This Week In Markets: 13th - 17th September 2021

Okay, good morning. It is Monday the 13th of September. Hope you're doing well and had a great weekend. As per usual, Monday morning, going to get you up to speed on some of the major news from the weekend and then have a look at the calendar of events for the week ahead. And things that I'll talk about are going to be the US budget, prospects of that passing, a few things to be aware of for Manchin and also some source reports about potential corporate tax rates in the US. We're also going to talk about the breakup— command from the state in China of Alipay— on the latest crackdown on the tech space, which saw that underperform in the Far East. Talk about Iran and North Korea on the geopolitical front, and then weather watch as there's another tropical storm that could form into a hurricane in the Gulf of Mexico in the coming days. For the week ahead, we'll have a look at some of the highlights, being namely US CPI Tuesday, retail sales on Thursday. We've also got the new release of the highly anticipated iPhone 13 lineup and the new Series 7 Apple Watch as well coming out on Tuesday is what's expected from that, that event. But let me get straight into an overview of the charts first to have a look at how things are performing. And the most notable thing probably is the dollar index, a little bit of a blip high as we've gone into the European open. The Dixie's now trading up just shy of 0.2%, so a little bit of weight felt in both major currency pairs in the top left, euro dollar and cable both down around 25 pips each respectively. Pretty flat though overall, overall in gold and T-note futures. We have seen a marginal uptick in WTI crude just as Europe have come in, and just keeping an eye there. This is on now daily bar chart, and you can see here we've got that kind of double top of price action that we had at the beginning of the month on the 2nd and 3rd of September, which is around these levels at 70.53, which has also been a prior inflection point in WTI crude over period of the last 4 months or so. So some upside resistance of note just coming in in WTI. In equity index futures, obviously after a bit of downside that was seen to finish off last week, that did continue in the overnight Asia-Pac session, as you can see here, as evident in the S&P 500. However, just finding some support at that kind of Wall Street close on Friday low, and we've just seen a bit of an about-turn coming back up here and looking at resistance here identified from that previous low that we saw on Friday and the overnight recommencement of trade high, which would be about 4 points above the current price, with pivot residing just above in the S&P 500 future for the moment. All right, well, let's get straight into it and talk about a couple of the news stories. As I mentioned, overnight in Asia, the Hang Seng Tech Index was down quite heavy again about 3% after reports, as you can see here in the FT, talking about officials seeking to break up Ant Group company's Alipay. The plan would also see Ant turn over its user data that underpins its lending decisions to a new credit scoring joint venture with, you guessed who, yes, the state. So they will do that joint venture on credit scoring, which would be partly state-owned. According to two people familiar with the process. Alibaba shares were down about 6% actually in Hong Kong trade overnight. So the latest in that episode of government looking to break up some of these tech giants over in China. Otherwise, in the US, the latest on the, the budget is that Manchin has told the CNN State of the Union that he would not vote for $3.5 trillion uh, budget bill, adding that there's no way they're going to meet the September 27th deadline, which is obviously looming at the end of the month. Separately, on the back of this, we've also had comments from the House Democrats, who are believed to be set to propose raising the top corporate tax rate to 26.5%, according to people familiar with the matter, which is below what Biden was pushing for, which was 28%. Uh, Democrats on the House Ways and Means Committee are seeking to implement new taxes for cryptocurrency, tobacco, all this looking to help to pay for that trillion-dollar economic plan that's been proposed by Biden. Elsewhere, some other things on the geopolitical front, neither of which I must upfront say is particularly market-moving, and certainly it's not a rationale of why crude oil is moving this morning, but there are things to be aware of because these are hotly contested geographic areas on namely Iran and North Korean Peninsula. So if with Iran, the reason why they're in the news over the weekend is they've agreed to allow UN nuclear watchdog access to surveillance cameras inside its atomic facilities, uh, in what's seen as largely symbolic move. Uh, the positive step raises the likelihood that Tehran will escape formal punishment therefore by the IAEA at this week's meeting. Hence the timing, where they are expected to be censored for failing to cooperate with investigations into traces of uranium found at undeclared nuclear sites. So that's the reasons there. Separately, North Korea— you might have seen some fairly, what sound quite sensational headlines— they successfully test-fired a new type of long-range cruise missile over the weekend, which technically speaking means then it could cover the entirety of of Japan, which obviously is the most contested within that region. And the news comes just days after North Korea held its first military parade since Joe Biden became US president. So almost feels like we've been here before with Biden and Xi having that first phone