 Good morning. Welcome to CMC Markets on Friday, the 26th of January, and let's look at the week ahead beginning the 29th of January with me, Michael Hueson. Well, burning season is in full swing now. We've seen a number of reasonably positive updates this week, Netflix being a case in point, US markets continue to eke out further record highs, European markets, we've seen them look to reverse the damage of the early part of last week, but it's been slow progress higher with the FTSE 100 underperforming relative to its ears. And I think what we're seeing this week is a little bit of a divergence between what we're seeing in the US in terms of the economic data and what we're seeing in Europe. And I think the main concern for investors over the course of the past few days has been trying to navigate a path through a backdrop of disappointing economic numbers in Europe and a reluctance on the part of central banks to consider the prospect of early rate cuts. Now, obviously we've seen and we've had the European central bank this week, yesterday, in fact, we've got some important inflation numbers in the upcoming days out of Europe. We've also got some important four quarter GDP numbers out of Europe as well. And I think if we look at what Christine Lagarde said earlier this week, there was I think a slight change of tone from her while she would probably seek to deny it. She didn't actually close the door on the prospect of a rate cut in April. Yes, indeed, she reiterated her comments earlier this month to Bloomberg TV that rate cuts were not discussed. It was too early for rate cuts. The decision by the ECB didn't contain any surprises, rates left on hold, the accompanying press conference was a board word salad a jibber jabber in part. But I think one thing that she did say, which markets do appear to have reacted to was, you know, while the insistence of rate cuts was premature, she didn't push back on the idea of an earlier rate cut. She could have implicitly ruled out the prospect of an earlier rate cut than June, but she didn't do that. And I think that's important, particularly if you look in the context of the data that we've seen out of Germany this week, Germany and France, actually, the IFO survey was pretty awful. In January it pointed to a further decline in optimism about the prospects for the German economy. Companies more pessimistic about the outlook than they were at the end of last year, with the reluctance of the ECB to consider an early rate cut most likely to have salad business optimism. And again, consumer confidence smorning, which was released this morning, coming in at an 11 month low. Now, if we look at the reaction of the bond markets to events of the last 24 hours, look at the German to you, it's down three basis points today. But it was also down quite heavily yesterday. Bonds have gone quite bid on the prospect that we might see an April rate cut. Well, obviously the time to sort of signal that would be on March 7th. And I think over the next few days, the next few weeks, could well see whether or not the prospect of a March rate cut is a realistic proposition. And I would argue that it is. I think that the idea that the Federal Reserve is going to cut rates before the ECB is fanciful. And if we look at this week's US fourth quarter GDP numbers, which came in at 3.3%, well above forecast 2%, that sort of bears out the prospect that the economy is ticking along at a fairly decent rate. Weekly jobless claims did tick higher from 189 to 214,000, but that's still very, very low relative to where they were over a year ago. And core PCE, quarterly core PCE is at 2%. Now, obviously we've got the inflation numbers of core PCE, the rate of inflation numbers later today. And at that time of speaking, I don't have sight of those numbers. But we've got the Fed coming up in the next few days, Fed rate decision. And we've also got the Bank of England rate decision. So obviously we've heard from the ECB. We've heard from the Bank of Japan this week. We might see a tightening of policy from the Bank of Japan come April. We could see a cut from the ECB come April. And then obviously we've got the Federal Reserve coming up next week along with the Bank of England. So we'll start with the Fed, because I think that's probably the logical place to start. But certainly I think if we look in the context of what markets have done this week, we have started to see a little bit of a rebound in the FTSE 100. If we look at it on a weekly chart, we can see the underperformance. It's quite clear. We're still well below the highs that we were a year ago. We've seen a fairly decent rebound. And we look at all likelihoods to finish this week higher. And to my mind, there's no reason why we can't continue to retest the tops of this recent range. So seen some fairly solid gains this week, but still aren't particularly close to reversing the damage of last week, unlike the DAX, which has pretty much managed to do that and a little bit more this week. And we can see that here on the weekly chart. So looking at the current rebound, could we see a retest of the record highs of December? Certainly seems a realistic possibility. 