In this weekly market outlook, the host reviews recent US equity performance, highlighting the S&P 500’s pullback after a strong start to the year and the market’s reaction to hotter‑than‑expected PCE inflation, which has revived expectations of a 50‑basis‑point Fed rate hike. He outlines key technical levels for the S&P 500 and notes the vulnerability of growth‑oriented stocks. The briefing then shifts to political‑economic news: a pending meeting between UK Prime Minister Rishi Sunak and EU Commission President Ursula von der Leyen that could produce a post‑Brexit settlement for Northern Ireland, though the deal remains uncertain and unlikely to move the pound dramatically. Next, euro‑area inflation is examined, with consensus forecasts for headline CPI to fall to about 8.1% in February while core inflation stays sticky around 5.3%, and the upcoming ECB minutes are flagged as a potential rate‑path signal. The host previews US retail earnings (Costco, Target, Lowe’s, Dollar Tree, Occidental Petroleum, Salesforce) and references Walmart’s recent strong results but cautious outlook. He then covers China’s manufacturing PMI data, contrasting the official NBS reading (expected 50.7) with the Caixin private‑sector reading (expected 51.3), both indicating a move back into expansion. Finally, US ISM manufacturing and services PMI releases and durable‑goods orders are discussed, with expectations of a modest pull‑back in services and a dip in durable‑goods orders driven by Boeing’s volatility. The segment concludes with a reminder to like and subscribe.
Chapters
Okay, welcome back to the outlook for the week ahead, and going to give you an update on where we finished in US equities last week. A chart here of the S&P 500, a couple of key levels to look out for going through the next couple of sessions. Then we're going to talk about Brexit on an update. We've got eurozone inflation and ECB minutes coming out this week, and US and Chinese manufacturing and service PMI data as well. As earnings coming out from big giant US retailers. So let's start with this, the S&P 500. And the reason why is because the major US stock index is coming off its worst week since December 9th. We had that hotter inflation, hotter than expected inflation reading in the preferred measure for the Fed, the PCE number at the end of last week. And that has got people speculating once again that the Fed are not only going to have to increase rates further, that's very much expected, but even started to price in an upshifting from— they downshifted to 25, back to 50. The pricing split at the moment in the short-term interest rate futures market is about a 70-30 split between 25 as the base case, but now pricing a minority looking for a move back up to 50 basis points. There's obviously a little way to go yet, or so. We've got— I think it's 22nd of March, the next meeting. So plenty of incoming data and developments, I'm sure, to come between now and then. However, it's more about the prospect of higher rates for longer, and particularly we saw the likes of those interest rate-sensitive growth stocks get hit. The Nasdaq, of course, underperforming last week. But as you can see here from the S&P 500, from the peak that we saw right at the beginning of the year, this trend line is really in play. It's acted well as resistance areas back in March, also retest in the summer of last year. So this is going back to the beginning of 2022, I should say, and then March, the summer and then at the end of last year. We did break through that, and you can see it acted as a bit of a catalyst technically for the push-up that we saw to 4,200 before. Now we started to see the market pull back, and fairly aggressively so. So we've come back down to that trend line. It's gonna be quite key on the weekly performance. Anything below this area really opens up and becomes vulnerable somewhat to a deeper pullback down to around 3,800. And of course, plenty of Wall Street banks calling for lower equity prices at the moment, valuations to compress further given the inbound economic slowdown that we're set to experience despite some of the more positive economic data points that we've had. The point being is that any bright spots that we see in a decent labor market or in terms of price pressure still being eminent in the likes of PCE, the more likely rates are going to have to stay higher for longer, and stocks don't like that. That's the general summary. But let's jump into some of the news flow. Not too much really to me to update you, more of an outlook for the week. And Brexit, here they are. Rishi Sunak, the UK Prime Minister, of course, and Ursula von der Leyen. They're going to meet in the UK on Monday, speculation building of an imminent announcement on a post-Brexit settlement for Northern Ireland. The deal would seek to soften trade and regulatory barriers that emerged within the UK as a result of the Northern Ireland Protocol. So still quite a bit of work to be done here politically, as you would expect. The likes of the DUP, the more right-minded Conservative MPs still to satisfy. So definitely not a done deal at this point, although lots of smoke, if you like, lingering in the air in UK press this weekend that a deal is imminent at this point in time. Would it move the pound? Not really, I don't think. But at the moment, I think the, the major currency pairs are more driven by dollar dynamics. As we saw last week on the back of that data, euro-dollar and cable both lower on the week, and that predominant selling pressure came towards the back end of the week on the prevailing dollar strength that we saw on that renewed rate expectation coming out from the market. That also of course