 Good morning. Welcome to CMC Markets on Friday the 15th of January and this quick look at the week ahead beginning the 18th of January with me, Michael Houston. First and foremost, a happy new year to you all, albeit somewhat belated given the fact that I decided to take some extended time off over the Christmas and new year break. Pretty much hit the ground running. Get rid of the risk warnings and what have you. Pretty much hit the ground running straight out of the traps at the beginning of the year, posting some fairly decent gains in the first week of trading. Second week of 2021 has been slightly more subdued. Nonetheless, Equity Markets still remain fairly resilient. If we look at the FTSE 100, we've managed to consolidate significantly above this 6600 level, which were the peaks that we saw at the beginning of December. I think the likelihood of further gains still remains fairly high. I'm still fairly bullish on the FTSE 100 heading into 2021. We might see a little bit of consolidation over the course of the next few weeks, but nonetheless, I think despite the worsening outlook that we've seen in the first two weeks with respect to infections and obviously record death rates, not only here in the UK, but also in France, Germany and the United States. The vaccination program is continuing apace, and I think that more than anything, while we may see a delayed recovery, I still think the prospect of a recovery is very much on the table, though it's probably not now going to happen much before the second quarter or even the third quarter of this year. I think really as we look ahead to the second quarter, it's really about how quickly restrictions can be loosened, and at the moment, they're still being tightened in France. They've just implemented a 6pm curfew, and in Germany, they're talking about the prospect of extending the restrictions to April. Just to remind you that this will be Angela Merkel's last year, or last few months as German Chancellor because she is stepping down, and the race to succeed her is already starting to get underway in Germany for the German elections in September and October. We've also got the Dutch elections due in March, and there's a distinct possibility that we could get a new Dutch government and the Italian government was once again struggling to stay afloat. So political dysfunction in Europe is slowing down the European response, and I think that could well also be positive for the pound more broadly, and I'll come to that in a minute, but as we look ahead towards the rest of this month, the outlook still looks fairly positive for stocks. Yes, we have seen a little bit of a pullback in these daily candles here, which might suggest that we could well be constrained at 6,900 and may continue to trade between 6,600 and the current levels over the course of the short to medium term. I would be concerned more broadly, I think, if we fall below this particular trend line that I'm about to draw in here. If we fall below this particular trend line through here in the 50 day moving average, then I would be a little bit concerned about the direction, the overall upward momentum that we've been in over the course of the past few months. But with central banks remaining very much on the front foot when it comes to monetary policy and governments still remaining fairly accommodative when it comes to fiscal measures, I'm broadly optimistic that we shouldn't see significant downside in stock markets in the short to medium term. Same applies to the DAX here. It seems sort of storey. We've broken above these previous peaks through here around about 13,400. So we could see dips back towards that, but overall this candle here is in particular is bearish. It's a key reversal day, which is a little bit of a worry. But as we can see in previous instances where we've seen sharp downward thrusts, we haven't really followed through towards the downside. And as such, I would still expect to see fairly positive momentum maintained here. It's much more prevalent, I think, if you look at something like the S&P 500, which once again has made new fresh record highs over the course of the past few days. One word of warning I would give you, ladies and gentlemen, is that the tech sector, particularly social media stocks, could well be vulnerable to sharp downward corrections. I think there is a case to make to say that US stocks are overvalued, very much so. And with that in mind, I would caution being looking to get aggressively exposed to the likes of Facebook, Twitter, Alphabet, for example, obviously they own YouTube. There's going to be a crackdown on the big tech companies, some more than others I think. And the new Biden administration is likely to be much less sympathetic, shall we say, to the lobbying of US big tech than their predecessors, who some of which are equally as antagonistic towards the tech sector. So that sort of brings me neatly on to what we're going to be looking ahead to this week, because we've got a big week, we've got a big week for macro, probably more than micro. We start off the week on Monday with Chinese fourth quarter GDP, retail sales and industrial production. So let's talk a little bit about that, because certainly I think in terms of the economic recovery, the global economic recovery, China has really been blazing a trail when it comes to the economic recovery there. The lack of a second wave is certainly helping the economy recover. We saw from the trade data in the early part of this month that imports and exports are racing ahead. Another record surplus for the Chinese economy, PMIs have been broadly decent. And as such, we've got Chinese retail sales and industrial production for December as well. So we'll start with the retail sales. I mean, the fourth quarter GDP, I think is neither here nor there. I think I've always been highly suspicious of the Q4 GDP numbers or any GDP numbers coming out of