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As the Fed and ECB adopt differing rate hike strategies, the US dollar index faces an uncertain trajectory. An anticipated testimonial by Fed Chair Powell tonight may offer some directional clarity. Source: Bloomberg Forex Federal Reserve United States dollar European Central Bank United States Central bank Tony Sycamore | Market Analyst, Australia | Publication date: Wednesday 21 June 2023 After a fiery display of strength in May, the US dollar's flame appears to be dwindling as June is marked by three consecutive weeks of declines. The US dollar index, the DXY’s decline in June accelerated last Thursday after the Fed paused its rate hiking cycle at 5.0-5.25% while the ECB raised its deposit rate overnight by 25bp to 3.50% and endorsed market pricing of another 25bp rate hike in July. Whether the US dollar index, which includes a 57% weighing of the euro, will continue to depreciate under the weight of central bank divergence is debatable. The ECB is expected to raise rates by a further 25bp in July to 3.75%, with the possibility of one final 25bp rate hike before year-end, taking the deposit rate to 4%. As the Fed’s new dot plots showed last week, members expect at least another 50bp of rate hikes this year, taking the Feds Funds into a range of 5.5% to 5.75%. The rates market is pricing in a 76% chance of another 25bp rate hike but only assigning a 12% probability of a second-rate hike. Fed Chair Powell may choose to lean against this dovish pricing when he delivers his semi-annual congressional testimony before the House Financial Services Committee at midnight tonight AEST. Awaiting Powell's guidance In the post-meeting press conference following last week's FOMC meeting, Fed Chair Powell emphasised that the upward shift in the Fed's dots was predominantly a response to heightened core inflation. However, he was quick to downplay these projections, underscoring the Fed's commitment to data-dependency. The efficacy of a "pause" or "skip" in rate adjustments, as recently demonstrated by the RBA and BoC, hinges significantly on the subsequent cooling of data. Yet, this poses a notable question as the recent housing starts and building permit data for May exhibited minimal signs of cooling, indicating the continued resilience of the economy. Housing statistics surged 21.7% m/m to 1.63 million, the largest increase since October 2016 and building permits rose by 5.2% m/m vs 0.6% expected. Both numbers suggest that the housing market is recovering from last year’s weakness as the underlying economy remains resilient. DXY technical analysis In 2023, the US dollar index, the DXY, tested and held support at 101.00/80 on three separate occasions before bouncing to a high of 104.69 in May. While the weakness from the May 104.69 high has been disappointing, it likely confirms the DXY is set for further range trading between support at 101.00/100.75 and resistance 104.69 /105.20 coming from the May highs and the 200-day moving average. Aware that if support at 101.00/100.75 were to break on a sustained basis, it would likely see a test of support at 97.00. DXY daily chart Source: TradingView TradingView: the figures stated are as of June 21, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

Value investing is a popular strategy that involves buying stocks that appear to be 'on sale', based on an objective analysis of their intrinsic value. Read on for the strategy's pros and cons and how to get started. Source: Bloomberg Charles Archer | Financial Writer, London What is value investing? Value investing is a very popular strategy involving buying stocks that appear to be trading for less than their intrinsic value. Value investors consider that the market often overreacts to both good and bad news, resulting in company stock prices lurching away from their fundamentals. An overreaction towards bad news, therefore, offers investors the chance to 'buy the dip' before the correction upwards. Famous and successful proponents include the Sage of Omaha Warren Buffett, in addition to Benjamin Graham, Charlie Munger and Seth Klarman. Graham – together with David Dodd – were the forefathers of the concept when they began research into the phenomenon in the 1920s while teaching at Columbia Business School. Buffett was a student of Graham for several years and has been significantly influenced by his former professor.¹ There are two key factors to bear in mind when considering deep value investing: investors view themselves as part 'business owners' rather than as traders, valuing companies on their financial statements by way of fundamental analysis the calculated 'intrinsic value' will usually rely on many assumptions when valuing a business, so it will likely fall into a range rather than an exact figure. These assumptions may not always be right Value investing vs growth investing Investors often confuse the two strategies, but there are marked differences between a value investing strategy and growth investing. The key difference is that value stocks are companies that investors think are undervalued by the market, while growth stocks are companies that investors think will deliver better-than-average returns. Value stocks: currently undervalued low P/E ratios high dividend yields Growth stocks: currently overvalued higher P/E ratios low/no dividend yields Another difference is in the type of risk. Value stock investing involves the risk that the stock may not appreciate as much as expected, while growth companies are usually highly volatile with a relatively high rate of failure. How value investing works Understanding the mindset behind value investing is actually very simple. If you know the true value of something, then you can save money when buying it 'on sale'. This applies to every purchase, from groceries to electronics to housing. For example, whether you buy a jacket at full price in the run-up to Christmas or half-price in the January sales, you’re still getting the same jacket. Buying stocks is the same – a company's share price will fluctuate (sometimes drastically), even though the underlying fundamentals remain the same. Of course, it's harder to buy stocks 'on sale', as the sale price isn't advertised. Investors need to do some detective work to discover which stocks are trading 'at a discount' as a value investment. Even then, there's no guarantee that buying shares will yield a return. This detective work involves using several metrics to attempt to find out the intrinsic value of a stock. This involves combing standard financial analyses of revenue, cash flow, earnings and profit with fundamental factors such as brand power, the business model, the target market and the so-called 'economic moat' of competitive advantage. The most popular metrics include: price-to-earnings (P/E) – which reflects the company's track record to decide whether the stock price reflects its earnings. The lower the ratio, the more likely it is that the company is a value stock price-to-book (P/B) – which sums up the total value of a company's assets, then compares this figure to the stock price. If the stock is trading for lower than its total assets, then the company may be undervalued free cash flow – which is cash generated from revenue after expenditure costs. Expenditure costs extracted include day-to-day operating expenses and one-off purchases, called capital expenditure (CAPEX). Positive free cash flow indicates that a company has the capital to grow, reinvest, pay off debt, pay dividends or similar² Of course, there are many other metrics to consider, including total equity, debt, overall sales and revenue growth trends. It's worth noting that these metrics are always backwards looking – so investors should be careful to consider any potential future problems, too. Value investing strategies There are many tried-and-tested strategies that many investors use when conducting value investing. Attractive characteristics The best value stocks usually boast several hallmarks of quality. These include being well-established businesses with a solid history of success through recessionary periods, consistent profitability, relatively stable revenue with limited sales growth or contractions and often regular dividend payments. Seeking a margin of safety As intrinsic value is calculated under assumptions and within a given range, value investors require room for error in their calculations set within their own 'margin of safety' based on their personal risk tolerance. This makes you less likely to lose money if the stock doesn’t perform as well as you expect.³ If you consider that a share is worth £10 and buy it for £5, you will make a £5 profit by simply waiting for the share to rise to your perceived value – and it may even make more money if the company grows too. Benjamin Graham only bought stocks he considered to be priced at two-thirds or less of their intrinsic value – a ratio he felt was optimal from a risk-return perspective. Taking a long-term perspective It may take many years for a value stock to return to its fair value, and this requires both patience and the ability to believe in your own analysis and strategy. Many investors get impatient, sell too early or look for faster returns on the market. Importantly, this means that this strategy is only suitable for investors who can readily afford to lock their money away for long periods. Having a contrarian mindset Related to the long-term perspective is that value investors need to adopt the contrarian mindset. If a stock is trading for less than its intrinsic value, then it's likely to be out of favour with many other investors who disregard its potential. This can make it even harder to stick to your guns – especially when returns are not guaranteed. However, value investing involves choosing to buy when everyone else is selling. This sounds easy but becomes psychologically challenging when investing your own money. Rejecting the efficient market hypothesis This theory posits that a stock price always considers all public information about a company, and therefore reflects its fair value. Clearly, this is the antithesis of value investing. Value investors might argue that a share price is underperforming because of extrinsic factors, such as a recession or market panic, or overperforming based on investor excitement that doesn't reflect a company's true value. This is often the case with biotech companies – many promise incredible medical advances, but only a small few deliver. Pros and cons of value investing As with all strategies, there are advantages and drawbacks to value investing. Pros of value investing Decent profits – incredible gains are possible with value investing when the market eventually recognises the true value of an asset you bought on the dip Low-risks, high-rewards – the risk-to-reward ratio is generally favourable, assuming correct analysis and a large margin of safety Compounding returns – value investing benefits hugely from compound returns, especially if you reinvest dividends and any capital gains. Interest on interest is extremely powerful in investing Emotionless investing – value investing involves a cool analysis of a company to analyse its prospects and margin of safety, rather than becoming attached to a stock Blue chip power – well-established blue chip companies prioritised by value investors are less risky than the small caps Ability to invest in an ISA for exceptional compound returns Cons of value investing Research intensive – undervalued shares are hard to identify and require expertise. You also need to understand that not every company you analyse will end up being worth buying shares in Ratio analysis flaws – a company's P/E ratio can be determined before or after tax, can only be an estimation, and may differ from another company depending on how earnings are defined or what accounting practices are used. This makes objective comparisons harder than you might expect Uncertainty – you have no control over factors such as management changes, a company disaster or competitor behaviours that can change the fundamentals over time Patience – of a saint. You often need to hold a position for years to reap the rewards until market sentiment turns positive. Even then, you might hold for a lifetime and still not see a return Self-confidence – value investing requires being certain that you have spotted an opportunity that others are shunning. This is highly pressurised, especially if you lack professional knowledge Weak diversification – most value investors seek shares in depressed sectors, which means that they are unlikely to be diversified and thus riskier. Further, it can be tempting to rely on past performance of an indicator of future returns, but this is never guaranteed Value traps A value trap is a stock that looks cheap but actually isn't. This is primarily because your analysis of a company's figures is based on historical performance and not future prospects. Two key value trap situations to be aware of are: Stocks in cyclical industries – think construction, mining or oil. These tend to see earnings rise during boom times and collapse during recessions. If shares in these companies are low compared to past earnings, this is often because markets are pricing in weaker future performance.⁴ Stocks relying on patents – think pharmaceuticals or tech companies. If a drug company relies on one patented drug that is going to come off patent soon, much of its profits can rapidly disappear. Value traps are not always easy to spot. The key point is that you should consider a forward-thinking analysis before placing a trade. How to start value investing Create your live account in minutes Choose fully managed IG Smart Portfolios or share dealing if you want to pick your own value stocks If you choose share dealing, conduct further research into your proposed value stock, how to diversify your portfolio and how to manage risk If you choose IG Smart Portfolios, we will ask some questions to assess your risk tolerance Invest a lump sum or set up a regular instalment to fund your account New to investing? Open a demo account to build your confidence. Value investing summed up value investing involves buying stocks that appear to be trading for less than their intrinsic value value stocks are usually undervalued, have low P/E ratios and high dividend yields the risk-to-reward ratio is generally favourable, assuming correct analysis and a large margin of safety a key risk is the value trap, where a stock looks undervalued but actually isn't you can buy shares with us directly or open a fully managed IG Smart Portfolio

