 Good morning. Welcome to CMC markets on Friday the 24th of September and it's quick. Look a week at the weekend beginning the 27th of September with me Michael Houston, it's certainly been a bit of a strange week we've seen quite a bit of Volatility quite a bit of movement, but we haven't really gone anywhere. It's all been in the confines of the ranges That we've been in for pretty much the last three to four or three to six months. I Think that for me. I think just highlights how uncertain Investors are about the outlook for markets in general We started off the week very much on the back foot Falling sharply with the FTSE 100 Falling all the way back virtually to 6,800 before rebounding quite strongly Tuesday Wednesday and Thursday and You know, I'm struggling a little bit to sort of really make sense of the news this week because You know concerns about ever grand and nothing new they've been bubbling under the surface for quite some time Um, certainly there's nothing new about supply chain constraints has been nothing new about rising energy prices So for markets to be freaking out on Monday and then Evergrande makes a loan payment on Tuesday and then misses a bond payment on Thursday. It kind of sounds like a Craig Davidson Um We're not really any further forward in terms of whether or not Evergrande is going to make those bond payments Then we were at the beginning of the week in the markets I've done a pretty decent round robin tour of the overall range So what does that mean going forward? Well? I think it's going to be more of the same if I'm honest If I look at the price action with respect to the FTSE 100 that it's best to reprise its role as a perennial party Pooper yesterday By sliding back from its intro day highs to finish in negative territory We've also seen a little bit of weakness today, but if we actually look at the FTSE 100 over the week It looks like to be a fairly positive week which makes a pleasant change But you know, are we any further forward in terms of a directional? Indicator than we were a week ago not really so brings us to Brings us to the S&P 500 Again, we broke below the 50-day moving average Which has helped to support Pretty much the move over the course of the past 12 months And despite brief forays below it once again We are now We now appear to be trying to move back above it I don't have some concerns however with respect to this not moving US markets because we did take out the previous lows We took out these lows through here and these lows through here and even though we have recovered back above them I'd be more confident of further gains if we were able to take out 4500 in terms of a momentum play Which would give me then greater confidence that will move up towards 4600 certainly I think in the wider scheme of things Nothing really much has changed in terms of the overall outlook. Yes, the Fed has become an awful lot more But not not an awful lot more hawkish I think they pretty much signaled their intention that they were going to tilt towards a taper At their latest meeting and they've certainly done that The number of FOMC members who sought a potential for a rate rise in 2022 Increased from 7 in June to 9 This month so certainly it wouldn't take much more For there to be a majority for a 2022 rate hike always assuming of course That we get a decent September payrolls report. So there's an awful lot hanging on The September payrolls report on October the 8th and one thing that did strike me from the press conference on Wednesday was That if progress continues broadly as expected the committee judges a moderation in the place of asset purchases may soon be warranted Which means we could get an announcement in November With potential potential start in December Some people are arguing that we might get a start in November. I Mean, yeah, we might but that only leaves one payrolls report between now and then because the Fed meets on The 3rd of November two days before the October payrolls report and I think to my mind Yes, they will want to taper But I still think that I probably want to see how the November the 5th payrolls report for October plays out First another thing that did strike me was that Powell said that an even half decent report Could be the final piece of the jigsaw for tapering to start in November. So How do you define half decent 400,000 500,000? Less than that would be what another 235 be considered a half decent report, you know, and I think that phraseology half decent Maybe doing an awful lot heavy lifting if we get if we get a disappointing report It's unlikely given the weekly jobless claims numbers that we've we've been seeing but you can never rule anything out and in any case One of the things that we did notice this week is obviously bond yields shifted higher as a consequence of that US Fed meeting the 10 years now back above 1.4 percent first time it's been above there since July So certainly I think the narrative has shifted to It's concerns about Inflation the Bank of England also Indicated that it was concerned about the direction of travel for inflation and as a consequence of that We've seen UK guilt yields spike and I'll show you a chart about that just after I've shown you this this DAX chart It's quite interesting that this DAX chart here. Okay, it did break this line here But what it didn't do is take out those lows there and we managed to hold above the 200 day moving average So, let's just quickly draw in horizontal line through there There we go, so that 15,000 level now becomes a very sort of key line in the sand I think for me when it comes to DAX support that in the 200 day moving average But once again, we didn't really break out of the ranges that we've been in over the course of the past few months And what was it? I think particularly notable is that while European markets and US markets were rebounding from the lows the The K225 was pulling back from significant resistance levels around about 30,700 so not much correlation going on there apart from the fact that it's still stuck in it still stuck in its range So I think we can pretty much expect to see More of the same over the course of the next few days and weeks in terms of the dollar and Seen a little bit of a