meant we had high US yields, which pushed the 10-year down as well as the US equity market. It's all very much US-influenced at the moment. And then quick look elsewhere, talking about inflation, the eurozone is going to be quite interesting, particularly on Thursday. Economists expect headline eurozone inflation to drop to close to a year low in February, but the core reading of course is going to be particularly cool, particularly of interest, and likely to remain somewhat still quite sticky at this point. The headline reading is expected to slow. So continuation of this trend we've seen really since the autumn of last year when we peaked at 10.6%. The previous reading was at 8.6% in January. We are expecting that to decrease once again to 8.1% is the median consensus, predominantly lower driven by a decrease in energy prices. The core reading though, if I just jump over here, it is problematically, at least for the perception of markets about what's going to happen with an ongoing tightening cycle from the ECB, is that Analysts are expecting the core reading to remain at 5.3%, which of course is the highest on record. Now, the reason why Thursday is going to be quite interesting is just a few hours after that USA inflation print, we're going to get the ECB publishing their minutes of the account of the February monetary policy meeting, where they concluded that a half a percentage point increase was appropriate at the time. So investors will monitor that in case of any details about the planned path for rates beyond March. However, as is always the case with minutes, they could be somewhat outdated in the context of if we get an outlying inflation reading earlier in the morning, that will by far dominate proceedings for the euro currency and euro-denominated assets. Looking elsewhere, I did briefly mention earnings. So earnings season very much coming to the tail end of things at the moment, but retail giants like the company names such as Costco, Target, home improvement store Lowe's, budget-friendly Dollar Tree among others are all reporting this week. We also get big oil names like Occidental Petroleum, and you can see after market on Wednesday you get the the likes of the tech firm Salesforce. In terms of what we're expecting, of course, we had the largest retailer last week, Walmart. They reported strong fourth quarter earnings but issued a cautious outlook for the second half of the year when it expects sales to fall. So whether or not we'll see similar is what we're going to be on the lookout for. Meanwhile, jumping geographically elsewhere to the Far East and looking at China, we get the official and independent manufacturing PMIs for February. They're both going to be released on Wednesday. So economists polled by Bloomberg expect the former. So this is the official reading to— well, first of all, what is the difference, I guess, between the official and independent reading? So let's just go through this. This is the China NBS. So the official kind of Bureau of Statistics reading that we get. So this is classified as the official one. It concentrates largely on large state-owned enterprises. It is expected to come in at 50.7. So you can see here that would, out of the last 12 readings, Mark, the highest that we've had over that period, meaning then that further expansion into— or further movement into expansion territory above that key threshold of 50 as far as the PMIs are measured. On the Caixin Manufacturing PMI, that looks at coverage of mid-sized private companies that make up the majority of the sector, and it's tipped to exit contraction with a reading of 51.3. So yeah, both positive developments really. And as you can see from this Chinese number, we exploded higher back in, in Jan. Obviously the MBS one, people are a little bit of a skeptical eye just given it's more government state-owned enterprises and a big jump. And a lot of that was on the positivity of the reopening. So the government just looking to reaffirm this idea of more positivity coming in, dropping of the zero tolerance procedures. But the other figure, the KGM one, is expected to move up into positive expansion territory, which will be quite key. So kind of a not an immediate tradable event, but something of a more positive force for the overall global picture and the idea about more of a soft rather than hard landing on a global perspective. Finally, just taking a quick look on the US front, there's quite a few things out, but I'm just going to focus on the ISM Manufacturing Service. Reports for February. They're due out on Wednesday and Friday respectively. On the service side, analysts expect a pullback as weather-related impacts over the last 2 months subside. You can see here we had a particularly cold in the States, um, so impeding the ability for consumers to get out there and really utilize a number of the service main industries that compile of this number. So we had the depressed figure in December and a really strong figure with really great weather, quite the opposite in January. So looking that to just, um, just balance off a little bit and probably likely to pull back, uh, just a touch. Meanwhile, durable goods, they're also going to come out in the US on Monday. It should fall quite a lot. Analysts at ING though say you shouldn't be alarmed by that, it's entirely due to volatility in Boeing aircraft orders. The company received 55 orders for aircraft in January and that's down from 250 in December. So outside of transportation, orders more likely to be flat at this point. So that's it. So thanks very much for listening. Don't forget to like and subscribe to the channel and have yourself a good week ahead. All right. Take care.