Nikkei 225 has been the clear outrunner year-to-date, surging more than 30% to cross the 33,000 level for the first time since 1990. What’s ahead for the index? Source: Bloomberg Indices Japan Investment Nikkei 225 Corporate governance Market trend Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 21 June 2023 Nikkei 225 has been the clear outrunner year-to-date Year-to-date, the Nikkei 225’s performance has way towered above its peers, surging more than 30% to cross the 33,000 level for the first time since 1990. With the index failing to deliver a new record high for more than 30 years ever since its asset price bubble's collapse in the 1990s, expectations are mounting that an era shift is in the making. A series of catalysts are on the radar, which include a corporate governance overhaul, hopes that Japan will break free from its deflationary cycle to being a beneficiary of supply-chain diversification with souring US-China relationship. Not to mention the endorsement from Warren Buffett, who has just recently increased its stake in five major Japanese trading firms (8.5% versus 7.4% in April) as a show of conviction for their longer-term outlook. Shift in corporate governance may be a multi-year tailwind Fundamental weaknesses in corporate governance have traditionally served as a deterrence towards Japanese stocks over the past decade, as past experiences from the "post-bubble blues" have instilled a long-lasting culture of heavy capital accumulation while deprioritising shareholders’ returns. That could seem to head for a change, as markets are finally seeing more forceful action from the Tokyo Stock Exchange in improving capital efficiency. Listed companies with a price-to-book ratio below one are in the crosshair, having to be held accountable for their cost and efficiency of capital. Threats of potential delisting may add to the clear resolve from authorities for a change. No doubt it may be too premature to deem that the reforms will be a success and attempts for a change have failed many times before, but it will be looked upon as a step in the right direction. More follow-up efforts among companies in terms of share buyback announcements and more shareholder-friendly stances will be on the lookout as indications of progress, which may support further re-rating from current undervalued state and lift the longer-term appeal of Japanese stocks. Foreign investment for Japan’s equities has turned in an 11th-week net-buying streak Foreign investors have been convinced thus far, as Japanese equities witnessed its 11th straight week of net-buying – a phenomenon which has not occurred since March 2013. Considering that investors (eg. fund managers) tend to build up their exposure over a period of time, further shift in allocations to Japanese equities may continue to provide some support for the index, with any dips potentially deemed as a buying opportunity. A ramp-up in foreign investment (or foreign share ownership) in these companies may also translate to mounting pressure to place more focus on profitability and efficient capital allocation, which seems to feed into the drive for improving corporate governance as well. Source: Ministry of Finance, Japan Risks: Hopes of sustainable inflation still a black box, policy pivot on the radar A continued pull-ahead in Japan’s “core core” inflation to its highest level in more than 30 years has also given hopes that Japan may be able to break free from its deflationary cycle. But considering that improving wage dynamics has not been broad-based, much may still be up in the air for now. Nevertheless, a policy pivot from the Bank of Japan (BoJ) seems to be a question of when and not if. We have seen a surprise tweak to its yield curve control (YCC) policy last December, which prompted a 3% intra-day plunge in the Nikkei. Therefore, any further moves could trigger a bout of volatility in the index, with any higher bond yields reducing the traction in holding equities. At least for now, expectations are that conditions could remain accommodative over the next two meetings, which allow market participants to put the consequences of any policy pivot in the backseat for the time being. Technical analysis – Bullish flag formation as continuation pattern on monthly chart, near-term moves guided by 20-day MA The Nikkei 225 has been retaining its strength lately, as the Relative Strength Index (RSI) has managed to revert from overbought to more neutral territory without much of a dip this week. A bearish crossover was formed on its moving average convergence/divergence (MACD), but previous attempts for a bearish cross (1 June 2023, 9 June 2023) has proven to be a bear trap, which provides less conviction that it should be looked upon as a solid guide. Perhaps one to watch in the near term will be its 20-day moving average (MA), which has been supporting the index steadily over the past two months. As long as the fundamental outlook stays intact, any retracement on profit-taking activities may still be met with dip-buying, with a series of support lines (20-day MA, 50-day MA, Ichimoku cloud) aiding to drive the formation of any higher low as a continuation of its prevailing upward trend. Source: IG charts On the monthly chart, a bullish flag formation has been presented, which serves as a continuation pattern for its upward trend. The trading target as derived from the projection of a proportionate distance from the breakout level points to the potential for the index to deliver a new record high, but nevertheless, shorter-term focus will be on its December 1989 top at the 38,900 level. Source: TradingView

Early Morning Call: anticipated actions of the BoE after the UK CPI surpasses expectations UK consumer prices continue to put pressure on the Bank of England. Jeremy Naylor | Analyst, London | Publication date: Wednesday 21 June 2023 UK consumer price index and the BoE UK consumer prices continue to put pressure on the Bank of England (BoE). The headline consumer price index rose 8.7% in May year-over-year (YoY), higher than the 8.4% expected. This arrests the downward trend in headline UK inflation figures, which had been falling after a peak of 11.1% last year. The Office for National Statistics says that rising prices for "air travel, recreational, and cultural goods" helped keep inflation high. The core consumer price index (CPI) came in at 7.1% YoY, the highest since March 1992. The Bank of England is due to decide on its rates on Thursday. Central banks The Bank of Japan (BoJ) must ensure its policy "does not fall behind the curve." This was the comment of one of the nine board members when discussing the BoJ decision last April. BoJ policymakers agreed to keep ultra-low interest rates given ongoing uncertainties over the global economies, but it was noted that wages and inflation were already showing signs of accelerating. Yesterday, the Swedish krona slumped to a record low against the euro on a combination of global risk aversion and expectations that the nation's central bank is close to wrapping up its year-long interest rate hiking cycle. Bloomberg says the jury is out among analysts on whether further losses are possible, with both RBC Capital Markets and Nomura International seeing the year ending around current levels. Equities market On the equity market, Berkeley Group posted a nearly 10% jump in its annual profit. The British high-end homebuilder reported a pre-tax profit of £604 million, compared with £551.5 million reported a year earlier. The homebuilder had forecast a pre-tax profit of about 600 million pounds. FedEx FedEx saw shares fall 2.5% in extended trade last night. It was among the businesses that benefited from the Covid lockdown, as consumers had to rely heavily on online shopping. Since then, the picture has been very different for the sector. Consumers have returned to stores, and now shippers are dealing with high costs as the global economic slowdown weighs on demand even further. To protect its margins, FedEx had no other option but to slash costs. In the last fiscal year, FedEx slashed 29,000 jobs, retired 18 planes, and closed offices. It also reduced its Sunday deliveries. All this will cut $4 billion in permanent costs by the end of the 2025 financial year. This had a mixed effect on earnings and sales. Earnings came in better than expected at $4.94 per share, but revenue was lower at $21.90 billion. In the new fiscal year, FedEx intends to carry on with cost-cutting and now plans to ground 29 more planes. The group forecasts flat to low-single-digit revenue growth versus the prior year. That would put the range of adjusted earnings, excluding items, at $16.50 to $18.50 per share, compared to analysts' estimates of $18.31. Tesla Tesla is joining the growing list of companies that wants to invest in India. Elon Musk met with Indian Prime Minister Narendra Modi Yesterday in New York. "I am confident that Tesla will be in India and will do so as soon as humanly possible," Musk said when asked by reporters about Tesla's plan to invest in India, adding he intended to visit the country next year. "India has more promise than any large country in the world. He (Prime Minister Narendra Modi) really cares about India because he's pushing us to make significant investments in India, which is something we intend to do. We are just trying to figure out the right timing," Musk said. This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

