THIS WEEK’S HIGHLIGHTS

  • Monday: Fed speakers (Rosengren, Bostic, Williams)
  • Tuesday: North & South Korean delegates meet for first time since 2015
  • Wednesday: Chinese inflation data, UK Trade Balance & DoE numbers
  • Thursday: US PPI and ECB minutes
  • Friday: US CPI and Retail Sales

Welcome back to those joining us for the first time in 2018. Although last week saw US equities power to new all-time highs, and crude to a fresh multi-year high, the script remains largely unchanged and remains underpinned by the same pro-growth story that lifted markets at the end of last year. Here’s a breakdown of some of the key themes for the week ahead.

May’s Cabinet Reshuffle will have little impact…

Much of the weekend’s focus has been on reports that the UK Prime Minister will commence a reshuffle of her cabinet after losing three key ministers in 2017. The move I see as being more Tory PR than significantly changing expectations on key issues such as Brexit. As such, although it warrants close monitoring it is unlikely to be a tradable event. Meanwhile, from an economic perspective UK household purchasing power continues to be eroded with consumers curbing their spending for the first time in five years in 2017 amid the on-going pressure from rising prices against anaemic growth in wages. Although this situation is negative the performance of Cable this week may well be more USD led rather than GBP as negotiations surrounding Brexit are not likely to intensify until the back-end of Q1.

UK consumer

PIC1

US CPI the main event of the week…

Monetary policy at the Federal Reserve appears to be on a fairly clear path moving forward but there is still a lingering concern about the future path of inflation in the US. Last month the US CPI report missed for the 7th time in 9 readings and if the central bank are intent in raising rates three, possibly four times in 2018, then prices will need to show signs of picking up. In fact, we at Amplify view inflation as one of the key themes of this year and may well be a deciding factor in the performance of global financial markets. You can find out more from our head of trading HERE.

US CPI

To infinity and beyond…

Although it’s hard not to laugh at Trump’s vehement defence of his ‘mental stability’ at the weekend the US President has no doubt been a driving force of direction in the US equity market since his appointment. The passage of the US tax plan at the end of last year was the first major milestone of his Presidency and in the context of an improving global economy there appears to be much for corporate America to be positive about in the short-term. As such, looking at this week although valuations remain elevated we look to find opportunities to continue to ride the wave higher.

PIC3 SPX

Black gold…

Crude oil has begun the new year on the front foot posting the strongest opening week for any year since 2013. From a fundamental perspective not a lot has changed with the rise bring driven predominately by three main themes; the on-going commitment to cut production from OPEC and non-OPEC nations, optimistic global growth forecasts and a plateau in the US oil rig count. In fact the last Friday we saw Baker Hughes report that the number of active rigs fell for the first time in three weeks. Given the above, we remain bullish for the time being and look to find technically sound entry points for further upside in the week ahead.

dRILLERS

PIC 2 CLE

Have a good week ahead and we will be delivering our usual look around the market on Trading-Live at midday. You can also view this morning’s market briefing below:

 

 

 

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.