 Good morning. Welcome to CMC markets on Friday the 18th March and this quick look at the week ahead beginning the 21st of March And it's been another positive week for European equity markets. We've seen some decent gains in the FTSE 100 pretty much back now to Flat on the year wiped out its losses for 2022 whether of course whether or not of course That is sustainable is another matter. We've seen a fairly decent rebound in the DAX and we've also seen or look set to see A positive week for us stocks and that sort rather does beg the question as to whether or not potentially we've seen the lows for equity markets after the big declines of the past few weeks Certainly if we look at the way the FTSE 100 has performed we've we've we've rebounded quite strongly Large part I think of the resilience in the FTSE 100 has been the fact that it's very basic resource intensive but also Has got a quite it's got quite high proportion of financial services stocks and obviously higher rates um, certainly helps in that regard, but we're coming off the back of um Two rate rises this week one from the Federal Reserve um, which was fairly hawkish in nature the statement the prospect that we could well see six rate another six rate rises before the end of the year Yet markets seem to be fairly relaxed about that whether or not Whether they think that's realistic or whether or not they think that the Fed Is whistling in the wind when it thinks that it can raise rates six times this year Another six times a year and obviously we had the Bank of England also Raising rates for the third meeting in succession, but I think in contrast to the Federal Reserve They have a little bit more concern About the outlook for further rate rises going forward. We had one dissenter deputy governor John Cunliffe who was Voted who voted for no change essentially on the basis that he was concerned about the effect that commodity price shock Could have on household disposable income in terms of rising input prices and certainly the Bank of England's outlook for The economic outlook over the course of the next nine months is probably more realistic Then say for example the Federal Reserve even accounting for the fact that the US economy Does tend to be better insulated from global supply shocks and say for example other economies particularly economies here in europe where The likelihood of a rate hike from the european central bank Still remains quite some way off So where do we go from here? Well, you know, that's a very good question. We've seen a fairly decent Rebound this week second successive weekly rebound but I would caution About getting to ahead of ourselves when it comes to potentially resuming the upward path that we've been on simply because We're still very much in the downtrend that we've been in over the course of the past few weeks And thus far. I've seen no evidence to suggest that that is likely to change. Let's look at the headwinds to start off with Obviously, we've seen we've seen a bit of a boost this week on the back of a slight relaxation from chinese authorities In terms of supporting financial markets and supporting the economy but that's not surprising when you look at the the challenges Facing the chinese economy in q1. They've got a they're undergoing a massive surge In covet omicron variant or the omicron omicron variant Which is very which is much more contagious and where their vaccination program is well behind The rest of the world and they're also implementing a zero covet policy now With the current disruptions to supply chains Then being factored into further disruptions to supply chains from Further covet lockdowns in china. You've got to think That We could well see further up the pressure on prices going forward now We have seen some evidence that price pressures in china are easing But that could be demand driven as opposed to As opposed to anything else because of the slowdown that's basically being played out when it comes to The chinese economy we've also got concerns about The fact that while we've seen a little bit of weakness in oil prices this week The fact of the matter is all for all of this optimism about peace talks I just don't buy it You know if if i'm honest with you. I can't help feeling the russia Is um Is is gaming? um Is is gaming is gaming? The global economy if you like or gaming The political picture when it comes to a prospect of an imminent cessation of possibilities or a ceasefire To me, it's becoming increasingly obvious that russia's interest in a negotiated agreement Probably doesn't extend beyond the optics and it's not serious about cessation of hostilities. What's more worrying? To me, I think is the way um The president president putin is behaving with respect to some of his rhetoric um calling people Who don't actually agree with his view of the world and labelling them scum and traitors And that doesn't speak to me as someone who's serious about a negotiated settlement There's also the added complication that any ceasefire would require a major climb down From one side or the other And with their respective positions still being miles apart Russia still targeting civilians You know for all this talk of deescalation I don't think it looks likely at this point. So while I think um We're going to hear Further discussions about peace talks. I think the reality is That we're not going to see anything this time soon. And I think we're at much greater risk of an escalation From russia as they continue to get bogged down and I think that is likely to act as a further headwind I think the bank of england earlier this week talks about the risk of higher inflation And potentially inflation going above Obviously, it's april target seven point two set to seven point two five percent And up to eight percent in q2. Well, I think it could potentially go higher than that And that's likely to have significant impact on demand Not only here in the uk but obviously in europe and the us more broadly Which brings me on to obviously this week's key announcements or key macro items that I will be looking at this week And it's the uk that's really front and center of all of this We've got the spring budget or the spring statement. Whatever you want to call it on the 23rd of march We've also got uk cpi On the 23rd of march as well just before the spring statement We've got