How high can Microsoft’s stock climb? Source: Bloomberg Shares Microsoft Price Artificial intelligence Share price Market trend Chris Beauchamp | Chief Market Analyst, London | Publication date: Monday 19 June 2023 AI drives Microsoft share price to new all-time record high Microsoft Corp (All Sessions), which has surged 45% this year, might initially seem to be an unlikely beneficiary of the AI frenzy currently consuming financial markets. But as OpenAI’s largest shareholder and with plans to overhaul its entire Office suite, Microsoft seems to be well-placed to reap significant rewards from the move to artificial intelligence. Microsoft’s most recent earnings saw the company beat expectations for both sales and earnings per share, with the cloud computing component once again driving performance. The division provided $22.1 billion of Microsoft’s $51 billion overall revenue. At 37 times earnings Microsoft does not fall into the ‘cheap’ category, and a dividend yield of 0.78% is not one that will excite income investors, but its outlook for earnings growth over time continues to look compelling. How to trade the Microsoft share price? Source: Refinitiv Refinitiv data shows a consensus analyst rating of ‘buy’ for Microsoft – 19 strong buy, 25 buy, 8 hold and 1 strong sell - with the median of estimates suggesting a long-term price target of $340.00 for the share, roughly where the share is trading at the moment (as of 16 June 2023). Source: IG IG sentiment data shows that 72% of clients with open positions on the share (as of 16 June 2023) expect the price to rise over the near term, while 38% of clients expect the price to fall with trading activity over this month showing 51% of sells. Technical analysis on the Microsoft share price Last Friday Microsoft intraday rallied to a new all-time record high at $351.47 before closing at $342.33, marginally below its November 2021 peak at $349.67. Microsoft Share Price Weekly Chart Source: Tradingview On the daily chart the Microsoft share price doesn’t look quite so rosy, though. The reason for this is that last week’s high has not been accompanied by a higher reading of the Relative Strength Index (RSI) which from its early June high is pointing downwards and thus creates negative divergence. In the majority of cases negative divergence on the daily RSI acts as an early warning sign of at least a short-term correction against the trend being seen and sometimes points to significant top being formed. For the Microsoft share price it means that, as long as Friday’s all-time record high at $351.47 isn’t overcome, Friday’s Dark Cloud Cover on the daily candlestick chart is likely to lead to the early June lows at $322.50 being revisited. Microsoft Share Price Daily Chart Source: Tradingview If this level were to give way on a daily chart closing basis, a more pronounced correction may take the stock back to its 2023 uptrend channel support line and 55-day simple moving average (SMA) at $313.66 to $308.78 which are expected to hold. Investors may make the most of the possible short-term correction lower in the Microsoft share price to buy the dip or add to their long positions as the medium- and long-term trends remain clearly bullish. The medium-term uptrend would only come into question if a bearish reversal would take the Microsoft share price to below its $275.37 late April low, something which is very unlikely to happen anytime soon. Instead, once the anticipated correction is done and dusted, a new all-time should be made in the Microsoft share price with the minor psychological $400 mark representing a possible long-term upside target.

Tesco's share price remains flat after the UK’s grocery market leader reported resilient first quarter earnings. Where next for the FTSE 100 stalwart? Source: Bloomberg Indices Shares Tesco Inflation Retail FTSE 100 Charles Archer | Financial Writer, London | Publication date: Saturday 17 June 2023 Tesco shares (LON: TSCO) have seen some serious volatility considering the FTSE 100 company’s reputation as the bellwether for the UK’s retail economy. With a 27.1% market share according to Kantar, the FTSE 100 stock has risen by 15.2% year-to-date to 264p, having seen a low of 201p in October 2022 and a high of 303p in January 2022. But with many analysts considering that the worst of inflation is now behind us — CPI stands at 8.7%, down from a high of 11.1% in October 2022 — Tesco’s share price may be due for further recovery. Tesco shares: Q1 results For the 12 weeks ending 27 May, Tesco saw like-for-like sales rise by a solid 8.8% to £13.79 billion, driven primarily by high inflation in the UK, but held back by much lower growth in central European operations as the Hungarian government withdrew significant consumer stimulus. Tesco has advanced in four key areas. First, in the core UK business, it saw large store sales ‘particularly strong,’ with sales rising by 9.9%. Second, online sales grew by 8.2% as the FTSE 100 retailer saw its online market share rise by 75bps to 37.5% — and given the trajectory this could continue to rise over time. Third, it’s carefully targeting price-conscious consumers with 700 products now price matched to ‘discounter’ Aldi — which has been slowly stealing market share over the years — and seeing ‘strong volume response’ to its Low Everyday Prices price-lock scheme on over 1,000 products. But fourth, it’s also winning custom from wealthier customers, with a ‘ninth consecutive period’ of switching gains from premium retailers. For context, Finest sales rose by 14.9% after the retailer launched 126 new lines. It’s also worth noting that the Booker wholesaling distributor business saw significant growth with retail sales up by 15.6%. FTSE 100 shares: where next for Tesco? CEO Ken Murphy enthuses that Tesco is ‘well-positioned for the months ahead and we are reiterating our guidance for the full year.’ The anticipation is for ‘a broadly flat level of retail operating profit in 2023/24 and retail free cash flow within our target range of £1.4 billion to £1.8 billion.’ Of course, this a fairly large range — but perhaps reflects the uncertainty in the UK’s macroeconomy with inflation uncomfortably elevated and the base rate at 4.5% — both far higher than most analysts had predicted at this point last year. Indeed, Murphy notes that ‘many of our customers continue to face significant cost-of-living pressures...(but) there are early encouraging signs that inflation is starting to ease across the market.’ Food inflation currently stands at 19%, and though this is middle of the range across Europe, food remains one of the only areas of spending where consumers can cut back to value. The CEO has asked the government to help tackle inflation by easing Brexit-related regulations, and even wants business rates reduced, which have doubled over the past decade and cost the FTSE 100 company £700 million over the last year alone. However, Murphy also notes that even if inflation starts to dip amid rising wages, ‘it is unlikely prices will return to where they were.’ But the situation is perhaps better than first appears; most shoppers are down switching to own-label goods, or from fresh to frozen, such that personal inflation rates may be below the official 19% figure. In addition, the growth of sales at larger shops reflects bulk buying — even though overall sales are still falling. With the company winning market share from the likes of Marks & Spencer, Waitrose, and Ocado, Bloomberg Intelligence analyst Charles Allen considers that inflation remains a ‘huge factor’ for the FTSE 100 chain. Meanwhile John Choong at Investing Reviews points out that even though the update was ‘encouraging...(and) the growth rate is impressive by historical standards, this is mainly due to inflation boosting those figures.’ RBC Brewin Dolphin’s John Moore is more bullish, arguing that ‘Tesco is strengthening its grip on its position as the UK’s top supermarket... with life likely getting tougher for its leveraged rivals, like Asda and Morrisons.’ The FTSE 100 retailer remains the bellwether stock for the wider sector. A strengthening economy could see increased revenue, while weaker overall growth could see it continue to gain market share. In the low margin, highly competitive world of food retailing, the blue-branded operator remains the market leader for a reason. And recent volatility means that Tesco shares remain some way off their relatively recent high. Of course, volatility cuts both ways.

