 Good morning. Welcome to CMC markets on Friday the 4th of November and this quick look at the week ahead beginning the 7th of November And it's been yet another choppy week for global equity markets We've seen further weakness in the US as some of the earnings numbers and guidance numbers Continue to disappoint. We've seen the Federal Reserve and the Bank of England both raise interest rates by 75 basis points with very starkly different messages When it comes to guidance as to the future direction of those said rates So what does that mean going forward? Well, certainly I think in terms of the Federal Reserve. It's quite clear That term Jerome Powell is in no mood to pivot on monetary policy and unsurprisingly that has had A significant upward effect when it comes to us two-year Treasury yields which have hit their highest level since 2008 Above 4.7% However, if you contrast that with the messaging from the Bank of England if we look at a UK guilt two-year Line chart we can see that the messaging is somewhat different even though The two-year guilt actually closed the day three basis points higher Messaging from the Bank of England was starkly different in the context of the fact that while They matched the Federal Reserve's rate type what they didn't do was Issues and particularly tough guidance if anything they were more concerned about The health of the housing market mortgage rates. I was struck quite starkly by how much emphasis was placed on borrowing costs particularly mortgage rates and the Governor's really pessimistic outlook When it came to the UK economy all that was missing was private Fraser from dad's army wandering around muttering we're doomed Underneath his breath so stark was the message that the governor was painting and he was very keen to play down The prospect the rates were likely to rise anywhere near as much as the markets were pricing. Well, mr. Governor We don't believe you And the reason we don't believe you is because of the other narratives that's taken hold this week is The narrative of a potential China Reopening and I think that's the real risk For equity markets, but also for inflation, you know, if you think inflation is bad now What happens if the Chinese economy and suddenly kick starts into life as they look to come out of their zero Current zero covid policy now I think that is unlikely to happen in the short to medium term But it's certainly the narrative. It's certainly a narrative that markets have got hold of and You know in the absence of anything else. It's likely to be a narrative that's Could well underpin crude oil prices if we look at crude oil prices so far over the course of the past few weeks They have been trending higher and anyone who's you know, anyone who's has more than a passing interest in filling up their car will have noticed that Unleaded prices have started to edge higher again away from 162 163 a liter up back towards 170 so there is a significant risk that The Bank of England's assessment about future inflation levels could be well as has been pretty much The case for the past 12 months wide of the mark There the Bank of England's a target for inflation this time next year is around about 5.6% so around about half of where it currently is now at 10.1 Their end of year target for inflation you in the UK is 10.9% so I think in essence they've undermined their hawkish rate hike by basically pushing the pound lower against the dollar which Ultimately is the last thing I think the pound needs at the moment We have seen a bit of a rebound from yesterday's selloff 2% down on the day over 2% down on the day and over 3% down on the week so that's certainly a worry going forward because certainly the exchange rate is one mechanism that has seen inflation here in the UK spike quite substantially over the course of the past 12 months and Could well continue to do so if the Federal Reserve Has its way and that's why today's payrolls report is very very important in the wider context of things now I'm recording this around about 7.14 7.13 in the morning Before the payrolls report is published But we also have US CPI next week and I think that's one of the key I think that's one of the key economic indicators that we have when it comes to Peak dollar hawkishness how much higher can the dollar go certainly? I think if Jerome Powell has his way in the Fed has his way they want to dampen down Inflation expectations pushing the dollar higher is one way of doing that And that's why headline inflation in the US has been trending lower over the course of the past few months even as core prices Starting to edge higher the problem is the US is exporting its inflation problem to the rest of the world and That's that you know, it's not really a zero-sum game There will be consequences to that and we're already seeing that play out in the European Union as well Your inflation is even higher headline inflation is even higher than here in the UK So as we look ahead to next week and a potential further rate hikes in December from the Federal Reserve We have been talking all the Fed has been talking about a step down in the pace of rate hikes from 75 basis points to 50 basis points and certainly that was Could be construed as potentially dovish But what power went on to say was the fact that rate these rate hikes of 50 or 25 were likely to go on for much longer Then markets were