 Right. Good afternoon, ladies and gentlemen. Welcome to this month's non-farm payrolls webinar on the 8th of December 2023, this last webinar of the year. What a year it's been. In fact, what a week it's been. We've seen new record highs for the DAX. We've seen a significant shift since the last payrolls report in yields and interest rate expectations for 2024. We've transitioned from higher for longer to a belief mistaken or otherwise that we will see a significant amount of interest rate cuts over the course of the next 12 months. So let's dig into that a little bit. Obviously, today's payrolls report is important in the context of the narrative that the Fed will be cutting next year. And really, I think it's more about the timing than anything else. Now, obviously, earlier this month, in fact, it was the end of last week that I think Fed Chair Jay Powell pushed back against the idea of rate cuts. His comments that the prospect of more hikes was still a possibility. But the markets essentially weren't buying what he was selling. And I think to give an idea of what that looks like, you just have to look at the US 10 year yield over the course of the past few days. Now, we have seen moves like this in the past. We saw them at the end of 2022. And as we headed into 2023, we saw a further move down. That was the banking crisis, the US banking crisis. But since then, we yields rallied strongly before peaking again, all the way back in October. And then since October, we've come down quite significantly. I think the difference between now and a year ago is the fact that inflation is an awful lot lower now. And the numbers that we've seen, not only in the US, but also in the European Union, have shown that actually we're more at risk of deflation than we are inflation. Yes, inflation could remain sticky. And certainly it's stickier here in the UK than pretty much anywhere else. And the yield curve in the US is still screaming a recession. So the narrative now, let's have a quick look at the German two year as well. I mean, look at the German two year since the end of last month. I mean, that's seen a big, big fall, a fall of nearly 50 basis points in the last couple of weeks. And a large part of that is largely driven by the fact that German inflation has really slowed quite sharply. So I think while today's payrolls report is enormously important, unless we get a number that really deviates from the consensus, then unlike it's not unlikely to change the narrative when the Fed meets next Wednesday, because the decision the Fed has to make next Wednesday is how to dial back all that exuberance that's being reflected in the bond markets in terms of the fall in yields. And try and convince the markets that they're getting ahead of themselves. And for that, we need to look at what the US central bank's estimates for 2024 dots are concerned. Now, the last time they moved the dots on 2024, they moved them to 5.1%. So essentially Fed policymakers were predicting that by the end of 2024, the Fed funds rate would be around about 5.1% midpoint. So essentially only 25 basis points below where it is now. Now the market is pricing in 100 basis points of rate cuts. So they're pricing 4.1%. So how does the Fed push back against that? Today's payrolls report could dial into that, particularly if we get a strong number and the consensus at the moment between the estimates for non-farm payrolls is anywhere between 130,000, which Deutsche Bank are predicting, and 250,000, which Goldman Sachs is predicting. So that's quite a big spread. You could probably drive a bus through it. That being said, I have to say it's probably going to be anywhere in between in the middle of that. The consensus is anywhere between 180 and 185. That's going to be a slight improvement on the 150 that we saw last month, which was the lowest number this year for non-farm payrolls and the first time that we've missed consensus expectations to the downside on U.S. payrolls. Looking at the numbers that we've seen this week in terms of weekly jobless claims, ADP, as well as job openings, there is a slowing down in the U.S. labor market, particularly when you look at the last three months of ADP, where we've been trending at just above 100,000. Jobs grow slow to 106 in November, and we also saw that the previous month was also revised lower ever so slightly. Whereas if you look at the non-farms, we surged by 297,000 in September before slowing to 150,000 in October. The unemployment rate is steady at 3.9%, participation rate steady at 6.27%, 62.7%, and wages is still trending at 4%. The Fed's not going to be in any rush to cut rates anytime soon. I think the market is getting ahead of itself. You look at the data in isolation. We also have US CPI out next week as well. That is expected to slow to 3.1% in November, with core prices remaining steady at 4%. That's quite a bit higher than the EU inflation number, which came in at 2.4%. All these central banks of inflation target at 2%, and we've seen a significant shift from ECB officials over the course of the past couple of weeks, saying that they're pretty much done when it comes to rate hikes. That's not something that you've heard from the Fed, and it's not