The Week Ahead Read about upcoming market-moving events and plan your trading week Week commencing 19 June Chris Beauchamp's insight This week’s focus will be squarely on the UK. With the Federal Reserve (Fed), European Central Bank (ECB) and Bank of Japan (BoJ) out of the way investors will turn their eye to the UK economy. Inflation and then the Bank of England (BoE) rate decision are sure to be points of note, as the latter continues its fight to bring the former under control. Testimony from Jerome Powell may touch on the outlook for US monetary policy, and on Friday flash purchasing managers’ indices (PMI) will provide fresh insight into the global economy. Corporate news is lighter, though FedEx earnings can provide a clue on the global economy, and UK investors will be interested to see what insights Whitbread provides on the state of UK consumer spending. Economic reports Weekly view Monday Juneteenth holiday – US markets closed None Tuesday 1.30pm – US housing starts & building permits (May): starts to fall 1.2% and permits to rise 0.6%. Markets to watch: USD crosses Wednesday 7am – UK CPI (May): prices to rise 8.4% YoY from 8.7% and 0.4% from 1.2% MoM. Coire CPIU to rise 5.8% YoY from 6.8%. Markets to watch: GBP crosses Thursday 12pm – Bank of England rate decision: rates expected to rise 25bps to 4.75% as the bank reacts to strong UK wage data. Markets to watch: GBP crosses 1.30pm – US initial jobless claims (w/e 17 June): claims rose to 262K in the preceding week. Markets to watch: USD crosses 3pm – eurozone consumer confidence (June, flash): expected to rise slightly to -17. Markets to watch: EUR crosses 3pm – Jerome Powell testimony: the Fed chair may look to comment on the future path of US rates. Markets to watch: US indices, USD crosses 3pm – US existing home sales (May): sales to fall 0.5% MoM. Markets to watch: USD crosses 4pm – US EIA crude oil inventories (w/e 16 June): stockpiles rose by 7.9 million barrels in the preceding week. Markets to watch: Brent, WTI Friday 12.3am – Japan CPI (May): prices to rise 3.2% YoY from 3.5%. Markets to watch: JPY crosses 7am – UK retail sales (May): sales to rise 0.5% MoM and fall 2.4% YoY. Markets to watch: GBP crosses 8.30am – German PMIs (June, flash): manufacturing PMI to fall to 43. Markets to watch: EUR crosses 9am – eurozone PMIs (June, flash): manufacturing to rise to 45.2 and services to hold at 55.1. Markets to watch: EUR crosses 9.30am – UK PMIs (June, flash): services to fall to 54.4 and manufacturing to fall to 46.5. Markets to watch: GBP crosses 2.45pm – US manufacturing & services PMI (June, flash): manufacturing to rise to 49.7 and services to fall to 53. Markets to watch: US indices, USD crosses Company announcements Monday 19 June Tuesday 20 June Wednesday 21 June Thursday 22 June Friday 23 June Full-year earnings Berkeley Mulberry, DS Smith Half/ Quarterly earnings FedEx Carnival Trading update* Sthree Whitbread Dividends FTSE 100: 3i, Airtel Africa, British Land, Experian, United Utilities FTSE 250: Mercantile Inv Trust, Tate & Lyle, discoverIE, MITIE, Personal Assets Trust Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days. Index adjustments Monday 19 June Tuesday 20 June Wednesday 21 June Thursday 22 June Friday 23 June Monday 26 June FTSE 100 3.47 Australia 200 0.2 0.1 2.9 Wall Street US 500 0.03 0.29 0.39 0.04 0.10 Nasdaq 1.93 France 40 8.1 0.2 Netherlands 25 EU Stocks 50 2.6 China H-Shares 5.1 8.3 0.7 2.9 Singapore Blue Chip Hong Kong HS50 9.2 15.1 1.3 5.3 South Africa 40 20.1 Italy 40 2.3 Japan 225

The week has begun with losses across Asian markets, as the prospect of a US holiday drains liquidity from the systems and leaves investors wondering what comes next. Risk had a good week overall last week, rallying despite what seemed to be a more hawkish Fed, but some caution has set in today. The week sees the latest Bank of England rate decision, while Jerome Powell will also give testimony to US lawmakers on Wednesday and Thursday.

Charting the Markets: 15 June Brent crude oil, silver and copper drop on hawkish Fed. EUR/USD, GBP/USD and USD/CAD amid hawkish Fed forecast. And Dow and CAC40 drop back from weekly highs but Nasdaq 100 holds up well. Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 15 June 2023 This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

Hi @Agarwal Thanks for sharing your analysis on EURAUD All the best - MongiIG Take a quick poll and vote

The Federal Reserve maintained interest rates unchanged in June’s FOMC meeting. However, what came as a surprise to the market were the following three crucial signals delivered by the Federal Reserve. Source: Bloomberg Federal Reserve Forex United States Inflation United States dollar Interest rate Hebe Chen | Market Analyst, Australia | Publication date: Thursday 15 June 2023 FOMC June meeting message No.1：More than one hike is underway Federal Reserve maintained interest rate within the current range of 5% to 5.25% in June rate meeting, as expected. The explanation provided was that the Federal Reserve needed time to assess the lagging impact of the previous ten consecutive rate hikes. While the market had widely anticipated another rate hike in July, it seems that the Federal Reserve has more in store. Notably, in the post-meeting press conference, the Fed Chair indicated that more rate hikes might be necessary to bring inflation back to the 2% target range. Another clear evidence of this stance is the release of the Fed's interest rate projections for the next three years. The Fed increased its projected rate peak for 2023 from 5.1% (as forecasted in March) to 5.6%. This implies that if there is a 25 basis point hike in July to 5.25%-5.5%, the Federal Reserve may consider another rate increase in the fourth quarter. FOMC June meeting message No.2：Inflation will persist for longer than expected Despite the recently released CPI data suggesting a significant easing in inflation in May, reaching the lowest point in two years, it appears that the Federal Reserve remains cautious. The opening paragraph of their latest statement explicitly states that inflation remains elevated. Furthermore, the Federal Reserve predicts that core inflation will be higher than previously expected. This is reflected in their economic projections, where they raised the terminal forecast for the Core Personal Consumption Expenditures (Core PCE) index in 2023 from 3.6% to 3.9%, and in 2025 from 2.1% to 2.2%. The primary concern of the Federal Reserve regarding inflation's "stickiness" stems from the labor market. According to their forecasts, the US unemployment rate is expected to remain below 4.6% for the next three years, indicating a persistently low level. FOMC June meeting message No.3: Economy is strong now but will slow from 2024 Regarding the economic outlook, the Federal Reserve displayed strong confidence in the June meeting. Despite the recent crisis-like events, from US regional banking crisis to US government's debt ceiling turmoil, the Federal Reserve seemly believes these events have had no significant impact on the economic prospects. On the contrary, the central bank predicts better-than-expected performance for the US economy in 2023, leading to a substantial upward revision of the GDP growth target from the initial median of 0.4% to 1%. As for when the economy might experience a slowdown, the Federal Reserve indicates that it is likely to occur in 2024. Consequently, they have revised down the economic forecast for 2024 from 1.2% to 1.1%, and they anticipate the effects to persist into 2025. USD Technical Analysis From a technical perspective, the USD dollar index has shown mixed signals. While the shorter-term hourly chart indicates a temporary uptick following the Fed's hawkish stance, the overall daily chart still reflects a downward trend. Currently, the USD is finding support above the 50-day moving average, providing short-term stability. However, the ability to hold above the 100-day moving average remains uncertain. In addition to maintaining above the 100-day moving average, the USD would need to break through the key level of 102.95 and effectively breach the downward trendline to have a chance of reversing the trend. If successful, the USD could potentially target the 103 level. US Dollar 1-hour Chart US Dollar Daily Chart