uk retail sales on friday the 25th And obviously we've also got flash pmis from germany france and the uk As well as well as a number of key earnings announcements So i'm probably not going to cover them in a great deal of detail But certainly the ones at the bottom of my watch list here next king fish or a nike Are the key ones that i'll be keeping an eye out for this week Before we move on to the spring statement, let's have a quick look At some of the key indices and and the recoveries that we've seen thus far now last week i talked about Yeah, I talked to you know, I talked looked at the technical picture and talked about the 4400 level On the s&p 500 that's still for me remains the key resistance level. We can see it here We posted a golden cross obviously on the 50 in the 200 day moving average If we do break higher, we've then got the added complication Of this the level here 44 18 also coincides with the 200 day moving average but for now We're still struggling to get back through here even though we've done a marginal break Of this trend line through here. So I think you know that that for me. I think is is one of the really key Key levels when it comes to A key resistance level and a break To the upside and further gains towards 4500 around about 43 80 at the moment in the pre market As I say, we really need to push on beyond those key levels there to really suggest that we're going to see further upside You know, and I'm I'm struck. I have to say I'm struggling with that at the moment You know, even on a technical basis, we've seen a minor break On the nasdaq here, but again here 14,380 These early month highs as I say, we've seen some decent rebounds, but nothing so far to suggest That we're going to break out of the downtrend That we're currently in and have been in pretty much since the start of this year when it comes to US markets So, you know, please please bear that in mind. You know, we've seen some decent rebounds But thus far we still remain very much in the trend of lower highs and lower lows And that's the most important thing to remember When we're looking at whether or not this decline in stock markets is coming to an end And we can we can see the same thing here manifest itself In the way that the DAX looks so as I say, we could well see further gains, but We're still very much within the downtrend and in all bear markets Sometimes you do see face ripping rallies and these rebounds could be one part of that equation So it's important. I think to bear that in mind. So let's move on to the currencies Cable it's been pretty lacklustre if I'm honest with you When it comes to any sort of rebound this week, we found fairly decent support at 130 But for me, I think the likelihood is that we could well see a move back to 12850 Why well for a start we haven't really been able to get much back above 132 and that's a worry. It's a worry because I think that For us to signal that we could see a rebounding cable That's only going to likely come about as a consequence of a week of weakness in the dollar Now we have seen some early weakness in the wake of the Fed decision And we could well see Further dollar weakness But I do struggle with that concept Even allowing for the fact that we sold off in the wake of the Fed decision On Wednesday This very much remains a technical market for me with respect to cable. We're still in the downtrend If we do break below above 132 20, which is sort of my my level for further gains towards 134 We still remain within the overall downtrend that we've been in over the course of the past seven to eight months So let's say if we break 132 20, we could come back to these series of highs of around about 134 20 So at least another 200 points. So that's important to bear that in mind So what does that mean in the in the overall context of Further rate rises from the Bank of England? Well, obviously this week We got what I would call as dovish hike if there is such a thing With obviously the descent of John Cunliffe who voted for no change eight to one For a 25 basis point rate hike. So we're back to base rate levels pre-pandemic Which suggests that yeah, everything's hunky-dory But if we look at where the base rate was pre-pandemic And where boundary bond yields are they're in two totally different places the base rate pre-pandemic was 0.75 and UK 10 year guilds were Around about 0.8 Well, you can see there we're at 1.5 percent now so And obviously that's as a consequence of the fact that We could we'll see another two or three rate hikes over the course of the next Few months if you look at the two-year guild yield that picture is even more marked in terms of Where we are and where we were or where we were and where we are I can get my terminology right so here again pre-pandemic two-year yields We're around about 0.5 percent Now they're at 1.2 percent And obviously the base rate is 0.75 percent So within the next two years the market's pricing in at least another 50 basis points Within that but so potentially we could well see certainly not as many as six US rate rises, but we could certainly see another two or three Here in the UK because at the end of the day while you can argue the case that an interest rate rise will slow demand And tip the economy into the risk tip the economy into recession So we'll out of control inflation Now the two the different sides of the same coin essentially So the Bank of England has a choice It can either raise rates to try and fulfill its inflation mandate Or it can let inflation rip and let the economy Fall into recession that way. So it's damned if it does and it's damned if it doesn't Either way it's going to get blamed so Brings this onto the spring statement or the spring budget And I think one of the reasons why the Bank of England was so cautious about the outlook Was because of the inexplicable decision to go ahead with This week's or or the tax rises national insurance increases in april You know it beggars belief that with inflation Back at levels last seen in the 1990s the Chancellor of the Exchequer is going to go ahead with this Having said that to basically push it out a year I think it's likely to be too late to do that because hmrc would have to change all its tax codes and pretty much everything else And all the prep work with respect to rolling this out Given the fact that tax year