Look Ahead 14/9/23: ECB; US retail sales; AU jobless rate; Adobe

(Video Transcript)

Inflation pressures may be alive and kicking

Hello, I'm Angeline Ong and welcome to your Look Ahead to Thursday, 14 September. Let's start with Australia because we have unemployment rate numbers there. The expectation for August is 3.7%.

Now the rate is not as key as what the labour market is actually indicating. At the moment, if the expectations are right, it should mirror a still-robust labour market is in Australia.

Taking a look at the Australia 200 here because we have had this financial index, this instrument that mirrors the ASX 200 trade between this band here, between 7093 and 7377. And currently, it's been trying to break out of this band for some time.

If we see volumes hold and could creep back towards that blue line there at 7273.4, however, if you look at and widen out this chart, you can see that since September 2022, it's been quite a rocky ride, a lot of the increases and falls there, partly to do with the interest rate and inflation dynamic over there.

What's also interesting is that domestically, at the moment, the Commonwealth Bank of Australia has shown that household spending did rebound in August, thanks to gains in the education, transport and recreation categories, all signs of consumer resilience.

And the reason why I'm telling you this is because it feeds into perhaps the thought that perhaps inflation pressures haven't quite gone away.

Are we in for an ECB surprise?

Let's turn now to the Euro Zone where we have the European Central Bank (ECB) interest rate decision. This is the set piece of the session. Main refinancing rate expected to remain at 4.25%, however.

Just showing you the euro versus the dollar there, this is going to be quite an interesting trade if you're going to take a position there because no one actually really knows what the ECB is going to do.

The expectation, of course, which many polls were done many weeks ago, is that ECB is going to hold rates steady. This is according to a poll of economists by Reuters.

However, there's now this growing concern that in many major markets around the world inflation has been quite sticky and growth and the employment rather robust, which means that perhaps the ECB could surprise in the coming session.

If it does, then we could see the euro bounce. However, much of this has been talked and tweeted about already, so perhaps the impact might not be as large as we expect.

All this, of course, plays into the United States as well. We had some mixed consumer price index (CPI) numbers just quite recently, and perhaps many market-watchers out there think now that the Federal Reserve Bank (Fed) could perhaps stay at hand when it comes to deciding interest rates in the coming week.

Retail data shows how cost of living bites

However, prior to that, we've got August retail sales out of the US that will give us a good indication of how consumers are feeling there. Many of the big retailers like Kroger and Walmart, have indicated that consumers have started trading down to cheaper brands as the cost of living bites.

We've also got the producer price index for August and initial jobless claims as well. This is the weekly figure and the latest snapshot of business inventories.

Moving swiftly on, we have some earnings still out of the United Kingdom. We've got the TRIO Group and THG release numbers, and out of the US, look out for Adobe. Now, this is the company, as you know, that makes Photoshop and many other editing tools that form the core of its creative cloud subscription software business.

Adobe shares on the rise

There are some unique shares of Adobe there because it has had quite a climb, as you can see here, since around May 2023. If you go further back, if you bought around December 2022, then you would have made quite a large gain.

Let's just try and quantify that for you. From that level up to where we are now, that would be around a 68% gain. However, pay special attention to what Adobe says about the legal side of creating all these AI-related features and how they plan to price for it because, of course, there are infringement issues and there's been very little detail out on that.

Adobe says that the prices for many of its subscription products will rise $2 to $5 per month starting from November.

And that's it for now. For more market-moving news, I'll be back and be at BEat the Streett 1.30pm London time to give you a heads-up to the US trading day. And IG's Jeremy Naylor will be on at 7.30am on Early Morning Call ahead of the European market open. Follow me on Twitter. This is IGTV.