currently pricing and that's why you saw the dollar And rise as much as it did over the course of the past 24 to 48 hours and that and therein lies the rub If China reopens next year then inflationary pressures aren't likely to subside Particularly quickly so all these central banks targeting much lower levels of inflation could be overestimating the fall when it comes to the direction of prices and that is a key risk that is a key risk when it comes to overall Global demand higher prices will act as a break on demand So the China story the China reopening story is a double-edged sword Certainly it could potentially be positive for the global economy in terms of the resumption of trade and the untangling of supply chains but it would also drive prices higher as demand for natural gas and crude oil products goes up So Looking ahead to the key data items that I'm looking out for next week We've got third quarter GDP out of the UK We've got US CPI and we've also got China trade for October now the September's China trade numbers were unexpectedly delayed Prompting concerns that data was likely to paint a really ugly picture of the Chinese economy While the numbers eventually came in slightly ahead of expectations as little doubt that they probably don't Offer an accurate reflection of the problems facing the Chinese economy as COVID cases continue to surge as winter approaches And that's I think that's why an imminent reopening of the Chinese economy is unlikely this side of 2023 I think if it's going to happen it will probably happen at the end of the first quarter beginning of the second quarter As the weather starts to warm up but more importantly I think once China gets on top of its vaccine program because essentially a zero COVID policy just will not work when you have a COVID the COVID virus is as easily as transmissible as this current amicron wave I got COVID three or four weeks ago and knocked me sideways for a week And I wasn't the only one so it is a say it is very highly transmissible and Consequently, it's impractical to have a zero COVID policy Indefinitely, and I think you know we could see that start to get relaxed sometime next year so In terms of the October trade numbers We could well find that There is a continued Low level of Imports consumer demand also continues to look challenging even as industrial production continues to improve So I think in terms of imports in september we saw a modest increase of 0.3 percent, which was unchanged from august 0.3 percent while exports also rose 5.7 percent. So certainly in terms of exports the picture is slightly better Given the fact that we are heading into the fourth quarter and heading into the Thanksgiving period for the US economy Christmas period as well Where demand generally does tend to pick up a little bit as we head towards the new year But ultimately I think it's going to be very very difficult for the chinese economy This side of 2023 to see any significant GDP growth irrespective of what those numbers were or are telling us But certainly in the context of what commodity prices are doing We ask we are starting to see a slow grind higher in crude oil prices and that is a worry Going forward even though we are still well off the highs of the summer Gold has started to rebound off the lows on the back of a slightly weaker dollar today After these after the big bid that we saw last week last week yesterday even And actually if we look at gold there is some evidence that potentially we could be seeing a little bit of a short-term base So that's certainly worth looking at in the overall scheme of things But what is troubling is we could see a rebound back to this level here But I think to break the downtrend in gold We need to break through the 50 day moving average and push higher So keep an eye on gold because I think if that spikes higher that could spark a little bit of about Of dollar weakness. What could cause that dollar weakness? Well, you know, there were two factors a weak payrolls number today Seems unlikely given the tightness of the labor market But US CPI On the 10th of November next week if we get a softening in core and I think that's I think that's the key metric now that markets are looking at if core prices start to show signs of Not necessarily softening but flattening out peaking and what have you That could actually prompt a little bit of softness In the US dollar and actually be positive for risk and certainly it's been a mixed bag For equity markets this week european equity markets have outperformed us equity markets us equity markets and tech in particular Is still under pressure, but look at the footsie today That was the big rally that we saw yesterday and on the back of the weaker pound Um and the bank of england and now we're seeing a push higher today on the back of these unsubstantiated reports That china is looking at a potential reopening strategy. Now, as I said Previously that's probably not going to happen anytime soon But the market is picking it up and it's running with it So it's certainly something that we do need to be aware of going forward and it certainly keeps the the trend or the range intact when it comes to Um The footsie 100 now this is an interesting chart the DAX because what we've seen here yesterday We saw a bearish engulfing day And we are starting to see a little bit of a pullback as we head into