 Good morning. Welcome to CMC Markets on Friday the 6th of May and this quick look at the week ahead beginning the 9th of May and it's certainly been an interesting last couple of days with the obviously the Fed meeting on Wednesday followed up by the Bank of England meeting on Thursday and the difference in price action in a fairly short space of time, you know, begging the question, you know, what changed between Powell's Wednesday press conference to Andrew Bailey, Governor of the Bank of England's Thursday press conference? To be quite honest, the only thing that really changed was the tone and the narrative. I think there was a widespread sigh of relief on Wednesday evening when Fed Chair Jay Powell basically took the option of a 75 basis point rate hike off the table while at the same time obviously articulating a path of rate rises that was probably less severe than markets were pricing in. So 50 basis points taking the upper bound of the Fed Funds Rate to 1% with the prospect of a two more 50 basis point rate hikes by the end of the summer and then potentially another couple of 225 basis point rate hikes by the end of the year taking the Fed Funds Rate to at least 2.25 or 2.5%. Also outlined the start of balance sheet reduction program that starts first of June, $47.5 billion going up to $95 billion a month in September so far so good. US dot markets went sharply higher. You can certainly see that in the way the NASDAQ reacted on Wednesday. Monday, Tuesday, Wednesday and in Thursday wallop all the way back down again. And I think for me the obvious catalyst for the reversal on Thursday sort of gained traction after the Bank of England profit a gloomy outlook for the UK economy in the aftermath of his decision to also hike interest rates albeit by 25 basis points to 1%. Highest level since 2009 sent the pound sharply lower and I'll cover that in a minute. Whereas Chairman Powell of the Fed adopted a somewhat optimistic tone. He was slightly more upbeat. He was confident that the Fed could achieve a soft landing and obviously the US economy does appear to be in slightly better shape. We've got US payrolls numbers out later today and there is some evidence that hiring trends are starting to slow even if inflationary pressures aren't as we saw from the ISM surveys for both manufacturing and services this week. And you also got a price in the fact that the US economy has a record 11.2 million vacancies and the UK economy has over 1 million vacancies. So I think the dire outlook painted by the Governor of the Bank of England was probably an overreaction. Yes, there are significant challenges facing the UK economy. I mean 54% rise in energy bills for a start. That's going to be significantly problematic. It is going to slow down the economy but at the moment unemployment still remains relatively low levels and I think before unemployment starts to go up you've got to see those vacancy rates start to come down and at the moment they still look in fairly decent shape. So while the Bank of England was really downbeat about the last quarter of this year there's still an awful lot of water between now and then. There is still potential for the UK government to introduce further fiscal measures to try and alleviate some of the income squeeze that we're seeing. Some of that will kick in in July when the national insurance thresholds go up. I can't believe that they won't do more because if they don't they're essentially signing their own electoral death warrant if they don't. So I think at some point there may be further fiscal measures being outlined by the Chancellor of the Exchequer. So in the here and now the key support levels on the major indices going to be starting with the NASDAQ. We're still above this 12,700 level here which basically I've drawn through these loads through here. This has been a constant on my chart for quite some time. So we've got that one. It's a similar sort of pattern playing out on the S&P but again much will depend on this afternoon's play roles as to whether or not we hold above this 4,100 level. At the moment it's intact but if we do fall below it and the NASDAQ also falls below its key support level then we could well see further weakness going forward and certainly I think there's plenty of evidence to suggest that we could be starting to see a little bit of a slowdown in the US economy after the first quarter contraction that we saw from the most recent US GDP numbers. That being said the unemployment picture, the unemployment picture still looks reasonably positive. For the FTSE 100 that continues to look fairly resilient. It's currently holding above the 50-day moving average and it's managed to hold above the 200-day moving average. The upper boundary of that is around about the February highs back here. I think there's probably fairly decent support around about 7,200. If we do see a sell-off in US markets I don't expect it to hit the FTSE 100 anywhere near as hard. However, the Germany 40 or the DAX continues to respect that downtrend line that