The conclusion of the June meeting has seen the Fed keeping rates on hold in a widely-anticipated move, but a high-for-longer rate outlook seems to be on the horizon. Source: Bloomberg Forex Indices Commodities Federal Reserve Federal Open Market Committee United States dollar Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 15 June 2023 Market Recap The conclusion of the June meeting has seen the Federal Reserve (Fed) keeping rates on hold at 5.00%-5.25% in a widely-anticipated move, but there is less conviction for markets that today’s move will mark the end of its tightening campaign. A hawkish takeaway came from the Federal Open Market Committee (FOMC) dot plot, with peak rate for 2023 revised to 5.6% from the previous 5.1%, which suggests another 50 basis-point (bp) of tightening by the end of this year. Rate forecasts for 2024 and 2025 were revised upwards as well, which seems to put a high-for-longer rate outlook on the horizon. The justification may come on the back of some persistence in inflationary pressures, with the Fed’s core Personal Consumption Expenditures (PCE) forecasts seen higher at 3.9% for 2023 compared to the 3.6% expected in March. Comments from Fed Chair Jerome Powell seem to add to the hawkish equation, saying that Fed rate cuts are a 'couple years out', at a time when broad market expectations were pricing for rate cuts by the end of the year. With the July meeting being deemed as a ‘live’ meeting from the Fed Chair, it will leave any rate decision to just a handful of inflation and labour data ahead. Current Fed funds futures continue to lean towards a 25 bp move in July, but its pricing for terminal rate at 5.25%-5.5% are still less hawkish than what the Fed has guided, which leaves any further recalibration on watch. Treasury yields were on a mixed tone, reflecting some indecision in the aftermath of the FOMC meeting. On the other hand, a high-for-longer rate outlook has not been well-received by gold prices, which saw a sharp paring in initial gains overnight. Intermittent bounces over the past one month have failed to find much of a follow-through, with prices hovering back near its two-month low around the US$1,940 level. Any breakdown to a new lower low may be in sight, which could reinforce its near-term downward bias. Its Relative Strength Index (RSI) continues to trend below the key 50 level, while a key trendline support in place since November 2022 has been invalidated, reflecting sellers in control for the present. Source: IG charts Asia Open Asian stocks look set for a slight positive open, with Nikkei +0.17%, ASX +0.31% and KOSPI +0.30% at the time of writing as market participants continue to digest the latest FOMC meeting. The economic calendar this morning has seen first-quarter gross domestic product (GDP) read from New Zealand dragging the country into a technical recession. A 0.1% decline quarter-on-quarter in 1Q, following a 0.7% decline in 4Q, is likely to provide further justification that the Reserve Bank of New Zealand (RBNZ) is done with tightening, which translates to some downward pressure on the New Zealand dollar. The day ahead will bring focus to Australia’s employment data, followed by a series of economic data out of China (industrial production, retail sales, fixed asset investment). Recent cuts to China’s short-term borrowing costs may drive hopes of a similar adjustment to the one-year Medium-term Lending Facility (MLF) rate later today, with the upcoming economic data likely to add to the recent series of downside surprises and reinforce a low-for-longer growth outlook in China. All three above-mentioned data are expected to display some moderation in year-on-year growth from April. Copper prices have managed to recover more than 8% since finding support at the US$7,940/tonne level. A reclaim of the RSI above the 50 level, along with a bullish crossover on moving average convergence/divergence (MACD) may point towards some upward momentum in the near term. That said, immediate resistance still stands at the US$8,600/tonne level for now. Greater conviction for a more sustained upside may have to come from a move above the Ichimoku cloud to signal an upward trend in place. On any downside, the US$8,250/tonne level may bring some support from an upward trendline in confluence with a Fibonacci retracement level. Source: IG charts On the watchlist: Knee-jerk reaction in the US dollar but more signs needed The FOMC meeting has brought about some volatility in the US dollar overnight, with the release of the dot plot triggering a 0.5% knee-jerk reaction mid-day before some gains were pared during the Fed press conference. Greater conviction for the bulls may have to come from an overturn of the lower-highs-lower-lows formation on the four-hour chart since the start of the month, with immediate resistance to overcome at the 103.12 level. For now, its RSI has headed below the key 50 level, along with a declining MACD, which calls for the need of a significant build-up in upward momentum to provide some conviction for the bulls as well. Any failure to tap on the hawkish tone from the FOMC meeting for any move higher over subsequent days could point towards ongoing exhaustion, which could place its May bottom in sight for a retest next. Source: IG charts Wednesday: DJIA -0.68%; S&P 500 +0.08%; Nasdaq +0.39%, DAX +0.49%, FTSE +0.10%

Early Morning Call: USD strengthens after Powell hints at another 50bp hike ahead of ECB rates The Fed Chairman signaled that borrowing costs may still need to rise by as much as half a percentage point by the end of this year. Jeremy Naylor | Analyst, London | Publication date: Thursday 15 June 2023 Fed rate decision The USD edged higher on Wednesday after the Federal Reserve's (Fed) rate decision. As widely expected, the US Federal Reserve kept its rate target at 5%–5.25%, the first pause after 10 consecutive hikes that took rates 500 basis points higher. But the fight against inflation is not over yet. For Jerome Powell, US growth and the job market are holding up better than expected, giving room for the Fed to continue its campaign to limit price rises. The Fed Chairman signaled that borrowing costs may still need to rise by as much as half a percentage point by the end of this year. An opinion shared with eight other officials, while three others feel borrowing costs need to go even higher. As for the market, the Chicago Mercantile Exchange (CME) Fed watch tool points to a 72% chance of a 25 basis-point hike next month, but contracts tied to the Fed's policy rate see the central bank delivering only one quarter-percentage-point increase by the end of the year. The decision was accompanied by economic projections. The Federal Open Market Committee (FOMC) sees the unemployment rate rising by the end of 2023 to 4.1% from the current 3.7%, lower than the 4.6% jobless rate officials projected in March. The 2023 economic growth projection was raised to 1% from 0.4% in March. The Core Personal Consumption Expenditure Price Index (PCE) is seen dropping from the current 4.7% to 3.9% by the end of 2023. That is higher than the 3.6% projected in March. The European Central Bank This Thursday, the European Central Bank (ECB) is in the limelight. Christine Lagarde is expected to announce a 25-basis-point rate rise before another one in July. Then the ECB is believed to go into "wait-and-see mode" for the rest of the year. This is according to a poll conducted by Reuters, which indicated that economists believe inflation across the single currency economies remains elevated. After 375 basis points of hikes over the past year, economic activity across the region has slowed, sending the eurozone into a technical recession. Macroeconomics A set of macroeconomic indicators released this morning reinforced the case that more stimulus is needed in China, the world's second-largest economy. China's industrial output rose 3.5% in May from a year earlier, missing expectations and slower than the 5.6% expansion recorded in April. Ditto for retail sales, up 12.7%, missing forecasts of 13.6% growth and slowing from April's 18.4%. Investment in the property sector declined, accentuated in the first five months of the year, down 7.2%. Private fixed-asset investment shrank by 0.1% in the period. And if the jobless rate remained at 5.2% in May, youth unemployment would jump to a record 20.8%. Two days after cutting two key short-term policy rates, China's central bank cut the borrowing cost of its medium-term policy loans by 10 basis points to 2.65%. The Reserve Bank of New Zealand The New Zealand economy has slipped into a technical recession. Gross domestic product (GDP) matched analysts' expectations of a 0.1% contraction in the March quarter but was well below the Reserve Bank of New Zealand's forecast of 0.3% growth. Furthermore, fourth-quarter GDP was revised to a contraction of 0.7% from a decline of 0.6%. This cuts the risk of more rate hikes but creates a new headwind for the government's re-election hopes. The Australian dollar overview The AUD is one of the most enduring bull stories today. In Australia, the job market was stronger than thought in May. The unemployment rate unexpectedly fell to 3.6% when economists anticipated it to remain at 3.7%. Full-time employment rebounded by 61,700 from April, and part-time employment also rose. Last week, the Reserve Bank of Australia (RBA) unexpectedly raised interest rates to 4.1% and signaled that further tightening could still be required to tame inflation. The strength of the job report supports the RBA's case, as a tight labor market will contribute to stronger wage growth. This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

The Fed duly 'skipped' at last night's meeting, leaving rates unchanged But they raised the terminal rate forecast to allow room for two additional rate hikes, jolting markets and giving the dollar a boost. After last night's excitement we now look towards the ECB meeting today, with the bank expected to lift rates once more. Overnight China cut its medium-term lending rate to 2.65%, following on from a similar cut to short-term rates earlier in the week. Industrial output and retail sales was weaker than expected in China last month, adding to the impression of a slowing economy. Aside from the ECB meeting, US weekly jobless claims and retail sales for May are released later.