the end of the week I think the key thing for me is this moving average here um, this Let's just change that so we've actually got 200 day. That's our long-term moving average on the DAX. We've broken above this trend line here We're finding a little bit of support around 13 000 We need to push back above the 200 day moving average to diminish um The downside risk and mark a breakout From the downtrend that we've seen so far this year It's very interesting to know that also we we appear to run out of steam at around about 13 500 area which also coincides with these peaks through here So I think in terms of the DAX keeping on that 13 500 area. It could be very very key in the overall scheme of things, but at the moment That does appear to be a bit of a bearish reversal On the on the on the germany 40. So it's worth keeping an eye on s and p 500 seen a bit of a rebound on that today, but That picture tells the story for successive days of declines. We're seeing a little bit of a rebound today But overall, I think the dollar remains strong And there are and there are and there continue to be concerns about earnings numbers in the us the us is much More overvalued than any other market So it still remains very much in the downtrend that we've been in over the course of the past Few weeks. So even if we do get a squeeze higher The us markets continue to Be a play a sell a rally type of play Um nasdaq 100 that's obviously seen the biggest Um sell off this week interesting to note. We haven't been able To take out that 10 500 area. So that's going to be very key going forward 10 500 on the nasdaq For signs of further weakness there Euro dollar Broken lower this trend line here We can now get rid of that line. It's no longer valid seen a bit of a bearish reversal here. We've trended lower We're looking to retest the 97 area which was the lows Back on the 21st of october, but we've also got decent support at 96 30 We have broken slightly to the downside, but there still are multiple areas of support All the way back to the lows in september And I think that's probably going to be the way of it choppy trading Retesting the lows getting a rebound retesting the lows getting a rebound You know, the big resistance level at the moment is obviously the rally that we saw Just prior to the ECB meeting around about 101 so I think we need to get above 101 to signal a change of direction when it comes to euro dollar So we talked about cable That's been pretty ugly Get rid of that line now Don't need it anymore. This is the next key support level. It's 109 101 1060 Which was the lows on the 21st of october and the 109 20 area and the october lows Um back here So again similar to euro dollar. What was interesting about this cable chart was we respected This downtrend line from the highs of earlier this year as for euro sterling that continues to chop Quite significantly and probably will continue to do so interesting to note. We respected this up trend line from here The next key resistance level for euro sterling is in and around these peaks around here 87 80 there or there abouts Okay, so third quarter gdp out of the uk not expected to be a pretty number We did see an unexpected revision in second quarter gdp from minus 0.1 to 0.2 So we won't be in a technical recession But nonetheless for most people it won't feel like that. The third quarter gdp number is not expected to be pretty PMIs have been trending lower for months In august and september retail sales fell off a cliff Dropping by minus 1.7 and minus 1.4 and the recent monthly gdp numbers don't offer much help with july expanding my 0.1 While august saw a minus 0.3 Contraction september is unlikely to be better given the expert bank holiday for queen elizabeth the second's funeral Which means we could see a contraction of up to 0.5 percent minus 0.5 percent But that won't be telling us anything that we don't already know because we're already feeling it um got the us midterms on the 8th of november um I don't expect that to have any significant impact on risk Yeah, you've got democrats complaining about the fact that the fed's going too fast when it comes to rate hikes And the effect that it will have on the unemployment rate But that's just standard political noise and political posturing playing to their base Nonetheless, um, I think if anything it's probably just going to mean the the outcome's just going to mean more gridlock in congress More gridlock at the top of the us body politic In terms of earnings numbers, we've got a lot of retail coming out By a bit of a mixed bag this week, but we've got associate british foods That continues to underperform aka primark does appear to have found a bit of a base same reason numbers earlier this week or Earlier this month were actually better than expected and the shares saw a fairly decent pop from The lows well, they've already seen a fairly decent pop off the record lows that we saw back in october and I think You could you could actually argue that potentially There's too much pessimism priced in to the abf and you so associate british foods share price as well It's primark business Has been doing fairly decent business since it reopened after the pandemic Sales rose to 3.54 billion pounds with the uk business driving the recovery In q3 the The numbers showed the worst was behind it group revenues rose to over 4 billion pounds