50-day moving averages looking reasonably positive and the 200-day moving averages taking higher. So at the moment, I think there's no reason to suggest that we won't see or maintain the resilience that we've seen in markets more broadly. S&P 500, again, made consistent record highs this week. It's been incremental, more than explosive, I think. But overall, we are continuing to make higher highs and higher lows. And for me, it's really about momentum. Obviously, this week, we saw Tesla report disappointing numbers and that prompted a bit of a sell-off in the Tesla share price. And of all the magnificent seven, I would potentially argue that Tesla's probably got the biggest challenge when it comes to continuing to push up to the levels that we saw earlier or at the end of last year, at the beginning of this year. We've seen a little bit of a sideways move in Tesla and it'll be interesting to see whether or not it's able to get back above $200 or risk and move back to $160. But I'm slightly going off pace here. NASDAQ 100, still the trend here seems broadly positive. Moving averages, again, pointing higher, which suggests we still remain very much in buy the dips mode. And I think an awful lot of the resilience that we're seeing in U.S. markets is predicated on a belief, rightly or wrongly, that the Federal Reserve is closer to cutting rates than perhaps they should be. The Nikkei seen a little bit of a sell-off this week. Not really surprising when you consider the prospect that we might see a rate hike. How does it take to use the word rate hike when it comes to the Bank of Japan? Because rates are minus 0.1. So even if they pull them back into zero territory, they're still going to be fairly easy in terms of monetary policy. One thing I would say is that we haven't really seen a significant pullback since we broke through these peaks all the way back at the beginning of the month. So I think we're probably well over a due pullback when it comes to the Nikkei 225. Anyway, let's get on to the Federal Reserve. Because we've seen a slightly stronger dollar this week, despite the fact that we've seen a softening of yields. And I think the next few days could see the Federal Reserve look to put a pin in the idea that they might look at cutting rates when they meet in March. Certainly based on what we've seen this week, there is no rush for the Federal Reserve to cut rates as early as March. Since Powell's December press conference, when he admitted that the committee had discussed rate cuts, only two weeks after dismissing the idea out of hand at the beginning of December, markets have decided that March is a live meeting. Now, yeah, it could well be a live meeting, but it certainly doesn't mean that they're going to be cutting rates. In December, what the FOMC did was they returned the 2024 dot plots to 4.6% back to where they had been in September. So we saw a very hawkish September meeting. They raised the 2024 dots to 5.1. In December, they returned them back to where they were in September. I wouldn't call that particularly noteworthy. Just slightly reset the expectations for 2024 and gave them more flexibility when it came to easing monetary policy. So having signaled the death of Hyatt for longer, the debate has now switched to when rate cuts are likely to begin. And I think this is key here. I think for me, the ECB could well cut in April if the data continues to disappoint. And we will certainly get a better idea of that with flash CPI numbers for January on the 1st of February, as well as the fourth quarter GDP numbers later in the week as well. So for me, we've seen the dollar start to firm up. As I think Mark has become a little bit more reluctant to consider that the ECB will be cutting after the Fed and are looking to price in an earlier rate cut. And we're certainly seeing that in Eurodollar, we started to drift down. We're still above 108, and we could potentially drift back to 107.30. Certainly, I don't think Euro's going to fall off a cliff, but I think it'll be much more difficult to head back towards 110 in the short to medium term, given what we're seeing here on this Eurodollar chart. We're also seeing Euro sterling start to drift lower as well. But again here, I don't see any significant downside simply because over the course of the past 12 to 24 months, we've been trading sideways. Yes, the highs are getting lower, but we've got a pretty solid base all the way through 84, 80, 84, 90 there or thereabouts. When we can zoom all the way out as far as that, but it's not been particularly exciting Euro sterling when you look at it. I think it's very much a range trade and will continue to be so. Dollar end finding a little bit, finding a few offers above 148.5, but again here 146.25, this Kumo cloud support support, it's going to be a tough nut to crack. So I think in terms of dollar yen, we're probably 141.50 on the wide at the moment. Certainly I think dips are going to be probably bought into and in the short to medium term, this is probably the extent of it as far as Euro sterling is concerned. Moving to cable and this is where things might get a little bit interesting at the moment. What we're seeing on cable is very much a range trade 125 90 on the downside. 