I drew in from the January peaks. That continues to look a little bit soft. I think looking in the wider scheme of things we go all the way back from where we were two to three years ago we're still at fairly decently elevated levels but if we do drop below this low here from April on the DAX 13,500 that's the level. Then I think there's potential for us to see further decline. Keep an eye out on that level if we drift back down there. I talked about cable. I talked about cable in the context of obviously we've got data coming next week. We've got first quarter GDP numbers. We've also got US CPI. The picture for US CPI and UK GDP, it could determine the direction of the pound. Though judging by the breakout that we've seen in the cable this week, I suspect we've got further downside to come. It's hard to believe that we're above 130 less than two weeks ago or two weeks ago and now we're below 123, 124 and heading towards 122. The next key support level for me really I think now that we've broken below this little flag formation here we had a strong thrust lower, had a sideways consolidation and we're getting another thrust lower which is probably going to be the same sort of distance from here to here. That would suggest it brings us back to 195. Now I know an awful lot of people won't want to see that and the only way that I would sort of reverse my call on that is as if we are able to break above these Twin Peaks at 126, 2030. These two impulse highs here. We can get back above there and we can delay a downside thrust. 124.90 is also likely to be a bit of a barrier going back but why is this important? Well it's important, 119.85 for this very reason. Going back to 2016, okay so obviously this is quite a longer term chart, 2016 Brexit vote June fell down to 119.85 in October flash crash and then rebounded and another test in 2017 formed a base, moved back to 143, 144, came all the way back in 2019 to 119.5, rallied off that level again, went back to 131.60 and then obviously this was the Covid sell-off which proved to be fairly short-lived in terms of it straddled one week to the next so you've got two weeks down thrust to 114.10, 20 whatever. There's an awful lot of debate as to how low we actually did go on that thrust lower but we didn't stay down there very long, came back above it, held back above 119.85, 80.85 and since then we've been all the way back to 142.40. It now looks as if we're going to have a retest of that key level so based on the price action, based on the strength of the dollar, based on the move higher that we've seen in yields this week, there is upward pressure on US yields, it's been a bit of a downward pressure on UK guilt yields at the short end because markets are pricing out the multiple rate hikes that they had in for the back end of this year, beginning of next year, you can't really hike rates when the economy's in recession because essentially you're just exacerbating the effect of a demand slowdown by doing that and you don't really want to be doing that. So that's going to be the key support level I think for me. I think we're likely to see further declines that appears to be the direction of travel and it's certainly borne out in terms of the euro-dollar chart as well. If you look at the euro-dollar chart you can see a similar sort of price action playing out. I already talked about the breakout on euro-dollar, I posted an article, Euro parity, anyone? This is why potentially I think we could well see it. We traded in the sideways consolidation from the lows back in 2017-2016 to the highs in 2018. We've consolidated in the sideways pattern. We've broken out of it. We're testing towards the downside. Initial target is 103.40 but if you extrapolate that out further then you're looking on a measured move basis of a move below parity towards 96.60. Now you've got to remember this move has taken place over four five years here between here and here. So any move towards parity and below beyond is likely to take place over a similar sort of time frame or not similar sort of time frame but certainly over a one or two year period or six months to 18 months period going forward. What mustn't happen is for us to break back into this triangle. So we could get squeezes back to 108 but that wouldn't negate the triangle breakout that we've seen on this particular pattern. So if we take it back down to a weekly chart we can see that this decent support 104.70 we haven't rallied much above 106.40. We'd need to get back above 108.50 to negate this breakout and potentially argue for a delay in a move back to 110.112. Even with ECB rate hikes, the interest rate differential is still going to be massive when it comes to what the Fed's doing and what the ECB is doing and the ECB is still deeply negative on its headline rate. So on the basis of this initial target 103.40, potential parity potentially even lower in the long in the medium to longer term. Well again still looking very well bid potential for us to go back to the 2002 peaks of 135. Why do I say that? Well