Charting the Markets: 14 June Indices stall ahead of US Fed rate announcement. EUR/USD and AUD/USD push higher while USD/JPY consolidates. And WTI, gold bounce off support while natural gas continues to rise. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 14 June 2023 This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

WTI, gold bounce off support while natural gas continues to rise Outlook on WTI, gold and natural gas ahead of Wednesday’s Fed’s rate decision. Source: Bloomberg Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 14 June 2023 WTI bounces off support ahead of FOMC meeting WTI, which fell by over 9% from last week’s high, found support marginally above its late May $67.12 low on hopes for stronger demand from top importer China after its central bank lowered a short-term lending rate. Lower-than-expected US headline inflation also helped prop up the oil price as it supported bets for a pause in the Federal Reserve’s (Fed) interest rate hikes. A rise above Tuesday’s $69.95 high could lead to the April-to-June downtrend line at $72.34 being reached. Only a currently unexpected fall and slip through the $67.54 to $67.12 key support zone would void the short-term bullish outlook and put the May trough at $63.77 on the map. Source: ProRealTime Gold continues to range trade in low volatility with a bearish bias On Tuesday the gold price revisited last week’s high at $1,973 per troy ounce before selling off again towards the lower end of its sideways trading range as US inflation came in softer than expected. The precious metal is currently trying to remain above its May-to-June support line at $1,940. As long as it stays above it and last week’s low at $1,939, further range trading is on the cards. If, however, $1,939 were to be slipped through, the May low at $1,933 would be in focus, together with the psychological $1,900 mark. Only a rise above $1,973 would push the early June high at $1,983 and the 55-day simple moving average (SMA) at $1,988 to the fore. Source: ProRealTime Natural Gas Natural gas prices are heading back up again on concerns Europe will need to ship more gas to replenish its stocks. The front month natural gas futures price is approaching last week’s high at $2.415, a rise above which could lead to the April peak at $2.572 being reached over the coming weeks. Short-term upside pressure is expected to be maintained while Monday’s low at $2.247 underpins on a daily chart closing basis. Source: ProRealTime

Indices stall ahead of US Fed rate announcement Outlook on FTSE 100, DAX 40 and S&P 500 ahead of Wednesday’s FOMC meeting. Source: Bloomberg Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 14 June 2023 FTSE 100 continues to be range bound The FTSE 100 continues to sideways trade in a low volatility range as the British economy expands 0.2% in April, recovering from a 0.3% drop in March, and in line with expectations. The technical levels to watch for a potential break out of the range are Tuesday’s 7,611 high and last week’s 7,546 low and the 200-day simple moving average (SMA) at 7,545. While Friday’s low at 7,546 underpins, the late May and current June highs at 7,655 to 7,660 may still be reached. Source: ProRealTime DAX 40 ploughs ahead The DAX 40 is still trying to reach its May all-time high at 16,333 as German wholesale prices fall for a second straight month by 2.6% year-on-year in May. For the all-time record high to be reached, Tuesday’s high at 16,248 needs to be overcome. Short-term it acts as resistance and as long as it does, a slip back towards Monday’s high at 16,161 may ensue ahead of today’s US Federal Open Market Committee (FOMC) June rate decision and Thursday’s European Central Bank (ECB) anticipated 25 basis-point rate hike. Source: ProRealTime S&P 500 trades at levels last seen in April 2022 On Tuesday the S&P 500 rallied for a fourth consecutive day to its 14-month high at 4,375 ahead of Wednesday’s US Fed rate decision at which the central bank is widely expected not to hike its rates but rather do so in July. Above 4,375 lies the minor psychological 4,400 level and further up the 4,421 March 2022 peak. Slips should find support around the August 2022 peak at 4,325. If not, a break out of a rising wedge formation could lead to a swift reversal to the downside if last Thursday’s 4,257 low were to be fallen through as well. Source: ProRealTime

The BoJ is set to hold their monetary meeting across 15 – 16 June 2023, while speculations for a quicker policy shift from the BoJ have not been receiving much validation by policymakers. Source: Bloomberg Forex Bank of Japan Japan Inflation USD/JPY United States dollar Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 14 June 2023 What to expect at the upcoming Bank of Japan (BoJ) meeting? Speculations for a quicker policy shift from the BoJ have not been receiving much validation by policymakers thus far, as a continued dovish rhetoric from BoJ Governor Kazuo Ueda has led initial hawkish bets positioned for the new leadership change to fizzle out quickly. Patience is still the takeaway from the Governor’s recent comments to end last week, where he emphasised the need to continue with monetary easing as more work is still needed in attaining its 2% price target in ‘a stable and sustainable manner’. With that, current rate expectations have remained anchored for a no-change in policy rate for at least the next three policy meetings, with an almost-certain 98% probability being priced for its negative interest rate policy (NIRP) to continue this week. The showdown between bond traders and the BoJ has also fizzled off lately, with bond traders throwing in the towel on challenging Japan’s 10-year bond yield cap at 0.50% since May this year. Source: Refinitiv Pressures for a policy pivot still present, but not yet The next set of economic projections will only come during the July meeting, therefore clues on Japan’s growth and inflation outlook will have to be inferred from the Governor’s comments. Thus far, the reopening of borders has been a positive for corporate and household spending, but the strength will have to be pitted against a declining export growth outlook. The 2.6% read for April exports has translated to the weakest gain since February 2021. Overall, the economic surprise index for Japan remains in negative territory, providing some validation for accommodative policies to remain before a more sustained recovery picture is presented. Source: Refinitiv On the other hand, a continued pull-ahead in Japan’s “core core” inflation to more than two-fold its 2% target (4.1% in April 2023) has been constantly looked upon as an argument for a quicker policy shift by the hawks. But with the BoJ setting its sight on wage growth as a factor in its policy decision, a sustained move above the 2% level may be required on that front. Currently, it still sits at a subdued 1% growth, which could be tapped on by the central bank to justify its ‘transitory inflation’ view. Japan's wage dynamics could be due for a change over the coming months, however, with the shunto wage negotiations concluding with a 3.8% pay rise – the highest since 1993. Any uptick in the wage numbers will be one to watch moving forward. Source: Refinitiv USD/JPY: Rising channel pattern in place since the start of the year The USD/JPY has been trading within a rising channel pattern over the past months, with a reclaim of its 200-day moving average (MA) and Ichimoku cloud resistance suggesting that the bulls are in control. Since May this year, a renewed rise in US Treasury yields has been supporting a widening yield differential with the Japanese 10-year Government Bond (JGB), which aided to uplift the pair to a new six-month high. With the US 10-year yield hovering at its three-month high ahead of the upcoming Federal Open Market Committee (FOMC) meeting, any break to a new higher high may translate to an in-tandem rise in the USD/JPY. Near-term, recent moves for the pair seem to be in consolidation mode, largely on some wait-and-see as the Federal Reserve’s (Fed) decision looms. The formation of a bullish pennant is still presented however, leaving any break above the pennant on watch to provide further upside to the upper channel trendline resistance next (142.00 level). On the downside, any breakdown of the pennant could leave the 137.00 level on watch for any formation of a new higher low. Source: IG charts

The yen remains close to its recent low against the US dollar which is feeding into the Nikkei's rally. Jeremy Naylor | Analyst, London | Publication date: Wednesday 14 June 2023 There's a Bank of Japan rate decision on Friday, but it's not likely to yield a move up in rates despite a rise in inflation, according to economists who want to see a rise in wages first. The Federal Reserve Decision (Fed) is expected to pause tonight, but the European Central Bank (ECB) is forecast to raise rates on Thursday by 25 basis points, and another hike is forecast at the bank's July meeting. This means that the yen is likely to set a new 15-year low against the euro. Against the pound, the yen has been falling pretty much constantly this year, and Tuesday's strong UK job report gave more room to the BoE to keep its tightening cycle going. IGTV’s Jeremy Naylor looks at USD/JPY, EUR/JPY, and GBP/JPY. (Video Transcript) Nikkei One of the big winners in terms of global equity markets has been the Nikkei, which rose to 25 rising to 33-year highs. Part of this has been the weakness of the Japanese yen. The Nikkei is full of exporters, and weakness in the local currency means that they find it easier to get the external markets going in terms of sales. And then, when they get the money back onto their balance sheets, it means more because of a weaker currency. Let's look first at the Nikkei to 25 before taking a look at the Japanese yen. This has been the move up that we've seen to these 33-year highs at 33,607. And it's continuing today as we go into the middle of the European trading day on the markets. These are 24-hour markets, and the Nikkei, as you can see, will continue to trade on the upside. But I think it's really all about this weakness in the Japanese yen. USD This is the USD traded against the yen in September and October. You remember that Japan's finance ministry intervened three times when the Japanese currency hit levels not seen since 1990. You can see the spike up that we've seen in this chart here. There's still a way to go from where we are back to those levels. But if the differential between the Bank of Japan's rates and those of other central banks continues to widen, it's likely the yen will weaken further. And some market watchers are already predicting more intervention. Now, if there's no move expected today from the Fed, certainly there is more expected to come to light in July and possibly August, as well as the Bank of Japan rate decision on Friday. Japanese economy But it's not likely to yield a move up in rates despite a rise in inflation across the Japanese economy. According to economists who want to see a rise in wages, there are other areas of the market as well, which I think are more interesting than the USD/JPY. This is the EUR trading against the Japanese yen. Recently, we've seen levels not seen in almost 15 years, and that continues to be the case. And we're very close now, with the euro trying to break through into new 15-year highs against the Japanese currency. While the Fed is not expected to pause today, the European Central Bank (ECB) is forecast to raise rates on Thursday by 25 basis points, and another hike is forecast at the bank's July meeting. Now this means the yen's likely to set new 15-year lows against the euro. I suspect I will break this line at 5162. Where it goes from there, well, there's only upside potential to go that way, possibly up to 169. But it doesn't stop there either, because we've got another central bank that's raising interest rates against the Bank of Japan, and that is the Bank of England. The Bank of England The Bank of England is widely expected to continue to raise interest rates. Now, some economists are forecasting 150 basis points, potentially over the next 18 months or so, from the Bank of England as it tries to combat inflation. And this means that there's an opportunity here, I think, to go short yen against sterling as well. Sterling is rising now. There you can see levels not seen: 170, 60, and 65. The last time we saw these levels was in January 2016. So, you can see lots of reasons I think to go short on the Japanese yen against other developed economy currencies.