call at the end of last week in 7 months. And then we start to see the ante just ratchet up a little bit on the peninsula, which is normally a show of kind of subtle force within that region. Between the bigger top-level discussions happening on a broader context between China and the US. So the Korean news, as quite punchy as it sounds, it's really not that big a deal for markets because it's fairly commonplace. And then on the weather watch, something for any oil traders to be aware of, just coming on the coattails of Ida. We've now got periods of heavy rainfall expected to impact portions of the Texas and Louisiana coast. Through the middle of the week. Nicholas is forecast to approach the middle Texan coast, as you can see here, as a strong tropical storm today, and could be near hurricane intensity if it moves to the right of the forecast track and remains over water longer. And so definitely worth just keeping that in mind as well if you're an energy trader. As far as the calendar is concerned for this week, I'm just going to focus on a couple of key things rather than going into full details, of which you can read from my morning note, which is available on my Twitter handle. I've already sent out this morning. Um, so starting with the US, which will be the main focus of course, and the main things to look out for here is not so much today. You can see today is actually being omitted from this calendar completely because of a lack of real big things happening. So Tuesday then, we get US CPI coming out. And that's going to be quite key, giving policymakers, investors fresh insight into how persistent any concerns are around US inflation. The year-on-year for August expected at 5.3%. On a month-on-month basis, price increases have moderated somewhat, but now the focus is shifting as to whether sectors beyond those most sensitive to the pandemic-related disruptions, uh, they in themselves starting to remain a little bit more persistent in that sense. So, um, X-ing out these pandemic idiosyncrasies, is underlying inflation actually proving to be a little bit more sticky? And we talked about this last week, the fact that PPI prices in China are becoming a 13-year high. That means then that US import prices from China are going up, and that's getting passed through then ultimately to the US consumer. And this, of course, is very key for that that whole idea about the timing and kind of process behind tapering, which we're expecting from the Fed in the coming months. Otherwise, from the US, sticking with that first, we get industrial production from the US on Wednesday, but then we get US retail sales on Thursday. Now the expectation is there for another fall. If the headline is realized, it would represent the third successive monthly fall in retail sales. Downside in August likely to come from auto sales, which has been driven by chip shortages according to analysts on the street. And then Friday you get the September University of Michigan sentiment figure. This is the preliminary one, essentially to get a bit of a gauge on where consumer sentiment is at. Last month in that reading we saw the weakest print in more than a decade, mainly due to a slump in expectations as personal financial prospects continue to worsen due to smaller income gains and higher inflationary trends impacting the consumer psyche overall. So that would be quite closely watched. From the UK, we've got jobs data on Tuesday, you've then got UK CPI on Wednesday, and UK retail sales comes out on Friday. So quite a lot of focus on the UK as well from a data perspective, but none of that of which will be probably impactful too much on the timeline for the Bank of England and perception over the tightening of policy in the future. Other interesting things happening this week: quadruple witching on Friday. So refers to the date at which derivatives of stock index futures, stock index options, stock options, and single stock futures all expire simultaneously. And that normally just generates a bit of buzz around the potential larger volume coming through the market, and obviously comes at the end of the week. So something to be aware of. And from an equity perspective, um, you also have Apple California Streaming is what the event is being dubbed by the company themselves, and a new iPhone 13 lineup set to be announced by the company alongside a redesigned Apple Watch. So Series 7. In terms of the iPhone 13, smaller notch, faster refresh rate displays, a faster A15 processor— the biggest improvements we're expected to see this time around. Smaller tweaks Apple is expected to include range from a portrait mode for video, support for improved ProRes video recording as well. But as per with all these Apple events, if you just go on to Apple Mac 9to5, Wired, CNET, Apple Insider, you can already get pretty much exactly to the T everything that's going to be announced by the company. And hence the reason often you see a bit of a buy the rumor, sell the fact in Apple shares going into these events, because hardly anything comes as a surprise because it all gets leaked by very active blog sites going into the actual event. But something to just be aware of for this week. And so that is it. As I said, for a bit more of a breakdown of some of those data points I just mentioned, you can access it here. Also, of course, we've got the launch of our new platform AmplifyMe happening on Wednesday. The website is already now up and running, so feel free to check it out in the, in the meantime before I go into more details later in the week. It's just AmplifyMe.com. All right guys, have a fantastic week ahead. And I'll see you same time tomorrow. Take care.