something that you've heard from the Bank of England. I think the ECB is probably going to be the first central bank to cut rates, and that could come as soon as the end of Q1 and the beginning of Q2. We're talking March, April. ECB officials were all keen to push back on that, but look at the PPI numbers in Europe. Look at the CPI numbers in Europe. Those numbers are slowing really sharply. Now, it is absolutely true. Inflation doesn't slow in a straight line, and we could see a rebound. But the economic numbers are diabolical. PMIs in the mid to low 40s. The French economy contracted by 0.1% in Q3. There is an awful lot of what I would call economic, what's the word I'm looking for, lethargy within the Euro area, and it's going to be very, very difficult to turn that around. Essentially, this is where we are when it comes to the economy in Europe, the economy in China. This week's China data was disappointing as well. The US economy is probably the best of a bad bunch. It's unlikely, I think, that today's payrolls numbers will paint a significantly different picture to what we've been seeing over the course of the past few months. A fairly resilient economy, jobless claims around about $210,000, and a payrolls number anywhere between $150,000 and $200,000. If we get somewhere, if we get something anywhere in between $150,000 and $200,000, I think the markets will be happy with that. If we get $250,000, that's probably going to be dollar positive, and it could cause yields to tick higher. It could actually prompt a little bit of a mixed reaction in stock markets, because ultimately, it could delay the prospect of Fed rate cuts. On the other hand, a really poor number, while say anything below $100,000, could actually elicit a negative reaction in stock markets, because that would signal a hard landing for the US economy. We're in a bit of a sweet spot at the moment, and anything in and around that is going to make it very, very difficult, I think, to signal what's going on with respect to where markets are going anytime soon. If we look at, say, for example, the S&P, over the last few days, we've pretty much gone nowhere. We found support in and around $4,530,000. We look at the series of lows all the way through there. They're pretty much uniform when it comes to the lows, and the peaks $4,600. We're in a range trade, so I'd be surprised if we push much above the highs that we've seen earlier this month in the event of a number that's in any way supportive or within the guidelines of being in consensus. Similarly, comes to the NASDAQ as well. I think an awful lot of people, if they haven't made their money already this year, will be content to let sleeping dogs lie, if you like, and essentially not drive the market too far in one direction or the other. NASDAQ is slightly more yield sensitive. Just being asked, if it's under $100,000, the narrative of rate cuts wouldn't boost the market higher. You see, that's a tricky one. I've just been asked a question. If the payroll is under $100,000, the narrative of rate cuts wouldn't boost the market higher. No, it wouldn't, not necessarily, because that would signal that the economy is heading for a hard landing, and consequently, company profits might get hit as a result of that. Given the fact that we're at the end of the year, no one is going to make large decisions coming as we are towards a part of the year where liquidity starts to dry up. You could see yields come lower, and that would probably be the right reaction for the bond market, but I'm not 100% sure it would be positive for stock markets. If we get a number, let's say, for example, $130,000 or $140,000, that would be just about in the sweet spot where you've still got a little bit of what I would call optionality when it comes to the numbers going either way as we head into 2024. Trying to finesse that is very, very difficult when it comes to what might happen next year. I think it's unlikely we'll get a weak payroll's number because all the strikes have finished, but also you get an awful lot of temporary hiring take place in the lead up to Thanksgiving and the Christmas period, which helps to support the headline jobs numbers. That's why Goldman is thinking that we're probably going to get a number of around about plus 200. Having said that, Deutsche Bank's on the other side of that, and they're essentially saying $130,000. But whichever way you go, I would be very surprised if we hit a number below $100,000 and if we do, there's likely to be one-off factors at play if that does happen. Sometimes markets react to the headline number and then they'll dig into the details and suddenly find that actually that number could get revised away. That's why it's always very, very important to look at the revisions as well as the headline number as well. I think the main focus at the moment will be on wages and wages are still trending at 4%. Job vacancies are still at $8.7 million and that's still well above the levels they were pre-pandemic. If we do get a very bad number, I would suggest it's probably going to be a one-off when set against everything else. That's not to say that you won't get a knee-jerk move on the back of that. Quick look at the other