Further cooling in US inflation reflects some degree of success in policy moves thus far and provides room for the Fed to put on some wait-and-see at the upcoming FOMC meeting. Source: Bloomberg Forex Indices Inflation Federal Reserve Federal Open Market Committee GBP/USD Yeap Jun Rong | Market Strategist, Singapore | Publication date: Wednesday 14 June 2023 Market Recap Major US indices continue to add to recent gains overnight (DJIA +0.43%; S&P 500 +0.69%; Nasdaq +0.83%), as further cooling in US inflation reflects some degree of success in policy moves thus far and provides room for the Federal Reserve (Fed) to put on some wait-and-see at the upcoming Federal Open Market Committee (FOMC) meeting. An almost-certain 90% probability that rates will be put on hold this week is being priced by the Fed Funds futures, although expectations still largely lean towards a 25 basis-point (bp) upward adjustment in rates in July. A 0.4% increase in core inflation from the previous month may be the reason behind it by pointing to some lingering prices’ stickiness. But nevertheless, the broader trend of moderating inflation suggests that we are still heading towards the final phase of the Fed’s tightening cycle, with one-off policy tweaks at best. With expectations largely priced for a rate-pause scenario, more focus will be policymakers’ guidance and the fresh economic projections to determine what comes next. A more data-dependent stance and wordings around policy flexibility from the Fed may be looked upon as less hawkish. On the other hand, if terminal rate projection were to be revised higher alongside inflation estimates, it could paint a high-for-longer rate outlook and reignite hawkish concerns. US Treasury yields were broadly higher, with the two-year yields delivering a new three-month high despite an initial decline. The rise in both nominal and real US yields kept the downward pressure on gold and silver prices overnight. Following an initial move higher, gains in silver prices were quickly pared through the day, with the formation of a long-tailed bearish candle pointing to the strong presence of sellers. Prices are struggling to hold above a near-term rising channel pattern for now, with any failure to defend the lower channel trendline support potentially paving the way towards its May 2023 low. Source: IG charts Asia Open Asian stocks look set for a positive open, with Nikkei +0.75%, ASX +0.32% and KOSPI +0.03% at the time of writing. A surprise cut in China’s short-term policy interest rate suggests that recent economic weakness is turning more of a concern for Chinese authorities, which may pave the way for more policy moves to come, with all eyes on the one-year medium-term lending facility (MLF) rate this Thursday. While a further dip into accommodative policies may be welcomed by investors, upside reaction could still remain more tepid, with clearer indications of policy success on the lookout to provide greater conviction on a sustained recovery. Having traded on a descending wedge pattern since the start of the year, the Hang Seng Index is back to retest the upper trendline resistance, with a 9% gain month-to-date gain building on hopes that further support stimulus will kick in to lift growth. That said, a series of resistance remains in the way to drive the risks of the formation of a lower high, with the 19,600 level serving as immediate resistance to overcome. Much awaits, with the Relative Strength Index (RSI) crossing back above the key 50 level but sustaining above it will be key for now to keep buyers in control. Source: IG charts On the watchlist: GBP/USD at one-month high as hawkish bets mount Surprise strength in the UK job numbers has translated into gains in the GBP/USD overnight, as rate expectations for the Bank of England (BoE) recalibrated to price for more rate hikes from the central bank over subsequent meetings. A higher-for-longer rate outlook is the takeaway, with some pricing that rate could end at 6% by the end of this year, which is another 150 basis-point increase from the current 4.5%. This was followed by comments from the BoE Governor Andrew Bailey pointing to more sticky inflation, which reinforces the need that more needs to be done. The GBP/USD has pushed to a new one-month high overnight, with a bullish crossover on moving average convergence/divergence (MACD) and its RSI trending above the key 50 level pointing to an upward bias for now. The pair has been trading within an ascending wedge pattern since October last year, with further upside potentially leaving the upper wedge trendline at the 1.276 level on watch for a retest. Ahead, focus will shift towards the FOMC meeting, which leaves any moves in the US dollar as greater catalyst in driving the pair. Near-term support may be at the 1.248 level, where the lower wedge trendline stands. Source: IG charts Tuesday: DJIA +0.43%; S&P 500 +0.69%; Nasdaq +0.83%, DAX +0.83%, FTSE +0.32%

Early Morning Call: global indices rise ahead of Fed decision Equity markets continued to rise around the globe in Tuesday’s session after slowing US inflation supported the market’s expectations of a Fed pause at 5%–5.25%. Jeremy Naylor | Analyst, London | Publication date: Wednesday 14 June 2023 Equites overview Equity markets continued to rise around the globe in Tuesday’s session after slowing US inflation supported the market’s expectations of a Federal Reserve Decision (Fed) pause at 5%–5.25%. US consumer price index decelerated more than expected. Headline the consumer price index (CPI) rose by 4% in May year-over-year (YoY), the smallest increase in more than two years. It is undeniable that the effects of the Fed rate hikes are felt more and more, justifying a pause. However, core CPI remains sticky. It came in line with expectations, up 5.3% YoY, 1.3 percentage points higher than headline CPI, which suggests that the tightening cycle is not just over yet. Currencies overview There's a Bank of Japan (BoJ) rate decision on Friday, but it's not likely to yield a move up in rates despite a rise in inflation, according to economists who want to see a rise in wages first. The Fed is expected to pause tonight, but the European Central Bank (ECB) is forecast to raise rates on Thursday by 25 basis points, and another hike is forecast at the bank's July meeting. This means that the JPY is likely to set a new 15-year low against the EUR. Against the GBP, the JPY has been falling pretty much constantly this year, and Tuesday's strong UK job report gave more room to the Bank of England (BOE) to keep its tightening cycle going. The British economy expanded 0.2% month-over-month (MoM) in April, rebounding from a 0.3% drop in March and in line with expectations. The services sector was the main contributor to the growth, led by wholesale and retail trade and the repair of motor vehicles and motorcycles, while manufacturing and construction shrank. Industrial production fell by 1.9% in April YoY, marginally missing expectations. Construction output was up 3.6% YoY. Shell dividend Shell announces it will increase its dividend by 15%, starting in the second quarter of the year. Shell CEO Wael Sawan, appointed in January, is working at regaining investor confidence and announces a $5 billion share buyback program to start in the second half of 2023, up from $4 billion in recent quarters. Annual operating costs are also to be reduced by $2–3 billion by the end of 2025. This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

Markets will spend the day in anticipation of the Fed decision tonight, following on from yesterday's softer inflation data that has seen expectations of any further hikes revised down. Much will hang on the language around the decision, focusing on whether this is still a 'pause' (viewed as more dovish) or a 'skip' (more hawkish). Given the gains in risk assets in recent days, such fine-tuning of the language could provoke significant volatility. While the Hang Seng fell back overnight, the rest of Asia was generally positive, the standout once again being the Nikkei, soaring 1.7% to hit fresh post-1990 highs. UK GDP grew by 0.2% in April, in line with forecasts, but the pound remains in strong form following yesterday's wage data.