primark business saw an 18 percent rise 81 percent rise even my notes are wrong. I'm not this lexic honest um Yeah, seeing an 81 rise to 1.73 percent, which is hugely encouraging. So The set the revenues are comfortably above pre-pandemic levels and total revenue is up 29 percent on a nine-month basis. So even if you have a disappointing fourth quarter The numbers still look fairly decent Obviously costs have gone up by 200 million pounds But the grocery business is expected to grow its revenues as well as its sugar and agricultural businesses. So There's certainly scope for potentially that to go high We've also got marx and spences as well, which again has also seen significant weaknesses You know and again here we appear to have found a little bit of a base in and around october so With with pre christmas period coming up. There is certainly potential for Further gains having said that The gains that we've seen thus far have been fairly muted in nature and Um I think when you actually look at where the share price was beginning of this year where it is now you know, you're talking you're talking a decline of A significant significant how much you know, how much of it is already priced in let's look at let's look at the decline Thus far it's 52 percent Year to date down the share price So there's an awful lot of pessimism baked in already when it comes to marx and spences So that's worth keeping an eye out for that those numbers are out on the 9th of november We've got haly on haly on however you want to call it The business spun out of glaxo smith kline the the the consumer business That's really underperformed at the moment um falling from its ipo price of 330p And there is an awful lot of concern about the the amount of debt that particular business is carrying hence the sell-off and also concerns About litigation as a result of I think it's a zantac um product Um, which is a uh, which was I think some sort of painkiller So it'd be interesting to see the numbers for that again that those numbers are out on the 10th third quarter numbers then we have got Disney these numbers should be interesting in the context of the overall streaming narrative They have taken a dive in the past couple of days because shanghai Disneyland result has been closed indefinitely so there could be a hit to revenues there um Growth in disney plus subscriber numbers continued in this third quarter numbers with a rise from 137.7 million 152.1 It's also company also said it would be raising prices to 11 dollars a month for its u.s audience But most of the new subscribers in q3 came from its hot star service in india Which they are selling at a very discounted price. So certainly very much a lost leader nonetheless The various boosts from the parks and studios business helped to boost its q3 revenues to 20.5 and a half billion dollars um Q4 probably going to be a slightly different story and certainly q1 It's probably going to be revised down because of the loss of revenue from The china business because of the shutdown the indefinite shutdown there also got rivian and Be interesting to see whether or not it's still on course Or whether they think that they will be able to deliver on Their um one-year target of delivering 25 000 cars for the whole year. They still remain well short of that They have challenges facing production and sourcing raw materials But they do appear the shares do appear to have found a little bit of a base chopping around between 28 and 40 dollars So those numbers are out again on the 9th of november third quarter numbers for rivian last but not least amc Entertainment given the woes of cineworld we can see that this once meme stock has settled down pretty much where it deserves to be Which is very very cheap indeed certainly with the summer blockbuster scene behind it um amc share prices slipped below the waves again hitting an 18 month low um Which also came in the aftermath of the management taking the decision to declare a special preferred Stock dividend which essentially is a stock split so there's now two amc entertainment holding shares There's the preferred shares and there are these shares They did have a good summer tick itself more than doubled um From a year ago as it likes a top gun maverick doctor strange and the multiverse of madness got punted us through the door In july the company said it had the highest monthly attendance in us theatres is december 2019 So certainly in terms of foot forward if u.s. Business is doing okay Having said that They did warn that the third quarter was probably likely to be very very difficult to replicate the performance in the second quarter and hopefully The key here will be about guidance going forward so That's pretty much it for This week ladies and gentlemen As I say once again, thank you very much for listening as I say We don't know the results of the payrolls numbers quite yet, but expectations were 490,000 new jobs to be added in october the unemployment rates come in at 3.6 percent And wage growth to slip to 4.7 percent. None of that is particularly Dollar positive, but if we get a miss on the headline number we get weakness In the wages or we see something a significant rise in the unemployment rate that could be enough To take some of the edge of the recent dollar rally Anyway, thanks very much for listening. It's michael hueson talking to you from cmc markets