pullback in the dollar over the course of the past couple of days again That tapering announcement was pretty much priced in To a certain extent and markets appear to be fairly comfortable with it Certainly if you look at what bond yields are doing and what some equity markets are doing at the moment They appear to be going or yesterday they were going in the same direction yields were going up and markets were going up How long that could continue remains to be seen But certainly I think in the context of the moves higher in the dollar What we've seen here is a continuation of the broader range that we've been in over the course of the past few weeks So let's move on to this really sharp ship sharp shift and sentiment that we saw from the Bank of England this week much more concerned about Inflation and you can certainly see that born out in five-year guilt yields That's the move higher on Thursday. If we look at that on the two year We've also seen the two-year move sharply higher as well to their highest levels Since before the pandemic. I mean that's quite a sharp rise in borrowing costs since the beginning of August We've gone pretty much from 0.05% to 0.4% in a space of three months so markets are increasingly Pricing in the prospect of a rate rise from the Bank of England Sometime over the course of the next 12 months on the 10-year yield the even here. We've seen a Slight move to the upside. We've taken out the previous highs to be trading at the highest levels But we've seen pretty much in the last couple of years if I change that to a two-year chart We can see that we haven't quite got above the peaks there But if we look at say for example the two-year horizon borrowing costs is much is much more noticeable at the shorter end of the curve or the all the yield there so That's That's UK borrowing costs what we haven't seen though is a significant similar rise in the value of pound that continues to Remain a little bit on the soft side. We saw it a little bit of a rebound there That could potentially be a bullish reversal on the sterling index I might have to redraw that line there because I didn't draw it correctly through that point there But certainly in the context of these series of lows through here We do have a decent area of support All the way through there so You can see that around the 1,000 level on the CMC sterling index So again, it looks it looks increasingly like a continuation of the range trade that we've been in for several several weeks and months now so That's sort of looking back At the last week or so some good news came from last week obviously UK US transatlantic routes are due to reopen on the 4th of November That's given the airline sector a decent boost this week I AG British Airways up over 15% on the week That certainly will be welcome Rolls Royce is also done very well And certainly it's a welcome boost for the travel and leisure sector Unfortunately, it could be running into a cost of living crisis with energy prices and what have you? concerned about that fuel shortages of the pumps because of a shortage of tanker drives, but it does appear to be some Evidence of natural gas prices are starting to top out. We appear to hit a peak on Monday And these are Dutch natural gas prices and they are now starting to slip back a little so maybe Maybe whisper it quietly the worst is behind us in terms of The gas prices the big question now is whether or not we see shortages of supply of the winter months There's someone who remembers the winter of discontent in 1979. Let's hope not Anyway, as we look ahead to the coming week the main items on the menu are revisions or final revisions of UK second-quarter GDP US second-quarter GDP We've got flash CPI from the European Union on the 1st of October on Friday So that will give us an indication as to whether or not the reading of 3% that we saw in August has gone up Or whether or not That was just base effects pushing that up and we're actually going to come in a little bit lower over the course of The last month or so certainly in terms of What else we've got coming out in the week ahead. We've also got US PCE as well and that is expected to Remain unchanged at around about three point six percent. Now that is the Fed's preferred measure for inflation call PCE Flator as I say that should that should come in around about three point three point six percent We also have University of Michigan sentiment as well I'm So looking looking at the CPI number that is expected or it's estimated to come in at three point three percent Arise from three to three point three percent So which again will obviously have the Hawks of the ECB champing at the bit One of the notable things of the past week or so is the the ECB It's not in any hurry to talk about Moving on interest rates yet core CPI when you when you strip out everything else core CPI Is still below two percent and it's only expected to rise from one point six to one point eight percent So there's a big difference between EU core CPI prices and headline CPI prices and I think the governing council will probably hide behind that So only once the German election is out of the way Due this weekend we can probably expect to sit through Three to six months of naval gazing Amongst German politicians as they try and cobble together some form of coalition and the likelihood is That it will be a three-way affair the favorite Outcome at the moment or the electoral mass in terms of the booking or the betting office Was is it'll be a three-way affair with the FDP the Greens and the SPD So that will be very interesting to see who compromises on what When it comes to coming to a coalition and I think given the wide differences in terms of policy We could find that the the government could well be fairly fragile affair will have to wait and see as to whether or not We get it. We get a quick agreement if anything if it's anything like 2017 We could be waiting until after Christmas, but as I say, we'll have to wait and see so the results for that And should be due out late Sunday night early Monday morning. What does that mean to the euro? Well to be quite honest I think when you're talking about macro when you're talking about macro considerations in terms of the