected When you consider some of the weak PMI numbers that we've been seeing so in terms of August retail sales Those trade numbers would appear to suggest that we could well see a much more positive number For China retail sales going forward having said that economic Expectations around that are pointing to a further slowdown to 7% Which would obviously be the weakest retail sales numbers for China this year and a slowdown in industrial production as well Which is expected to rise by 4.8 5.8% Which would be its worst performance in August last year higher prices are also affecting the Chinese economy We saw earlier this week that China decided to release some Inventory crude oil inventory from its strategic reserves Which calls print crude prices to drop quite sharply? Yesterday they've rebounded today Still got this trend line here, which is intact while it remains intact And the seventy five dollars the August peaks here around about 7660 I still can't get enthusiastic about a move higher in crude oil having said that While we stay well above This 200-day moving average Then pressure is building potentially for a move higher These dips here away from this trend line resistance here and here They haven't been particularly solid. You know, they haven't been particularly There's not been an awful lot of Thrust behind the dip. We found fairly decent support in and around 71 dollars a barrel So we really need to break below 71 dollars a barrel to signal a deeper correction towards the downside Given how the that particular level has held quite substantially over the course of the past week or so So that's that's a that's a Brent Brent crude. So what else what else am I keeping an eye out for? This week. Well, we've got some fairly important earnings announcements from UK retailers. We've got JD sports When we've got a cardio group now JD sports has been a standout performer this year and absolutely Set itself apart hit record highs Earlier this month. This is its year-to-date performance If we look at it The latest trading update showed the profits before tax or on tracks becoming at around 550 million pounds They've been on an acquisition spree as well I'm also the CMA have once again decided to block its foot asylum acquisition Which is seems to be mind boggling mind boggling Lee unfathomable Struggling to get my words out at the moment Given the fact that it makes up less than 5% of the UK footwear market nonetheless, I think even if they are Forced to sell it off. They probably won't be able to get that much for much for it And they only paid they didn't really pay that much for it. Anyway, they've got net cash of 795 million pounds so It's not as if they're short of a bobble to so certainly I don't think markets are that concerned about The first half update is pretty well flagged. It's going to be a fairly decent one We've got dark trace an IPO that came to market earlier this year. It's performed very very well over the course Of the past few months since it was launched on the 30th of April Peaks at 784 pence. It did see a little bit of a drop Once a lock-up period expired and some shareholders basically cashed in In July the company upgraded its four-year growth forecasts Four-year revenue is expected to come in at 278 million dollars a rise of almost 40 percent client base is up 42 percent so The only cloud on the horizon is obviously it's involved in its involvement with shareholder Michael Lynch Who losses appeal against that tradition to the US on fraud charges has recovered some of those losses since then? And that could provide an unwelcome distraction So certainly expectations are higher in terms of its forecast for 2022 for annualized recurring revenue and That that that should be so that should be one to watch as we look ahead to this week's Earnings updates and we've also got associated British foods Primark, which is an on there and we've also got a card out Cardo group which is underperformed Relatively this year Which is not surprising really given that beginning of the year it was valued almost on a par with Tesco's Given the fact that it's turnover is nowhere near what Tesco's turnover is So we've seen a little bit of an adjustment that in terms of expectations around the Cardo share price It's below the 200 day moving average. It's finding momentum Pretty difficult to sustain H1 at first half total revenues saw a rise of 21.4 percent to 1.3 billion pounds this week's Q3 numbers Will be an early indication of how well the business is shaping up with respect to its current fiscal year now pre-tax losses are still No, I don't they were they're better than they were should I say and they came in at 23.6 million pounds in the first half New full new fulfillment centers are coming online in the second half of the year and and over came back online In Q3 So they should be they should see a pickup on the back of that and Perfleet is set to open in Q4. So certainly in terms of Fulfillment centers a picture for a card I certainly looks better than it did say for example six months ago in terms in terms of overall turnover so That's pretty much a praisey of what's coming up over the course of the Next week or so. Thank you once again for listening ladies and gentlemen I wish you all a very pleasant weekend and I will speak to you all same time same place Next week. Thanks very much for listening and have a great weekend