China, because I think they're massage to death. That being said, I think the prospect of a 6.2 expansion is going to be broadly in line with what markets we're expecting. With respect to retail sales, that turned positive in August last year, and since then it's continued to improve month on month. The lack of a second wave has certainly helped, and I think if that's sustained, and while demand still remains below the levels we saw at the end of 2019, there is scope for further rebounds. We've seen three consecutive months of gain since September. The December numbers are expected to continue that trend with a rise of 5.5% up from the 5% gain that we saw in November. As I say, I mean, the lack of a second wave appears to be prompting the Chinese consumers to slowly reopen their purse strings. As such, the performance of the Chinese economy should continue to do well as we head into the first quarter of this year. I'm not really expecting any negative surprises from the Chinese economic data that's due out on Monday. The other key event for the week is the presidential inauguration of President-Elect Biden on the 20th of January. Given recent events on Capitol Hill, I think the inauguration is going to be a fairly low key affair when it comes to crowds. Yes, there's going to be a number of high-profile celebrity names at it, namely Tom Hanks, Lady Gaga, Jennifer Lopez. But all in all, I think much more away from the so-called pizazz, shall we say, of how many A-listers and B-listers the Democrats can pull. It's really all about what sort of tone President-Elect Biden sets in contrast to four years ago when President Trump's inauguration, I think, was most memorable for the fairly divisive nature of the speech that he gave. It was a very belligerent tone. So this week's speech is unlikely to be as divisive. I think it will give a decent indication. We've already got a decent indication of what the Democrats intend to do when he outlined a new fisculate program of $1.9 trillion in a variety of areas, specifically in the form of $350 billion in state aid, an increase in the minimum wage, and a further $1,400 in stimulus payments to U.S. workers. Now, there was little in the way of detail about future longer-term spending commitments on infrastructure and other types of investment, including education, energy, and green investment. I think that's likely to come once he's got his feet under the desk of the Oval Office, but he could give some fairly decent steers on policy at his speech later this coming week. And I think that more than anything is what I'll be looking to take away from the presidential inauguration. So, away from that, we've also got an ECB rate meeting, which is due on Thursday the 21st. We've got flash PMIs for January for the 22nd. We've got also UK retail sales and UK public finances, as well as the latest inflation data, as well as a number of key earnings announcements, which you can see in my week ahead table down here, namely Burberry Netflix and Goldman Sachs. So, let's move on to the ECB. Now, it's been no secret that the ECB has been uncomfortable with the direction of the Euro since we broke above this one, 2070 area in the middle part of December. Now, we've seen a little bit of a pullback. We haven't, as we've met my interim target on my triangle breakout here of 1 at 2235, and we've overshot and gone all the way back towards 1 at 23.5. Now, I still maintain that we can probably revisit the highs that we saw in 2018 of around about 1.25, but I'm going slightly lukewarm on that in the short to medium term, simply on the basis that the vaccination program in Europe is not going well. They're lagging significantly behind the rest of the world, particularly the UK and the US. Political instability in Italy, also in Holland, the likelihood of a new government there. You've also got, Germany is going to probably start looking inward as well when they look to try and replace Angela Merkel as German Chancellor ahead of elections later this year. That would suggest to me that in terms of a fiscal response, you're going to see a very fragmented approach from EU leaders and I think that is likely to hold the European economy back. Nonetheless, we still have the pandemic recovery fund that has been signed off, how that money is divvied up is certainly going to make for an interesting, it's going to make for an interesting look going forward, but it's not really going to be enough, I think to really put a flaw under the European economy and drive a significant rebound in GDP growth and economic activity. And I think that's the big concern at the moment. The ECB is going to have to remain very, very accommodative and try in terms of its forward guidance to try and talk the euro lower. Now, by and large, it's managed to succeed. We have come back down from these levels here. We posted a bearish reversal here, but we're going to find a fairly key support level around about 1,270 and how the euro reacts there will determine where we go to next. Certainly on the basis of the slow stochastic and the RSI, there is decent support around about 1,270. There is also the dollar side of the equation. In essence, really it's about federal reserve inflation expectations. Will the Fed be concerned about rising inflation expectations? Will the market start to price in firmer bond yields and a stronger dollar? And will that help to drive the euro lower? That is the push-pull at the moment on euro dollar. It's US yields, which is spiked well above that 1% level on the 10-year, which is obviously giving the dollar a much better bid against the likes of other currencies. Or will it be economic events with respect to what's going on in Europe? Ultimately, I think the US economy is going to rebound much more strongly. That should favor the dollar against the euro, which means that even if we do get a move back towards 1,24 or 1,25, I really struggle to see euro much