indexes before we get into the guts of it. Dax is broken above previous record highs, continues to push higher. As I say, that's moving higher on the basis of potential ECB rate cuts coming as early as the end of Q1, the beginning of Q2. That narrative could shift when the ECB meets next week or Madam Lagarde will try and shift it. I don't think anyone could conceivably buy it given how bad the data is. If we look at the recent moves in Eurodollar, we can see that we've seen a significant rebound, a pullback rather from the highs that we saw at the end of November, finding a little bit of support around about $107.50. Could we drop a little bit lower possibly, but I would expect us to continue to see a little bit of range trading, but with a slightly negative bias simply on the basis of the fact that the ECB is likely to cut first. Big mover this week was Dolly N. This has been an absolute widowmaker of a trade. This week over the past two days, gone from $147 down to around about $141. What's holding it up at the moment is the 200-day moving average. Look at these long shadows on the candles. I would not be thinking of getting aggressively short Dolly N at this point in time because we're above this key 200-day moving average support, and that is likely to act as a little bit of a short-term base given the fact that it acted as support back here as well. It feels a little bit overextended as well. The reason Dolly N dropped as much as it did was because there was this perception by the Bank of Japan, or this indication by the Bank of Japan, they might look to tighten policy or pull rates out of negative territory over the course of the next few months. Now, they could well do that, but why would they tighten policy at the exact same time when Japanese GDP actually contracted by more than expected in numbers released earlier today? Minus 0.7. They were expecting minus 0.5. Why would you tighten monetary policy against that backdrop? I think markets are slightly overreacting to that slight change of narrative that could squeeze the dollar back to $145, $146. I still think Dolly N can go lower, but on the basis that potentially the U.S. at some point, U.S. economic data will slow in January, February, March, April next year, and rate cut expectations could start to shift. But one piece of GDP data out of Japan, it could get revised away. The economy could improve. I'm not sure. I think the markets got slightly ahead of itself with the 19th of December Bank of Japan meeting will no more then or whether or not the ECB, the Bank of Japan is just trying to fly a kite to see whether or not what the market reaction is in terms of positioning on Dolly N. I think the market was caught slightly offside on those particular numbers. That's Dolly N. I think if we do get a weakening in the dollar, those long shadows suggest that there is a significant amount of buying interest just above the 200-day moving average. That's not to say that we can't go down there between 144 and 142.5 on 41 on a particularly weak payrolls number. We can, but heading into the weekend, I think there's a decent chance that over the course of the next few days, any further tests of this level could see a bit of a modest rebound and a push back towards 144, 145, 146. Time will tell on that particular trade and we've still got around about 10 days to go before the Bank of Japan rate meeting. So quick look at gold. Gold's an interesting one. We're just counting down to the numbers now. So I'm just quickly looking at these here. We've got 30 seconds. That looks a little bit bearish to me. We made a record high and we closed on the lows of the day. So we could actually see gold consolidate at these sorts of levels. So let's quickly snap to the numbers. I will be quiet just for a little bit while I wait for the numbers to hit the tape. I've got eight seconds to go, counting down to the payrolls numbers. 3.7 unemployment rate drops 199. So it's pretty much in the ballpark there. I wouldn't expect a significantly reaction to that. No revisions. 3.7 participation rates gone up ever so slightly to 62.8. So unemployment's fallen. And no wage data yet. Oh, it's come out 4%. Revised down to 4% for the previous month. So again pretty much in line. 199.182. So it's pretty much in the window of Azure and we'll move on to the Federal Reserve next week. In terms, so basically what it does is it keeps the current narrative alive of lower yields. The possibility that we'll get rate cuts next week. Not rate cuts next week. What am I talking about rate cuts next year? The big question is the market's pricing in for June. Will they start pulling them into April or May? On the basis that those numbers no, it keeps pricing exactly where it should be when it comes to the actual pricing of US yields. And let's have a quick look at that. I'm just going to pull that in. I'm going to change that to a US two year yield and see what the bond market reaction to those particular numbers is. So slightly higher. So slightly it's 10 basis points higher. Let's look at the actual reaction on the day. So a little bit of spike in yields. I'm not sure that's really warranted, if I'm honest. But some of the moves that we've seen in