 Good morning. Welcome to CMC markets on Friday the 8th of September and this quick look at the week ahead Starting the 11th of September I'm going to be expanding and I'm going to be expanding a little bit beyond The next few days simply because I'm going to be off Out of the out of the out of the office for the next couple of weeks away from Odessa the next couple of weeks And in those next couple of weeks, we've got some very important central bank meetings Which I also want to cover off in this video because I think given what we've seen so far over over the course of the past few days I think we've seen a fairly I think we've seen a fairly decent shift in market expectations of Where interest rates are likely to go over the course of the next few weeks and months And I think a large part of that is down to some of this week's data In fact a large part of it. I think is probably down to this week's data and we're getting a little bit of a divergence when it comes to Expectations around the US economy We've had the US dollar is now risen for the 8th successive week and absolutely stunning run of gains and that's not and that's not because Investors or markets think that the Federal Reserve is going to continue to hike rates At the pace that it currently has been I'm still of the opinion that we get a pause from the Federal Reserve when they meet in the week starting the 18th of September is Simply on the basis that the US economy Appears to be in a much stronger position And continues to defy gravity in terms of the data earlier this week. We saw ISM services saw a fairly decent improvement through August prices paid also showed Shown and showed an improvement as well What was particularly telling as well is obviously the decision by OPEC plus to extend their production caps Pretty much into the end of this year, which has helped push oil prices above their recent highs into the highest levels This year and that is good. It's only going to be a concern when it comes to the stickiness around inflation potential target of a hundred dollars a barrel Obviously that would be a concern not only for future inflation Expectations, but also for consumer spending power because obviously if you're spending more money Filling up your car. You've got less money to spend on other bits and bobs So obviously that's a concern. We've broken above the highs this year back at levels last seen in November last year Does appear to be a little bit of a bearish reversal here? Bigger question is whether we can get back below $90 a barrel roll over and drift back down again certainly, I think OPEC plus wants a higher oil price and At the moment, that's essentially what they're getting We're also seeing a little bit of a move higher in natural gas prices as a consequence of that strike vote In Australia that I think is less of a concern right now given the fact that Storage levels in Europe are pretty much full already and we haven't even got into the autumn yet So in terms of what's happening with respect to markets We've seen quite a bit of a choppy week for the FTSE 100 as well as the DAX What I think is quite significant With respect to this week's market volatility is even when we've tried to move back towards the lows We've actually managed to Pull back well away from them. So here We we we made a one-week low, but we actually closed pretty much flat on the day Yesterday, Thursday We again retested the lows but actually finished the day higher and here again today We're starting to squeeze back towards a 7,500 area. So While the market does look a little bit overbought It does appear to be a little bit of support down towards 73 75 7400 so that is encouraging that perhaps we can retest the highs and head back towards that trend line resistance That I outlined in the chart above there It's been a similar sort of story for the DAX think the DAX is probably more important in terms of the longer term trend It's holding above the 200 day moving average, but also it's holding above 15,480 as well these series and lows through here But again a little bit more worryingly is that the rebounds off these lows are getting a little bit shallower So we were interested to see how that plays out going forward Similar story on the NASDAQ and the S&P NASDAQ Still above its 200 day. It's oscillating around its 50 day momentum does appear to be stalling out there obviously The rise the initial rise in yields that we saw at the start of the week, which is now starting to get reversed Has undermined that to a little bit, but we've also seen apples share price come under pressure Over the course of the past two to three days on this story out of China That all government officials and government employees will be banned from owning iPhones. So that is obviously a big Concern given that China accounts for about 20% of apples annual revenues, so I'll be interested to see how that pans out going forward, but we're still very much in the uptrend When it comes to the S&P and the NASDAQ and until such times as we get a break of the uptrend that we've been in for course of the past Past year nearly now I don't I think there's very little to be concerned about Even in even in even if you do have some concerns about overall valuations at the end of the day prices king and Ultimately, even though we haven't been