above that sort of level, which would suggest to me that we're probably going to see something in the region of 1,25 to 1,18 for euro dollar over the course of the rest of the year. So looking at the ECB, Madam Lagarde has already suggested that the projections that the ECB put out in December, she's sticking by them. I think that's optimistic given the fact that Germany is already looking at extending restrictions into April and France has implemented a 6 p.m curfew as of this week, which means that any rebound in economic activity is likely to be delayed that much further. We've also got flash PMIs for January from France and Germany. They were pretty poor in December. I don't expect them to improve that much in January either, even though on the manufacturing side, they were fairly strong. And I think that is one silver lining when it comes to the European economy. On the manufacturing sector, they've managed to ride out the worst of the downside of these latest restrictions and lockdowns. But obviously services is likely to continue to be a drag going forward. So that's a euro dollar. We're looking at euro sterling as well because it's likely to be a bit of push pull on euro sterling as we look ahead to the coming week. We've got a host of UK data coming out. We've already seen some fairly disappointing GDP numbers and industrial production and what have you. But they weren't actually as bad as I think most people had been pricing in. Now obviously Brexit finally has been resolved. So hopefully that's going to be one of the last times I mentioned the B word. That being said, towards the end of this week, we've got a host of data coming out, including obviously flash PMIs, some manufacturing and services. More importantly, we've got UK retail sales for December. Now, euro sterling, big, big level, 8860. We're once again retesting that level. Once again, finding decent support at that level. If we break below 8860, then I think there's a very good chance we could well retest the lows that we saw in the beginning of May last year, the end of April, beginning of May. I think with respect to the retail sales numbers and the public finances numbers, which are likely to be ugly once again, I think there's been an awful lot of chit chat about how much the UK government is borrowing and is likely to borrow over the course of this fiscal year. Personally, I think it's an awful lot of fuss about not very much, because it's not as if the UK is in a different boat than every other economy in the world. The US is borrowing at record levels. So is France. So is Germany. So we're all in the same very leaky boat. So really it's a question of how quickly do markets think that the various economies are going to recover? Given that the UK's vaccination program is still on course and ahead of pretty much everybody else's, that would presuppose that we'll get a faster economic rebound when we get an economic reopening sometime towards the beginning to end of Q2. So with a lot of sort of looking April, May, June, when restrictions slowly start to get eased and we start to get some element of normalization and I use the phrase normalization in the loosest possible term. In November, in terms of public finances, the government borrowed 30.8 billion pounds. Now that brings the total amount for this fiscal year to 245 billion pounds. It's a post-war record. The very real prospect, the total this year, could rise to over 300 billion pounds by year end. We're expecting another 32 billion pounds in December. Now obviously there is a concern about the high levels but if you look at UK borrowing costs, they're very, very low. So if the government is sensible, and I know that is a very big ask, the government could potentially borrow 30, 40, 50 years if they chose to do so, very, very low rates. When you can borrow for 10 years at 0.3% on the gilt market, then it stands to reason it might be worth trying to implement some new very longer term bonds and repay this borrowing over a much longer term time frame and lock in those low yields. So that for me I think is the key takeaway. It's not so much about the levels of borrowing, it's about the cost of borrowing and I think that's what markets are looking at at the moment. With respect to retail sales, we should see a rebound in December even though we experience yet another lockdown but let's not forget that at the beginning of December there was a big surge to the shops. You can forget those pictures on the news of crowds in Oxford Street, Oxford Circus and I think part of the reason why we saw such a big spike in coronavirus cases was as a direct result of that modest reopening at the beginning of December. That should be reflected in the retail sales numbers for December. Still expecting a rebound there of around about 1% sales of electronic items are likely to have been a boost as well because we got a new XboxX and PlayStation 5 and you couldn't get hold of any of them for love nor money. So you should see a fairly decent retail sales number for December. So that really I think tells us that the pound downside on the pound, downside risk on the pound has diminished quite considerably over the course of the past few weeks and that's really borne out I think by the way this sterling chart looks here. We have broken a very key downtrend line from the highs that we saw back in 2007-2008. We're running into a bit of a barrier at 137 and we can see why from this horizontal line that I've drawn across this chart here. We've got a series of lows through February 2018 and we've also got a decent peak here around about September 2017. We're running into a bit of a barrier there coincides there but also if we zoom out we can also see that it's a decent retracement level from the entire down move from 211 to 11411. So big, big barrier at 137. I still maintain we can see a move back towards 140 on the basis that the economic data if handled