euro I'd much rather look at the charts and at the moment in terms of what the charts are telling me is That We are pretty much at the lower end of the recent range. There's decent supporters around about 116 16 here and hereabouts what we saw yesterday was a potential bullish reversal Which suggests that we could see a little bit of euro strength and a little bit of dollar weakness Over the course of the next few days and weeks And as such we could see a continuation of the range that we've been in over the course of the past two to three months So fairly well supported in and around these sorts of levels here and resistance up here I really don't see any reason to change that overall narrative when it comes to euro dollar What does that mean for cable is pretty much the same here looking at this chart We can see fairly solid support in and around 135 70 136 That 136 level held yesterday and again We saw a very strong bullish reversal on the cable now We could drift back to around about 136 70 but as long as we hold above 136 Then I think the remains though the range will remain intact easy for me to say But that's what the charts are telling me until such times that we get a break below that low Then really I think that's really the sensible way to play it You know you play the price as it is not as you would like it to be and At the moment we've got fairly decent support in and around these series of lows Not only on your a dollar around 16 60 117, but around 135 70 and 136 on cable to our situation changes Then it's unwise to try and Get to try and jump on the back of a break of that range You know just based on just based on previous price history Looking at euro sterling again pretty much same old same old topy above 86 10 Fairly well supported around about 84 88 590 and that is essentially where you where we are you pays your money You takes your choice So that is euro sterling in terms of Brent crude We are now pushing back up against those previous peaks all the way back in July Decent chance. We could get towards $80 a barrel, but at the moment while this level here is capped then Again, I think it's likely that will find decent support in and around this 66 $65 a barrel and 78 $79 a barrel here I don't think that we will want to see prices much above that in the short to medium term Certainly not while we're heading into winter, but certainly the buyers Does appear to be war to be towards slightly firmer? commodity price gold has obviously taken a bit of a hosing on the back of that of the of the Potential inflation concerns and rate rise concerns not especially so We're down two weeks in a row Seem to be stabilizing those are the flash crash lows all the way back in August We quickly recovered off that which suggests to me. There's fairly decent demand for gold in and around $1,700 an ounce if we actually get down that far in terms of The outlook for this week over and above the GDP numbers that we've got for UK and the US on the 30th of September Not really expecting to see much in the way of revisions for either of those two numbers certainly in terms of the the UK 4.8% was the was the number for Q2 not really expected to see much of a revision in that number may see a slight revision higher maybe 4.9 perhaps but You know, it's it's it's really neither here nor there in terms of US GDP We might see a nominal revision here higher here as well from 6.6 to 6.7 percent But again, you know, it's it's likely to be nominal at best. We've got manufacturing PMIs on Friday We already know from flash numbers that they've been slightly softer supply chain constraints are pushing input costs up potentially driving Consumer prices higher and certainly consumer confidence in the UK and pretty much across Europe is starting to fall back over concerns that things are about to get an awful lot more Expensive on the earnings front. There's only two items to really that have really caught my eye Next being one of them when when next last reported in July The shares finished today sharply higher Down to the fact that I hate it when the chart does that it'll come back in in a minute There we go You can see that you see when it reported in July we've made margin We almost retested the record highs which suggests to me that maybe an awful lot of the good news is priced in first half numbers Q2 out performance Sales guidance for the year was raised from 3% to 6% growth Given recent events, I can't help thinking that's optimistic. We also saw Nike and FedEx this week issued profit warnings or lower their guidance on concerns over supply chain constraints, so That could be a factor in next next first half numbers However, I mean and next did announce it reached to deal with gap in the US to manage the US firms online business But then again, that doesn't start till next year. So that's not likely to Have much of an effect, but certainly they raise poor full-year profit guidance by 30 million 750 million so we'll have to wait and see whether or not They are as optimistic over the course of the second half of the year Given current concerns about supply chains. We've also got boohoo Certainly boohoo has been one of those that's Been struggling in recent months and we can see that born out from this chart here Got fairly decent support in and around 250, 250p This is again first half numbers for boohoo Shares are currently down over 25% year to date. So I think an awful lot of the news or the bad news Could well be priced in we'll have to wait and see on the plus side They have announced to deal with our Shia group in the Middle East Which will see boohoo brands in Debenham stores in the Middle East across the region as well. So there could be a boost there Management did warn though that to 2021 was going to be a more cautious here in terms of the outlook with sales growth predicted to slow to 25% so Again, I think this will be more about the outlook than about current trading. So keep an eye on that 250p level on boohoo shares going forward. So I think that's pretty much it for This week once again. Thank you very much for listening ladies and gentlemen I hope you all have a great weekend restful weekend and I will speak to you all same time same place next week Thank you very much