yields over the course of the past few weeks and months, that's pretty much part of the course. Big swings in US yields as positioning goes one way and then the other. I think it's probably strong enough because of the drop in the unemployment rate to be dollar positive from 3.9 to 3.7 and the rise in the participation rate. So the Fed swaps are pricing in less easing in 2024 based on the unemployment rate falling to 3.7% and the participation rate rising to 62.8. Nothing wrong with the US labor market, which is why you're seeing the reaction in the bond markets that you're currently seeing at the moment. Let's look at what the S&P is doing. Potentially probably a little bit of a softness there. Yeah, you would expect that. So a little bit of softness in the stock market. But again, go back to what we were talking about. Nice series of lows all the way through here. I would expect if we do drop back down to those lows for those levels to hold. But I think what it does do is it makes Powell's job a little bit easier next week when the Fed meets to discuss monetary policy. I think the Fed's biggest problem is sometimes they talk too much and that Waller's comments saying that monetary policy was currently well-positioned to slow the economy and get inflation back to target was probably a sensible thing to say. But when he went on to say if disinflation starts to become a concern they could cut rates, it would probably have been better if he hadn't said anything at all there. But that's essentially where we are. Does anyone have any questions on anything that I haven't already covered in the lead up to the numbers? So I was talking about gold. Obviously we saw record highs on Monday since then we've closed lower. That would appear to suggest that we are probably going to see a retest of $2,000. This is a classic bull trap. This is we break higher, make new record highs. But the key for me was where was gold going to close? And we actually closed below the open of the previous day. That is short-term bearish and that would suggest to me we are not going to see new record highs this year. We're probably going to see a bit of a consolidation come back down to $2,000, even perhaps retest these lows through here. If we draw a quick trend line in through those levels there, it's probably not particularly useful that line because it looks as if it's already broken. But in the context of the overall move, we go back a little bit further and take this line here. We're still in the uptrend that we've been in since March 2023. And if we look at these series of highs through here, there is certainly scope for us to come back to the 50 in the 200 day moving average on any correction lower. So the U.S. economy is still in fairly decent shape. We look at the small caps and we can see there's a decent area of resistance in and around this 1.890 area. And actually if you look at the U.S. economy as a whole or the U.S. stock market as a whole, the small cap index is pretty much unchanged, slightly higher on the year, but nothing to right home about, a bit like the FTSE 100 actually, small up on the year, but nothing to right home about. So thoughts on Kiwi. Just been asked about Kiwi. Is RBNZ cool? They won't cut till 2025? A bluff in your opinion? Yeah, it is. What they've done is they want to obviously maintain the higher for longer narrative that had convinced markets that central banks wouldn't be cutting aggressively in 2024. The inflation numbers since then have really undermined that argument. And in terms of rate cuts, I think the ECB will be first. The Bank of England, the Bank of England is tougher. And let me let me try and articulate my feelings about the Bank of England. In November, UPIL, Chief Economist, talked about a table-mounting approach to rate policy. So essentially higher for longer. And let's not forget, there's still three MPC members, Monetary Policy Committee members on the Bank of England committee, who voted for three rate hikes at the last meeting. Granted, they're all external members. Katherine Mann, Jonathan Haskell, and Megan Green. But I don't see how the Bank of England can cut when you still got three setters asking for more rate hikes. Furthermore, core prices, core CPI in the UK is 5.7%. It's much higher. It's around about one and a half percent higher than it is in Europe. Headline inflation is at a more manageable level of 4.6%, but that's still over double the Bank of England's inflation target. And services inflation is trending at around about 6.6%. So yeah, the US, the UK, the UK economy is struggling a little bit. And that's not surprising. But it's going to be very difficult for the Bank of England to justify cutting rates when you've got wage inflation at 7.9, services inflation at 6.6, and headline CPI at 4.6. So we do get the latest November numbers for UK inflation the week before Christmas. So I'll be interested to see whether or not we see a further slowdown from the numbers that we saw in October. But against that backdrop, I don't see there's any way the Bank of England can cut rates. Whereas the ECB can because headline inflation is 2.4, not 4.6. So I think the Bank of England will be longer. When they do start cutting, it