Charting the Markets: 13 June Dow, Nasdaq 100 and Nikkei 225 all looking strong. EUR/USD, EUR/GBP and GBP/USD rise amid lower German inflation and UK unemployment. And Brent crude oil and silver stabilise while copper attacks resistance. Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 13 June 2023 This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

Fundamental and technical outlook on the Tesco share price. Source: Bloomberg Indices Shares Tesco Price Supermarket Moving average Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 13 June 2023 Tesco share price recovery to continue The recovery in Tesco PLC shares continues, and is backed by signs that UK consumers continue to increase their purchases of supermarket own brand products. As the dominant player in the UK supermarket space, with market share of 27%, Tesco is well-placed to benefit from a recovery in consumer spending if energy prices fall back as expected. While currently trading at 26 times earnings, Tesco’s net income has recovered in recent quarters, and the solid 4% dividend provides an additional attraction. A push towards cost savings will help support margins in the near-term, with hopes rising that the cost of living squeeze may ease in the second half of the year. Tesco shares have held steady since the resignation of their chairman, with the overall strategy of the group unaffected. How to trade Tesco’s Q1 trading statement Tesco, the United Kingdom-based multinational groceries and general merchandise retailer, is set to release its first quarter (Q1) 2023 trading statement on 16 June 2023. Source: Refinitiv Refinitiv data shows a consensus analyst rating of ‘buy’ for Tesco – 3 strong buy, 9 buy and 2 hold - with the median of estimates suggesting a long-term price target of 304.50 pence for the share, roughly 16% higher than the current price (as of 13 June 2023). Source: IG IG sentiment data shows that 94% of clients with open positions on the share (as of 13 June 2023) expect the price to rise over the near term, while 6% of clients expect the price to fall whereas trading activity over this week shows 83% of sells and this month 56% of buys respectively. Tesco technical outlook The Tesco share price has greatly outperformed that of the FTSE 100 by rising by nearly 15% year-to-date. Even though the Tesco share slipped through its October-to-May uptrend line and has been trading in a low volatility sideways trading range over the past three weeks, this isn’t overly concerning for the bulls. The reason is that the uptrend may simply flatten out, as is often the case, before resuming its ascent. Tesco Weekly Chart Source: Tradingview From a medium-term perspective, as long as the Tesco share price stays above its 200-week simple moving average (SMA) and its February low at 244.60 to 240.40 pence zone on a weekly chart closing basis, the overall uptrend remains intact. Tesco Daily Chart Source: Tradingview The short-term technical picture also remains bullish while the current June lows at 258.7p to 258.6p hold on a daily chart closing basis. While this is the case, the current sideways trading range can run its course before another up leg is eventually being made. For this to happen, the late May and current June highs and 55-day simple moving average (SMA) at 267.2p to 268.4p would need to be bettered. If so, the May peak at 285.3p would be back in the frame. A fall through and daily chart close below the current June low at 258.6p would probably lead to the late March price gap at 257.3p to 255.5p to get filled.

Marks and Spencer, Rolls-Royce, and Greggs could constitute three of the best UK shares to buy next month. Read the details below. Source: Bloomberg Indices Shares Marks & Spencer United Kingdom Inflation Brand Charles Archer | Financial Writer, London | Publication date: Thursday 08 June 2023 Throughout 2023, selecting some of the best UK shares to buy each month has remained somewhat of a challenge. This is hardly surprising given how the country’s economic forecasts continue to shift; this time last year, most analysts were expecting the base rate to peak at 3% at most, and it’s now at 4.5% and expected to continue rising. Partially, this is due to stickier-than-expected inflation, with the CPI rate still at 8.7%. While this figure fell from 10.1% between March and April, analysts had been expected a larger fall given the 2% jump between the same months last year. Worse still, core inflation, which strips out volatile items such as food, has risen from 6.2% to 6.8%. For context, in mid-March the Office for Budget Responsibility predicted a drop in CPI inflation to 2.9% by the end of the year. This now seems unattainable, with the Bank of England now expecting the crucial figure to hit 5% by December, and then 2% by year-end 2024. Simultaneously, dire recessionary warnings from multiple respected bodies seem to have dissipated, with the OECD now expecting the UK to avoid a technical recession. But while a recession may be averted, the UK’s economic headaches are not over. The tax burden —both for individuals and businesses — is now at its highest level since World War II. Corporation tax has risen for larger companies from 19% to 25% and the super-deduction has ceased, directly impacting AstraZeneca’s decision to build its new state-of-the-art factory in Ireland. Larger companies including CRH, Flutter, ARM, Shell, Ferguson, and BHP have either left London already or are considering it. ARM’s decision not to dual list in the UK is a particularly damaging problem, as this was the status quo before it was sold off to Softbank some years ago. Legal & General CEO Nigel Wilson recently referred to the UK as a 'low growth, low productivity, low wage economy,' while Marks & Spencer CEO Stuart Machin believes that London is on 'life support' following the removal of tax-free shopping for foreign tourists. One key issue is that the country is experiencing both low growth and high inflation. This danger zone is a problem, because the key to increasing growth is cutting interest rates, and the Bank is going in the opposite direction to curtail inflation. This all makes selecting some of the best UK shares to buy as we enter H2 2023 an art rather than a science. Best UK shares to watch 1. Marks and Spencer (LON: MKS) Marks & Spencer is an iconic heritage British retailer, operating within the home, clothing, and food sectors. The company saw a remarkable turnaround in recent full-year earnings despite the cost-of-living crisis and has risen by 51% year-to-date to 191p. Given that M&S shares were changing hands for as much as 257p in January 2022, there could be further recovery to come. The company saw revenue increase by 9.6% to £11.93 billion, while profit before tax rose by 21.4% year-over-year to £475.4 million. It achieved market share growth in both its food and clothing & home segments, outperforming peers in the supermarket industry, with solid 11.2% growth in clothing sales. This positive financial performance could now position the company to achieve an investment-grade credit rating, in addition to resuming dividend payments in November, providing added value to shareholders who bought the dip last year. Hoping for further growth, M&S aims to regain its position as a leading retailer and return to the FTSE 100. Last year, a YouGov poll named M&S the ‘UK’s most trusted brand,’ and given the growth, it seems to be regaining some of the unquantifiable brand strength it has lost over the years. 2. Rolls-Royce (LON: RR) Rolls-Royce has seen similarly positive share price movement thus far in 2023 — rising 50% year-to-date to 149p apiece. Much of this rise is down to the pandemic recovery; full-year results saw underlying operating profit rise by £238 million to £652 million, free cash flow increased by £2 billion to £505 million, and net debt fell sharply to £3.3 billion. Engine flying hours rose by 35%, driving up revenues in Rolls’ civil aerospace division which generates the lion’s share of revenue as normal European travel resumes. CEO Tufan Erginbilgic, who took over at the start of the year, has been fairly critical of the FTSE 100 company prior to his arrival. He’s labelled it a ‘burning platform,’ called the power system division ‘grossly mismanaged,’ argued that full-year results fell short of the company’s potential and believes that Rolls has the worst leverage he’s ever seen. A much-needed strategic overview is underway with goals to be set shortly — these will almost certainly include regaining its investment-grade credit rating, paying down even more debt and reinstituting dividends. There are interesting parallels with M&S, given both companies’ status as heritage businesses. One key catalyst going forward is the continued development of the UltraFan power gearbox, which not only runs on 100% sustainable aviation fuel but also delivers 10% efficiency savings over the current global standard, the Trent XWB. Erginbilgic has been careful to highlight the successful relationship between the company and government as it hopes to win further funding for its small modular nuclear reactors. 3. Greggs (LON: GRG) Greggs is as close to venerated as a UK bakery chain can be — like McDonalds, it has a certain indefinable brand presence, as shown by its recent tie-up with Primark. In Greggs’ most recent trading update, like-for-like sales rose by 17.1% to £609 million, while the chain also opened up 88 net new shops. With food inflation is hovering just under 20%, some analysts remain concerned about its ability to grow, but the company is still planning to open more shops and extend opening hours in its higher-traffic locations. Arguably, its value offering could benefit from consumers down switching their brand from more premium offerings, while simultaneously current customers view the occasional pasty as an affordable, if now slightly more expensive, treat. Liberum considers that sales could double over the next five years, while Barclays thinks that the company is a solid long-term compounder. One key risk, however, is that the rapid historical growth so far may make growth through H2 2023 and beyond look weaker by comparison.