able to revisit the highs from July this year We haven't broken below this series of lows in June. So momentum even though while it's stalling out It's not turning negative quite yet. I talked a little bit about Apple And this coming week. There's a there's a normal annual event Let's look at the declines that we've seen in the apple share price They're interesting that even though we opened pretty much on the lows We actually closed above the open Even though we did finish down on the day and the key support for the Apple share price is pretty much a series of lows through 167 so that's worth keeping an eye out. Anyway, they've got a wonderlust event on the 12th of September and It's around this time of year the Apple sets it stalled out for new product launches and upgrades ahead of what tends to be its strongest quarter as we head towards Year-end. So, I mean, we have seen a slowdown in smartphone sales this year Apple has still managed to set itself apart when it comes to share price performance Shares are still doing really well the year to date Given the fact they started the year down here and they're still pretty much Well away up here. So what can we expect? Well, as is normal with these events, there's been a lot of speculation as to what Apple might announce with rumors of a new iPhone 15 Up there along with a new Apple Watch series 9 Could see a new standard iPad announced with upgrades to the chipsets most likely I also think it'll be very interesting to see Whether or not and well, I think we will Apple basically announced a new USB-C charging connector, which will replace the old lightning connector In line with recent EU legislation that adopted USB-C as a common charging standard We could also get an update on the Vision Pro headset, which was unveiled at the WWDC Back in June. So keep an eye on the Apple share price decent support in and around the August lows But also this horizontal red line here, which currently comes in around about $167 We've also got the arm holdings IPO That is due to start that is due to get priced on the 13th of September And we'll probably start trading on the 14th of September subject to the usual restrictions on an IPO So national positions or anything like that the pricing It's expected to price somewhere between $47 and $51 a share Assigning evaluation of between $50 billion and $54 billion Obviously that's above the price that Nvidia put in a bid for it, which was around about $40 billion But it's also down from some of the forecasts which predicted evaluation of up to $70 a share There's a variety of risk factors around this particular IPO Notwithstanding the fact that Softbank is only selling around about 10% of its overall share capital in arm Which sort of makes you wonder why they're even bothering You know your companies like Apple Microsoft saying they're going to be bidding some of the shares But the amount of money they're putting forward is pretty much pocket money in the overall scheme of things And obviously there are concerns about arms exposure to China as well So I think it'll be an interesting barometer of risk appetite for later this week on the 14th It won't though be the big item on the agenda for the 14th That will be the ECB rate meeting which is due on the 14th of September I've laid out my thinking on this in an article on the CMC website called A Period of Policy Stasis Wouldn't Go Miss from Central Banks This Month And this is essentially where I'm arguing the case for a pause from the ECB When they meet to discuss their policy decision on the 14th But also a pause from the Bank of England Which is currently not being priced and I think If you'll bear with me there is a case For arguing that over the past few days The likes of Hupeel, Chief Economist, Deputy Governor Brent Bourbent And Andrew Bailey have been softening up the market for a potential terminal rate In and around current levels I'll expand upon that in a little bit more detail as I go on But to begin with let's talk about the European Central Bank Because I think there are very clear and present splits Amongst ECB policy makers about whether or not we will see a hike next week You've got the more hawkish members of the governing council You've got the Belgium National Bank Governor Pierre Wunsch You've got Jochen Nagel of the Bundesbank And then you've got Klaus Nart of the Dutch Central Bank, the Netherlands Central Bank All arguing for the case for further rate hikes German inflation is 6.4% But if you look at the German economy it's on its knees Factory orders earlier this week for July Over minus 11% for July Worst number since the aftermath of the relaxation of lockdown on the Covid pandemic back in April 2020 PMIs, German manufacturing PMIs have been in contraction since July last year Over a year, 14 months Are you seriously telling me that European Central Bankers are going to hike rates by another 25 basis points When the biggest economy is on its knees And the services sector across the entire region has dropped into contraction territory for the first time this year Economic activity in Europe is non-existent EU GDP for the second quarter was downgraded from 0.3% to 0.1% earlier this week Which means that the last time the EU economy saw any meaningful growth Was in the third quarter of last year when the economy