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Walmart earnings and US wholesale inflation data are due

16 November 2022

Walmart is due to release Q3 earnings today. The big box retailer has issued multi-profit warnings across the year as it faces stubbornly high inflation, squeezed margins, and changes to consumer habits. These factors have created inventory issues and hit the bottom line. With household incomes squeezed, consumers have changed the way they spend, prioritizing essentials such as food and with less going on discretionary items. As a result, demand for general merchandise collapsed. On the plus side, more shoppers are coming through the doors. While previously lower-income shoppers shopped at Walmart, now everyone is looking to save. Expectations are for a 5.3% rise in revenue to $147.9 billion and a 9% year-on-year fall in adjusted EPS to $1.32.

Where might the Walmart price head to?

Walmart has been trending higher since late June, forming a series of higher highs and higher lows. The price trades above the multi-month rising trendline, the 50 & 200 smas, and the 50 sma is crossing above the 200 is a golden cross bullish signal. Could buyers look to rise above the $145 November high to extend the bullish trend? Meanwhile, sellers could be encouraged by the failure to rise above $145 and the fall below $139, the November low. Support could be seen a $135, the 50 & 200 sma ahead of $131, the rising trendline.

FTSE falls ahead of jobs data

After solid gains in the previous session, the FTSE is set for a modestly weaker start. The UK index, heavily weighted in resource stocks, is set to underperform its European peers after data shows China’s economy is losing steam. Both industrial production and retail sales miss forecasts as the economy struggles with ongoing COVID restrictions. Attention will also turn to UK jobs data which has remained resilient despite high inflation and a shrinking economy. Unemployment is forecast to remain steady at a historic low, and average wages are set to tick higher, although they remain well below inflation, deepening the cost of living crisis.

EUR/USD is rising, hovering around a 3-month high reached last week when cooler US inflation data fuelled bets that the Fed could raise rates less aggressively.  The euro is finding support from ECB Fabio Panetta’s comments that more rate hikes are needed, prompting bets of another large rate hike in December. The broad upbeat market mood following the Biden-Xi Jinping meeting is also helping the euro. Attention is now turning to Eurozone GDP data, the second reading for Q3, so it isn’t expected to be as market-moving as the initial reading. German ZEW economic sentiment is also due to be released and is expected to improve slightly in November after economic sentiment was less pessimistic than anticipated in October following the announcement of price breaks for gas and electricity, which helped stabilize sentiment.

Meanwhile, the USD could focus on US wholesale inflation data, PPI, which is expected to cool slightly. PPI is often considered a lead indicator for CPI inflation., so cooling PPI could be interpreted as dollar negative.


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