it's quite simple really if we go all the way back here we can see that there's nothing since the 2015 lows the next series of peaks are here January 22 2002, 135.04. So that's the next key target $4.00 while we're above the lows here and obviously we're also in a decent uptrend through here but you've got double support around about 128.60 through there so the dollar is still looking very very bid and that's bad news if you're looking for a significant move back into equity markets. Essentially dollar tends to be a haven trade the trend for that continues to be higher. So let's look at US 10-year yields because I think the next move here could be significant. This is a monthly chart or 10-year yields and we're approaching a very key level on the moment from the 2013 peaks to 2018 peaks and now around about 310, 320 on the 10-year. If we break below if we break through that then we could see a very quick move to 4%. Now if we see a quick move to 4% then that's going to be good news for the dollar and not much good news for anybody else if current price action is any guide. The only time we've been higher than 310 was a brief period back here in 2018 when markets were a little bit concerned about the Fed potentially hiking too aggressively that obviously hasn't happened and we drifted all the way back down but now we're pushing higher again so we get a concerted move through 310, 320 then it could be very very tricky going forward. So I'm paying particular attention to this 10-year yield chart at the moment there's a barrier around about 310, 320 but if we break through that on a monthly basis then it could get pretty messy because the US economy as well as pretty much everything else. So that's the sort of backdrop so what does it mean for what's coming up next week? Well obviously we've got payrolls payrolls data could dictate whether or not we get those breaks lower on the S&P then there's that kind of doubt. Now we've got US CPI coming up for April on the 11th and we've got UK GDP coming up on the 12th. US CPI is going to be interesting because even though Powell's taken 75 points off the table the most recent PPI numbers for March showed a much stronger than expected number of 11.2% which is another record high so by that definition you would expect the US CPI for April to be higher than the 8.5% that it was in March but expectations for April CPI are for a slide back to 8.1% and core prices slide back to 6.1% so maybe a softening of US inflation could pull the dollar back from its currently elevated levels and obviously we have also PPI US PPI which is also expected to fall back from 11.2 to 10.7. Now I'd be surprised I'd be more inclined to react to the PPI numbers because they tend to be much more leading indicators and if we start to see a slowdown in PPI that's likely to make me slightly more confident that we've hit or are about to hit peak CPI but that's where we are so I think much will depend on A whether or not CPI continues to rise. Given the numbers from ISM prices paid data this week I'm in two minds about that it could go either way it's still looking very frothy the prices paid numbers they jumped back above 84 on both manufacturing and services and while employment the employment components of both also softened a little bit from their March numbers as well so that potentially doesn't all go well for future employment even with vacancies at 11.2 million. UK GDP again first quarter GDP the expectation is for that to soften from the 1.3 percent we saw in Q4 to 1 percent now that's optimistic if I'm honest on the monthly numbers we've seen a 0.8 percent expansion in Gen 0.1 expansion in Feb I'll be very surprised if we see an expansion in March given the horrible retail sales numbers that we saw for March 7.2 percent year-on-year growth in March to 0.9 sorry from February 7.2 in February to 0.9 percent year-on-year growth in March I mean that's a big drum big big big drop big dump big drop consumer confidence levels also and the lowest level since October 2020 so again you know I'm in two minds I think 1.1 percent expansion for Q1 seems optimistic and it's not going to get any better from there so yeah and also we've got the fact that the economic outlook with China is zero COVID policy which is a complete train wreck it means that any supply chain disruptions and what have you the EU oil embargo on Russian oil it's keeping a keeping a bidder under Brent so looking at the Brent chart here we're starting to head back towards the April highest fairly decent support around about $100 a barrel we don't want to see it go back $120 a barrel for some reason oil prices aren't pricing in the China slowdown so you know will Chinese government see the light and drop it zero COVID policy I can't see that happening in the short term so that should act as a drag on oil demand particularly in Asia let's hope so because we need something to keep a cap on oil prices and energy prices more broadly so let's move on to what's what's what's what I'm looking at on the earnings front