starts on the 5th of april I think the Chancellor has left it too late even if he wanted to push it back a year He could he could well struggle And you can certainly make the argument that taxes have to rise to pay for the costs on the nhs of the covid crisis The decision to take these measures Raise the national insurance was taken at a time when the economic situation was very different to the one that we face today You know, there's a saying in financial markets that when the facts change I changed my mind You know and surely it shouldn't be any different When managing the public finances pursuing a bad investment strategy in financial markets and then doubling down Results generally in a bad outcome and yet this is what appears to be the the political equivalent of that So This will mean that inflation levels which are expected to increase further in the coming months Will likely get squeezed further or consumer incomes will likely get squeezed further Business of all sides sizes have already Undergone a tough couple of years as it is and yet the Chancellor appears determined to impose further costs And discomfort on them and that's before we even address the prospect or the problem of higher energy costs higher input costs You know, essentially the the price cap the energy price cap doesn't apply to businesses Um, so they're basically they're basically bearing the full brunt of the rise in oil and gas prices so We could get some measures to alleviate some of these increase Creases in costs, but this will probably be the equivalent of robbing pieces of pay Paul um with all, you know You know with all apologies to both Peter and Paul in terms of taking their names in vain Um likely to see a review of defense spending in light of russia's review Uh in like russia's war on ukraine um, and Could we see an extension to the super deduction that he announced? um Yeah, a couple of years ago. We may do, you know, I think it's been a long time um since we've since we've had a Since we've had a um spring statement It's probably as important as this one against a very difficult backdrop when it comes to the economic environment So obviously on the same day just before the spring statement. We also have um cpi That went to 5.5 in february. That's likely to go to 6 percent this month or for sorry In january get my months sorted out. So we saw it go to 5.5 a new 30 year high in january it's likely to move to Closer to if not beyond 6 in february an rpi is likely to move through and above 8 So I think that will certainly concentrate the mind Of mr. Sunek when he gets up on wednesday in the houses of in the house of commons retail sales also on friday will give us a decent indicator of Where consumer spending is retail sales for february We saw a strong rebound In january after the 0.4 slowdown seen in december 1.9 rise Will that be can you know will that continue into february? I think there's a decent probability that it could well do We could see a decent rebound In february, certainly the latest brc retail sales numbers showed that total sales rose by 6.7 In february as the complete removal of plan b restrictions at the end of january Boyd spending so we could see another modest rebound there and certainly the latest barkley card data shows that Spending went up 13.7 percent more in february this year than it did in february 2020 But that's not really a good indication given the fact that In february well actually no actually it is thinking about it because february 2020 was pre-pandemic so we'll see We'll see how that plays out, but certainly I think The uk economy is holding up fairly well Given the challenges that are about to come its way and I think the big question will be is how resilient is it? against these this Coming tidal wave of a rise not only in energy costs but also In food costs as well given the rises that we've seen in weak prices corn prices and pretty much Everything over the course of the last few weeks So keep an eye on those cable numbers 130 to 20 on the upside 130 on the downside. We've seen a significant short squeeze on euro sterling What is significant though is we haven't as yet? Broken above this series of highs through here so 84 60 to 84 80 That's likely to be a bit of a barrier as is the 200 day moving average So we could well see a little bit of a rollover back towards these range lows down here around about 83 Um, it's pretty much like watching paint dry when it comes to euro sterling So i'm not expecting any significant deviation from that particular range or the range that we've been in Over the course of the past few days. Let's have a quick look at brent because brent crude prices this week have been All over the place. Let's not forget. We saw 140 dollars on the 7th of march Earlier this week we saw a move down to around about 98 so we've seen a Pretty much a 40 percent move in prices In the space of two weeks that gives you an indication of the type of volatility that we're seeing Now we could well see further gains But at the moment the extent of this move lower would appear to suggest that we may well see a period of consolidation 120 dollars a barrel for me remains. I think a very important level psychologically on the upside we could squeeze higher In in the short term But overall the fact that we haven't been able to sustain the higher levels is encouraging And while an awful lot of people are talking for higher crude prices over the course of the next few weeks I think we do need to keep an eye on the fact that maybe this particular rebound In crude prices is starting to run out of steam. We're also heading into summer, which means that demand overall for um Crude crude oil could well drop off. Yeah demand still remains very strong. Obviously the chinese demand could well be weaker Um because of the slowdowns and the restrictions being implemented there But there does appear to be some encouragement The the big moves higher in crude prices that we've seen since the end of december Maybe starting to slow down a bit this sort of these sorts of moves are you know rarely sustainable On a long term basis So we could find The prices settle at a slightly higher equilibrium rather than making new highs um Of the type or new gains of the type that we've seen over the course of the past three months I mean we've gone pretty much from 70 dollars to 140 