50 day moving average is acting as support of the moment of a very much kept at 128. Now, obviously the day after the Fed, we have the Bank of England great decision and when the Bank of England took the decision to hold rates steady in September, it was pretty much a close run thing. It was a very close split between the Hawks and the doubts, but on the balance of risks. I think it was certainly the right thing to do, given the challenges facing the economy as we headed into the end of last year. Those were borne out by a very pretty awful retail sales numbers for December minus 3.2%. They've continued to look pretty disappointing even as we look at these services PMI numbers, which showed a fairly decent rebound or continued resilience from the rebound that we saw in December. We saw 53.4 in December. We saw 53.8 in January. So while I think consumers are being very circumspect about where they spend their money, hence the big declines that we're seeing in retail sales, I think the underlying services sector is showing remarkable resilience when you look at the services sector, say, for example, in France or Germany. So I think on the balance of risks, it'll be very interesting to see whether or not the three external members of Catherine Mann, Megan Green and Jonathan Haskell, who all voted to raise rates in December by another 25 basis points continue to adopt that position. I very much doubt that they will and I think we'll get a mature, we'll get a consensus hold 9-0 on Thursday. I think the caution is understandable given the high level of services inflation, which slowed to 6.1% in December and wage growth, which slowed to 6.6% in three months to November. I think certainly I think the fact that inflation in December ticked up to 4% and could well go up to 4.1 or 4.2% in January is likely to help keep at the pound better bid against the euro, potentially against the yen and also I think against the US dollar could well see us continue to agile towards 128 and potentially 130. That's not to say the Bank of England won't be cutting rates this year, they will be, but I'll be very surprised if we see a rate cut much before June. Certainly I think the expectation is for inflation to return to target sometime in April or May. If it does we're not going to know that for certain until May or June. So I think that for me precludes any prospect of a rate cut much before the middle of the summer. Certainly I think the prospect of elections in the UK or the US, they might influence some of the policy makers decisions. For me I think that would be dangerous. I think you've got to look at the economy and try and ignore the politics, but as we all know that's easier said than done. So I think for me the main debate now is not whether we see rate cuts this year, it's when we see rate cuts and that equally applies to the Fed as it does to the Bank of England. So non-farm payrolls coming up next week as well. Again here there were weak spots in the December numbers. The depreciation rate for example fell from 62.8% to 62.5%. That was a bit of a head scratcher because the actual underlying numbers were fairly decent. 216,000 jobs added in December. Expectations are for 185,000 jobs to be added in January. And ADP payrolls are also expected to see a bit of a slowdown. After a better than expected 164 in December we could well see 150,000. Again that speaks to reasonable resilience when it comes to the US labor market. So again I don't think there's any rush for the Fed to be looking at a March cut. And you know we also have to bear in mind that there are concerns about pickup in inflation and certainly that was reflected in the US CPI numbers. We saw a tick up in December and we could see another tick up in January when the January numbers are released. So I think there will be certainly a high degree of portion when it comes to trying to forward guide timing of the timeline for rate cuts. So I talked about EU flash CPI that's also due out on the 1st of February so it'll be interesting to see whether or not we see a tick down after the tick up from 2.4% to 2.9% in December. Core prices, they'll be interesting. They're currently at 3.4%, but we see a further slowdown there. German fourth quarter GDP on 30th on Tuesday with inflation coming down sharply. I think we're going to see another contraction for the German economy at the end of Q4 and the IFO this week suggested that we could see another contraction in Q1 which in essence would potentially be three successive quarters of negative GDP growth in the first quarter. Certainly the German economy hasn't got off to a particularly good start. Fruit oil prices are obviously a bit of an elephant in the room. We've seen a little bit of a tick up over the course of the past few days, but a number of reasons for that. Talk about China's China stimulus ahead of Chinese New Year, the triple R cut that basically takes effect from the 5th of February. Again, triple R cuts are all well and good, giving Chinese banks more flexibility to lend more money. That only works, of course, if there is demand from businesses and consumers to borrow money. At the moment, there's very little evidence of that. Having said that, we are seeing a fairly decent tick up on expectations that we might see pick up in the Chinese economy. We are starting to see oil prices move back to two months highs. I think the bigger question here is whether or not we're able to take out this $84 a barrel level which has been pretty solid resistance since November and December of last year. That's going to be a key barrier going forward. We've seen a nice little tick higher over the course of the past few days. The bigger question is whether or not we'll take out that key resistance which is a 50% retracement of this move on the range that we've seen over the course of the past few days. Oil prices looking slightly more resilient, but again, there's still significant pockets of weakness when it comes to the economic data story going forward. Gold prices looking pretty uninteresting at the moment. We've seen a little bit of a tick lower over the course of the past few days, but I think if