the economic rebound if handled correctly should be fairly sterling supportive even though we are a little bit overbought in the short to medium term. So what does that mean in terms of downside risk? Well in terms of downside risk we could potentially fall back to the 50 day moving average here which currently has been supporting the rebound all the way from the November lows. So if we do get into dips back to around about 134-135 should see a rebound from those sorts of levels. So that's the pound against the dollar. Inflation as I say not really a market mover at the moment we've got CPI from not only the UK but also the European Union. Those numbers aren't really expected to move the dial that much they're due on the same day as the presidential inauguration. On the Wednesday expecting a modest uptick to UK inflation in December largely as a result of higher fuel costs oil prices went on a bit of a tear during December on the back of that Saudi OPEC deal so that's likely to put a little bit of an upward bias into the monthly inflation numbers but overall there's nothing really to scare the horses there. In terms of earnings we've got Netflix. Netflix results for Q4. Now if we look at Netflix's chart we can see that it's been struggling over the course of the past few months it's been broadly trading sideways but it's fairly solid support in around $456 and Netflix has been one of the big winners of the pandemic over the course of the last 10 to 12 months has been shown by the move higher in the share price but subscriber growth is now starting to slow down again that's not a surprise and the markets didn't like their third quarter numbers when they only managed to add 2.2 million subscribers but let's not forget they added nearly as many subscribers in the first six months of this year than they did in the whole of 2019 so I think there was it's not unexpected to see a little bit of a slowdown. I think the big thing now is in the context of the new competition that they've got from Disney Plus and the likes of Amazon and Apple can they hang on to market share. I think that really is the big question and I would argue they can because their content slate is so much better than anybody else's they've got so much more content than Apple, than Disney Plus, than Amazon Prime and it's all in a one-size-fits-all category single price subscription yes they have put their prices up but they've still got a whole host of new content coming up down the pipeline they've got a new series of stranger things coming out they've got season four of The Crown which is still season three of Star Trek Discovery and I think the continued closure of cinemas into this year is likely to keep those subscriber numbers fairly buoyant with most with most attention on its international markets in the US I think Netflix is a saturation point so it's really about how many more international subscribers it can add going forward so the return of live sport to TV screens in the third quarter also may have taken an edge of some of the subscriber numbers as well so for Q4 this is what we're expecting for Netflix revenues of 6.57 billion dollars another 6 million new subscribers so that is well in excess of the 2.2 million it added in Q3 in terms of momentum yet it could start to struggle but it's still the market leader by quite some distance and yes it does trade at its prices are higher than everybody else's but as a reason for that it's a much better product so if there is any disappointment we could see a drift back to the 200 day moving average but the big support is in and around 456 currently from where it is at 457 we've also got Goldman Sachs continuing the bank earnings theme as of as I recall this video I haven't got sight of JP Morgan City Group or Wells Fargo so I don't know how good or bad they will be but given that Goldman Sachs does not have a big retail operation I would be surprised if the Goldman numbers disappointed the only concern I do have is this move looks well overextended and is well ripe for a pullback going forward this sort of move is unsustainable in the short to medium term look how far it is away from its 200 day moving average you know if you can go back an awful long way and whenever the price moves any distance away from the 200 day moving average you get a corrective kick in and we are well overdue a correction for Goldman Sachs it's gone too far too quickly and as such I think even if we get a massive beat on Goldman I think an awful lot of that is already priced in we've also got numbers from Burberry third quarter numbers on the 20th we've got Dixon's car phone we've also got Bank of America as well so that's it I think really I think I've covered quite a lot in a very very short space of time quickly have a look before I go at gold because I know a lot of you like for me to look at gold for me the 200 day moving average is a fairly key level on gold so I'll quickly quickly summarize that we're still above these lows here I think we're going to continue to range trade between 1760 and 1960 the 200 day moving average currently is managing to constrain any downside every time we've dipped below it over the course of the past year or so it's been fairly short lived so we can see that here we can see that here and we can see that here so for me gold remains very much a case of buy the dips and as for Bitcoin, Bitcoin can only be traded on the part of professional retail clients it's not available for retail simply because FCA regulations forbid it we are now we are now no longer allowed to supply Bitcoin to ordinary retail clients it's only professional clients that were allowed to make Bitcoin available or so moving swiftly back to what I was talking about earlier thank you very much for listening ladies and gentlemen once again I'd like to wish you all a belated happy new year and I will speak to you all same time same place next week thanks very much