expanded by 0.3% You've got stagnation in Q4, you've got 0.1% in Q1 And you've got 0.1% in Q2 Against that sort of backdrop, you've got to argue that we'll probably see a pause from the ECB this week It's likely to be a split decision, but I think the risks of doing too much are now starting to outweigh The risks of being more cautious and I think that's why we could well see a pause when the ECB meets later this week It's a similar story when we look at the Federal Reserve and the Bank of England The Bank of England probably more so, we've got the Federal Reserve coming the following week Obviously we do have some key data coming out over the course of the next two to three weeks We've got US CPI, which is due on Wednesday, the 13th of September And that is probably going to cause a little bit of uncertainty because we are expecting to see an increase in the headline number Of US CPI from 3.2% to 3.5, 3.6% But we need to focus less on that and more on core And core is expected to fall from 4.7 to 4.3 What we've seen since June is a significant increase in oil prices That is going to filter into the headline number simply on the basis of the fact that it is included in month-to-month inflation Therefore it is going to drive up that sort of more sensitive energy price inflation So oil prices feed into gasoline prices feed into higher prices of the pump So you're going to get a little bit of a pickup in headline inflation Central bankers are going to be more worried about core inflation And I think they will be reluctant to pile on more pain for consumers by hiking rates in response to a rise in energy prices Because ultimately what you're doing is you're basically doubling up on sucking demand out of an economy Which is essentially what higher fuel prices do anyway So they're doing part of the central bankers job for it Why would you compound that by hiking rates in response to an effect that you really have no overall control over So US CPI on the headline expected to tick higher on the core expected to tick lower We've also got UK wages and unemployment for July on the 12th on Tuesday Could well see an increase in unemployment there, a modest increase to around about 4.3% But wages still remain fairly strong around about 7.8% Still above core CPI CPI for the UK that is due out the following week The day before the Bank of England And again here I think we could see a slowing of both headline CPI and core CPI Although it's probably not going to be near as fast as policymakers would like and I think that's why in the context of While we'll probably see a pause from the Fed they pretty much indicated that they're going to do that It's really a question now if we see a pause from the ECB we see a pause from the Federal Reserve I think it gives much better cover it gives greater cover for the Bank of England to take a similar decision So while it wouldn't surprise me if the Bank of England did hike by 25 basis points because it's still currently priced There's still quite a lot of time between now and the 21st of September for that to get priced out And when I listened closely to the comments of Chief Economist Hugh Pyl, Ben Broadbent, who's Deputy Governor and Andrew Bailey when he was talking to MPs earlier this week I was struck by the fact that he was suggesting that well they're all saying that monetary policy is already restrictive And that they are continuing to analyze the cumulative effects of the previous 14 rate hikes And unlike other central banks the Bank of England actually hasn't paused yet the ECB has And the Federal Reserve, well I know the Federal Reserve I'm actually not so sure about the ECB But anyway the ECB could well pause next week and it wouldn't surprise me if the Bank of England goes down the same route So I'm going to stick my neck out a little bit and say that we'll get a pause from the ECB, we'll get a pause from the Federal Reserve that's priced And we could see a pause from the Bank of England and I think that would be the right thing to do of course What's the right thing to do and what the Bank of England does are two totally different things But I'm going to stick my neck out and say that we're pretty much at peak rate for all three major central banks The major outlier on that is going to be the Bank of Japan, they are due to make a decision on the 22nd of September And I think there you actually could see a little bit of surprise given the fact that Dolly N is currently approaching the 150 area Before I come on to that let's look at cable, at the moment we're holding above the 200 day moving average We're seeing a significant amount of cable weakness and one of the reasons for that cable weakness has been a pull has been a weakness that we've seen in guilt yields over the course of the past few days So it's a very choppy pricing in guilt yields up, down, up, down, up, down What's interesting is we haven't actually gone back above 5.3% on the two year And if we look at say for example the 10 year Do that now, I don't know why it's done that, should have just changed it We've also seen shop correction lower on that But again we're still above these series of lows here But I can't make a case for the Bank of England hiking any more than where rates currently are Particularly if you look at the economic data that's coming out not only from