yields continue to drift down, we could well see this as long as we hold above $2,000 an ounce, we could well start to take back higher again. But again, I think what the Fed says and does next week could well be a key determinant of what happens to oil prices, not our gold prices over the course of the next few days. Okay, big week for earnings. We've seen Netflix this week, we've seen Tesla next week Netflix blew the doors off whereas Tesla was pretty unimpressive. We've got poor now of the magnificent seven in inverted commas. We're going to start with Apple. It started to drift lower finding a bit of a barrier and around this $200 area and I think for Apple the key challenges will be not so much expectations about how it's our is eating its lunch in Chinese markets because I think the prohibition of the Chinese government playing a role by forbidding government employees and state-owned firms from being their own clients to work is I think fueled less by security concerns and more about basically promoting a local champion is how Apple deals with this challenge to its market share in one of its biggest markets. I think Apple's exposure to the Indian market could more set any hit to its revenues in China. I think the bigger challenge for me is whether or not Apple how Apple sees its second quarter going forward how it sees its projections for iPhone sales how it sees its projections for wearables how it sees its projections for its new Vision Pro that I think that's going to determine whether we see a further slowdown in revenue growth which is something that we haven't seen for quite some time when it comes to Apple's share price. Very much in an uptrend so even in any disappointment we could well see a little bit of a pullback but the big level for me $200 an ounce can we break that and will the guidance that Apple gives if any point to optimism about its future growth prospects because Microsoft has now overtaken Apple as one of the world's biggest companies and certainly the direction of travel here appears to be much more positive as the AI trade continues to push Microsoft from strength to strength. Now earlier this week Microsoft announced job cuts and it's notable that an awful lot of the tech companies are now starting to announce widespread job cuts it's gone from strength to strength one of the obviously it's weakest spots for Microsoft have been revenue and personal computing we've also seen Xbox content and services as well being a little bit of a weak spot so investment in AI solutions is likely to be a key area for Microsoft as it develops solutions for business as well as its co-pilot chatbot getting integrated into this Windows operating system as it looks to replace Cortana Q2 revenues are expected to come in at $61.1 billion now that is a rise of almost 20% commercial cloud revenue expected to account for $32.2 billion of that total so there's an awful lot of what I would call good news baked in to Microsoft it'll be interesting whether or not it actually is able to clear that bar those Microsoft numbers are due out on 30th of January we've also got meta meta has made new all-time highs this week it's completely reversed the drop from those August 2021 highs to those lows of November 2022 it's a 65% decline in the share price gone we're now at new record highs and I think what's particularly remarkable about this rebound in the meta share price is that they rely a whole host much on advertising revenue and in Q3 total revenues came in at the top end of forecast the Q4 revenue guidance and meta was nudged up to between $36.5 and $40 billion although at the time this was tempered revenue might slow due to uncertainty around the global economy four year operating expenses are coming down they were revised low between $87 and $89 billion with a four year revenue forecast expected to come in around about $133.7 billion and profits $14.37 a share so will it can meta share price continue to hold above the previous record highs which it currently appears to be doing ahead towards $400 announced obviously reality labs still hermaging an absolute cartload of money and will continue to do so at the moment markets don't really seem to care too much about that which does seem a little bit surprising and we've also got Google or Alphabet sorry Google's share price revisiting record highs of 2021 back there interesting I think we'll be see how YouTube has performed on the last set of numbers we saw comfortable beats with YouTube seeing $7.95 billion advertising $59.65 billion another revenue $8.34 billion for Q4 revenues expected to come in at $85.3 billion with cloud expected to come in at $8.95 billion and a profits of at $1.59 a share so we can see an awful lot of these companies have pretty much reversed 2021 to 2022 losses can the momentum that we've seen over the course of the past few weeks continue as we get to dissect their latest quarterly numbers so that's pretty much it for this week as I say there's quite a lot to get through we've got a busy week coming up so I think it's going to be very important in the context of what we've seen so far this week can the momentum that we've seen in US markets be sustained in the aftermath of the release of these the bulk of the magnificent seven earnings announcements it's certainly going to be a very interesting week and look forward to dissecting the numbers this time next week when we have a look back at the week just gone thanks very much for listening Michael Houston talking to you from CMC Markets