look at ITV well that doesn't look too great down at its lows from February that drop there was prompted by the announcement of 180 million investment into another streaming service ITVX as if they haven't got enough they've got ITV hub ITV hub plus bret box now what's their long-term strategy you know why do they need multiple streaming services it's almost as if they can't decide what they want to do the bid for channel four you know what's that all about okay yeah you could widen the streaming content but as we've seen from Netflix's numbers that's becoming a very competitive market and it's becoming a very low margin market and ultimately if you had to choose between dumping Netflix Disney plus or Amazon Prime or Brit box what would you dump well I wouldn't be keeping Brit box I'll give you a clue so I'll be interested to see what the churn numbers are on ITV with their Q1 numbers revenues last year got a fairly decent boost due to Euro 2020 which suggests that the outlook for Q2 this year is likely to suffer from pretty tough comparatives so worth keeping an eye out for that but I must admit I don't see much in the way of encouragement for the ITV share price particularly if we drop below this key support down here continuing the streaming theme we've obviously got BT groups four year numbers they don't look too bad they did take a little bit of a nosedive the end of March or beginning of March on the back of the disappointment I think that they wouldn't be selling their BT sport franchise to DAZN for 580 million pounds and that they were in discussions with Discovery to create a sports joint venture 50-50 split between BT sport and Euro sport UK I mean that's quite a lumpy chunk of change in a very competitive market I can't help feeling that perhaps that's something they really should have got rid of to free up some cash flow to accelerate their FTTP rollout which is now at 6.5 million properties and it's 5g builds which is proving to be quite expensive so total revenue for the year is expected to come in a little bit lower from last year four year outlook for EBITDA is for a number between 7.5 billion pound to 7.7 billion pound so those numbers are out on the 12th of May ITV's numbers are out on the 11th of May Walt Disney again it's a streaming theme here in light of the Netflix shocker Q1 Disney saw a big surge in subscribers to 11.8 million that pushed their total subscribers up to 129.8 million with its biggest market is India with its Disney Plus and Hot Star offering which is which has 45.9 subscribers and which operates at a loss so Disney's still maintaining its guidance that it can reach its 230 million subscriber target with 2024 narrator basically Netflix is already not far shy of that at around about 221 even if you count the fact that they lost 200,000 subscribers in its most recent quarter also Disney has the advantage of its theme parks business which has seen a decent rebound in Q1 and its holiday parks business as well so Disney does have other revenue streams to fall back on and is still expected to make a profit of a dollar 17 cents a share so that's Disney Disney Plus also Disney Plus has improved its content with the addition of the Fox back catalog in the form of Star Rivian going to finish off with Rivian the electric car maker that's $78 IPO price seems a long way away now and even further away is the $179 IPO price spike last year the company lost $4.7 billion on total revenue of $55 million I mean that's a big gap generated by the sale of 920 of its trucks in terms of orders the company's got 83,000 of them for its pickups and SUVs but in terms of annual deliveries it's going to take some time to actually get anywhere close to fulfilling them the company has a target this year of 25,000 annual deliveries so it says it remains on course to deliver 25,000 vehicles this year a month ago the company said it had produced 2,553 vehicles and its Illinois plant and delivered 1,227 of them so it's still got quite a way to go it does have an awful lot of cash to play with it's got $11 billion worth of cash from Ford and Amazon and $13.7 billion left over from its IPO and it is looking to spend $5 billion on another factory in Georgia so overall it's hoping to turn out 150,000 vehicles a year once it's got all of its capacity up to speed but that doesn't look like it's going to happen anytime soon so they're expected to see some big losses here with the shares already at record lows and well below their IPO price it's going to be a similar sort of story for Coinbase obviously the direct listing it's now at its record lows sell-off and cryptos the damage to crypto investors from the sell-offs that we've seen in the volatility could well weigh on its Q1 numbers and as such we could see further downward pressure on the share price on that when it gets to report its numbers back on the 10th of May so that's pretty much it for this week ladies and gents once again like to say thank you very much for listening this is Michael Houston talking to you from CMC Markets