could be quicker. But I just can't see them being first out the traps when it comes to rate cuts, whereas I can see it with respect to the ECB. Going back to, quickly going back to small caps, 2000 decent resistance at 1.890. Yes, we're in a nice little uptrend. But I would expect this range to continue to be the way of things for the Russell, the small cap. Very much a range trade, I think, on that particular one, Alan. So hopefully that answers your question. Coming back to you, Mustafa. Bank of England, sorry, Bank of England, I've covered Bank of Canada. We are starting to see a little bit of a slowdown in employment growth in Canada. So there is a good chance that the Bank of Canada will cut before the Fed. In fact, I'd say it's quite likely. As for the RBNZ, it's going to be very difficult, I think. I have to see what they say at their next rate meeting next year. But for me, I think their tweak to guidance did the job. But the bigger question is whether or not the markets believe them. Certainly, in terms of the way the Kiwis behaved over the course of the past few days, it has worked. It has pushed the currency higher. But if we look at this here, it's not dissimilar to the way the Aussies have been trading over the course of the since the start of the year, albeit we haven't been able to get back to that trend line from the highs. But overall, I think if you've got weak China and you've got weak Asia, I think Kiwi will struggle to get back to the levels that it was in the middle of the summer. So I'm very much of the opinion that the Kiwi is probably at some point a cellular rally type trade. So hopefully that answers your questions on central banks' rate policy. Does anyone else have any questions that they'd like to ask me on anything that I actually haven't covered yet? Because we've got time. We've got another five minutes. More than happy to answer your questions. As I say, a quick reminder that if you want to preview the week ahead, it's on the news and analysis section of the website where you click on there. And that takes you through the various key points for next week. Obviously, we've got wages data next week as well. Average earnings are expected to slow again for the three months to October down from 7.9 to 7.3. I'll be surprised if that's slow. And obviously, we also have UK GDP for October. This is the monthly number. This is not the quarter on quarter number. So yeah, I mean, that's, that's what we've got to look forward to. And then the week after we've got the Bank of Japan, that's the big thing that's going to be a very important decision given the declines we've seen in dollar yen. And we've obviously also got UK headline inflation that week as well, probably I think on either the same day or the Wednesday. So is the DAX overbought? It doesn't really matter whether it's overbought or not. It can continue to go higher even when it's overbought. It's been overbought since here, Allen. So it was overbought there and it's continued to be overbought and it's gone from 15,200 to 16,600. So that's, that's neither here nor there. It can be overbought for months and do another 100 or 200 points. So when you're looking at oscillators, please, please don't look at oscillators for timings in terms of when to sell and when to buy. Look at the price action and the price action on this. Yes, it has come a long way in a short space of time. Doesn't mean that it can't go higher. Look what it did back here in October 2022 and look where we are now. You know, it was overbought all the way through there and it continued to go higher. It's the direction of the price action that is the most important component. RSI is close to CAS6. I ignore them unless I'm looking to trade with the trend. But when they're overbought and the market's moving higher, don't use them. Ignore them. Now, I would say don't use them. Just have them there, but just push what they're telling you to one side because to slightly paraphrase Keynes, the market can remain overbought for longer than you can remain solvent. So a word of warning. Be very careful about when you use oscillators because they can cost you an awful lot of money. Any other questions, ladies and gents? Okay. Well, if that's it, I'd like to thank you all for your company this year. It's been an absolute pleasure. Always enjoy answering your questions. We'll continue to do these. I'd be grateful if you could leave some feedback when you get the feedback email on Monday because it helps me to basically decide what to discuss on these. I don't want this to be just about payrolls. I also want it to be a general chat about what the markets are doing, what they're likely to do, and essentially talk about the charts in general and try to try and have a general discussion with you guys on a fairly regular basis because it's basically all about your trading decisions, not mine. So as I say, that's it for this year for non-farm payrolls webinars. If I don't speak to you before, I'd like to wish you all a Merry Christmas and a Happy New Year and until the 5th of January when we get the December payrolls report. So thank you very much for all your company and speak to you all in just over or just under a month's time.