back to 100 I mean that volatility is off the charts So we may be well to a period of reflection and let's not also forget that supplies Um are still running, you know The oil is still coming out of russia And europe's still buying it Um as is the uk those sanctions with respect to russian oil They were caveated on the basis that we're going to get ourselves rush off russian oil by the end of the year You know, sometimes I think that gets overlooked in terms of the actual headline itself so those those the uk numbers we've also got flash pmis from france germany and the uk and again here We've Could well see a little bit of a pick up latest factory gate prices for january Is the germany showed a big record rise of 25 percent year on year So while we saw a little bit of a pick up in activity in january february The rise in prices that we're seeing could act as a break and certainly the recent ze w survey in germany saw a big drop-off um in um economic optimism Over the current situation going forward and that's likely to be reflected In the flash pm i numbers particularly on the manufacturing basis. So um, I think expectations for march pmis when it comes to uh, germany and france is that we could potentially see A little bit of a moderation um in manufacturing and services activity germany expected to soften slightly from 58.4 to 56.3 and in france A little bit of a moderation from 57.2 to 56 as and services Is likely to go in the same direction as well. So looking at euro dollar We've seen a nice rebound off that big trend line support That I drew in from those lows all the way back in 2017 That has thus far managed to hold We haven't as yet been able to get back above 111 20 on the upside Um, we did spike up to 111 38 yesterday, but we weren't able to follow that move through So that keeps The range here 108 to 111 20 very much intact if we're able to sustain and move above this Then obviously we can see and move back to 112 20 to 112 30 but at the moment In the same way that cable is being capped at 132 20 30 Euro dollar is being capped around about 111 20 30 So it means to be seen whether or not we'll see further dollar weakness Over the course of the next few sessions. So very much keep an eye on that gold prices very much Gone this pretty much the same way as crude oil come crashing off Only this time with respect to gold prices on the back of slightly higher yields Saw that bearish daily candle at the end of last week That's prompted a move back down towards 1870 1865 Looking at this trend line here. We do have room to come quite a bit lower And maybe just maybe there's evidence of a little bit of a topping pattern when it comes To gold. I think the key support level with respect to gold Is likely to be somewhere through here You know and is there the potential for a head and shoulders reversal starting to form On gold prices going forward. I'll be looking at this line And obviously these this this sort of 1965 1970 area here For evidence that we've seen a short-term top in gold prices as Inflation takes hold that pushes yields higher People talk about gold being an inflation hedge. This chart would appear to suggest that maybe Rising inflation May not be as positive the gold as perhaps an awful lot of people think So certainly with something to keep an eye out for on the basis of the price action that we're seeing played out here Okay, so we've also got couple of key Earnings announcements, which should tell us an awful lot about the uk economy We've got four year numbers from next When you look at the number of profit upgrades we've seen from next over the course of the past 12 months It's rather surprising the share price has actually gone down But that's essentially the world that we find ourselves in Next upgrades its profit targets over the course of the last last 12 months and the share price declines That sounds about right. I would suggest Thing biggest concern that next has is not about how good a year it's just had But how good a year it's likely to have over the course of the next 12 months and management have already talked about the risks Around rising inflation as well as the cost of living when it comes onto its demand outlook Having said that had those concerns last year as well And those concerns thus far have been misplaced So we'll have to wait and see but certainly we're seeing some evidence of a bit of a rebound But this 7 000 area is likely to be a big big barrier going forward So i'm really not expecting any great things on the share price front when it comes to Next it's funny. Look at kingfisher and you might as well be looking at a mirror image of next And that's pretty much the retail space as a whole. I think you know, you look at the retail space You'll probably find both of these two retailers have done very very well Certainly in terms of how they've handled the pandemic They're not getting much credit for it at the moment in terms of where they are and where they were But at the end of the day, they're still fairly decent companies and kingfisher now that it's sold its russia business It's its main revenue earner is screwfix, which obviously is online But there has been some weakness pretty much not only in its french business But it has seen some decent growth in eastern europe in poland and ukraine It's not even poland in ukraine in poland and romania Where we've seen some very strong gains in terms of growth of 4.9 and 17.2 respectively But they are very very small parts of their overall business. So Certainly keeping an eye out for that and obviously last but not least obviously nike That's always a it's always a fairly decent number. But again, you look at the price action there and again It'll be interesting to see what nike has to say about its russia Exposure where it has a fairly decent presence. It's also seen a bit of a slowdown in china this year. So again china and russia could well be Could well act as a bit of a drag When nike reports its q3 numbers on the 21st of march. So certainly worth keeping an eye out on that So that's pretty much it for this week Ladies and gentlemen, thank you once again Oh, I don't know what I did there. Hang on the start again So, yeah, thanks. Thanks very much for listening. Hope you all have a great day. Have a great weekend And i'll speak to you all same time same place Next week. Thanks very much