the UK But also pretty much elsewhere in Europe so I think we're pretty much there when it comes to rates Big support levels 124, the 200 day moving average But also these lows back here in May which are around about 123 So I think the key driver going forward will be whether or not the dollar continues in the way that it has been over the course of the past 8 weeks And you've got to sort of say to yourself well you know how long before we start to see a dollar correction Which could be broadly supportive of the euro and the pound So that's a quick look at the currencies and the indices, euro sterling I'm still of the opinion that we could vote to end lower there And I think a large part of that is not so much down to whether or not we see a pause from central banks over the course of the next couple of weeks Is when markets start to price in rate cuts And I think in the case of Europe I think there's a clear possibility that we could see rate cuts from the ECB before we see rate cuts from the Bank of England Simply because headline inflation here in the UK is much higher So the Bank of England is going to be a lot more cautious about cutting rates And also given the fact that the UK economy is doing better than Europe at the moment So the Bank of England has slightly more scope to keep rates As Hugh Pill put it at a table mountain level for longer The Bank of England's policy stance I think from here on in is not so much how many more hikes are coming But how long are rates likely to stay at current levels And I think that will be the new policy It'll be a policy plateau for rates How long will rates stay at current levels And the challenge for the Bank of England will be trying to convince the markets That they're serious about keeping rates at current levels until 2025 I think with respect to the ECB It's going to be harder for them to make a hawkish case When there's been virtually no growth in the Euro area since the third quarter of last year As for the Fed, they were already priced for 1% of rate cuts by the end of 2024 It's in their Fed funds projections So it'll be interesting to see whether or not any of those get tweaked over the course of the next few weeks So summing up, we've got quite a bit to get through Because I'm trying to do three weeks in one, given the fact that I'm not here next week And I'm trying to guide you as best I can When it comes to what to expect between now and when I come back But obviously, the next seven days we've got ECB, USCPI, UK wages We've got July GDP as well from the UK That's likely to see a slowdown from the June 0.5% And then we've got China retail sales for August I'm not expecting any great shakes there The Apple Wunderlust event on the 12th The Arm Holdings IPO on the 14th And then the following week, we've got the Fed rate decision on the 20th of September Followed by the Bank of England rate decision on the 21st We've got UK CPI on the 20th of September And we've got the Bank of Japan rate decision on the 22nd of September At the same time, we've also got Flash PMIs for France, Germany and the UK On the same day as the Bank of Japan rate decision So, I mean, there's so much more stuff I could go through Earning season is pretty much over We've got a couple of items that might be of interest We've got FedEx's first quarter numbers on the 20th of September And Next and JD Sports on the 21st of September in the UK So, that's certainly something to keep an eye out for How well is retail demand in the UK? How well is that held up over the summer? And I think that's pretty much it for this week's video Worth just having a look at the gold prices They are still in the downtrend they've been in since the peaks back in May An awful lot will depend, I think, on whether or not we see a period of dollar weakness After the gains that we've seen over the course of the past few weeks The key level to keep an eye out for on gold here is this trend line here And these peaks are around about 1955, which was the highs at the start of this month If yields start to come off, then obviously that should benefit gold So, in terms of central banks, what we hear over the course of the next couple of weeks is likely to dictate where gold goes to next But if we do get markets start to price in the possibility of lower long-term rates That could give a lift to the gold price, which has been struggling Pretty much since May, but is actually seeing a nice level rebound at the moment And having a little bit of a pause So, I think I've gone on enough, as I say, please feel free to read the article Could the bank of a period of policy status wouldn't go amiss from central banks this month You can find that on the news and analysis page here So you go to learn, news and analysis, it's right there, scroll down It's that market update there And then you can read my thoughts about the upcoming central bank rate meetings that are coming through over the course of the next couple of weeks Otherwise, thanks very much for listening everybody I will talk to you all again in just over, well in three weeks time actually Because obviously I'm away for the next two Fridays, so in three weeks time In the meantime, have a great weekend, have a great two weeks And I will speak to you again when I return to my desk on the 27th of September Thanks for listening