 Good morning, ladies and gentlemen, and welcome to CMC Markets on Friday, the first of October, the first day of Q4, and this quick look at the week ahead beginning the 4th of October. Now, this will be my last one of these. I won't be doing one next Friday because I have next week off, so I'll try and also cover some of the events of the following week, which officially will be the start of US earning season, and we got quite a bit to get through. It's certainly been an interesting week over the course of the past few days, and as such, hopefully I'll be able to get through this, get through an awful lot of the events in fairly short order. So, with Q3 firmly in the rearview mirror, European markets posted their first negative month since January. The DAX, here we go, we're back pretty much at the bottom end of the recent range, and we're at a fairly key level. We're at the 200-day moving average, but also coincides with the 15,000 level and the key low, and I think for those of you who are nervously eyeing October on wondering perhaps if this could be the beginning of further weakness and whether or not we've seen the top of the market. It's important to remember where we've come from. If I select the year-to-date option on there, we can see that thus far, so far this year, we've posted only two negative months. The first was in January, the second was in September, just gone. US markets also saw a significant downdraft at the end of September, and the decline there was much more severe. It was the worst monthly performance, 40 S&P 500, since March 2020 when we saw the pandemic come crashing through the markets, and even a late deal to fund the US government until December 3rd, and a vertical shutdown hasn't been enough to really prevent a fairly poor finish to the month. So, keep an eye on this level here over the course of the next few days. I think it's going to be very important in the context of where we head to next. More importantly, with respect to the S&P 500, we can see from here, year-to-date, here we go, and again, similar sort of trend. We still remain quite away from the 200-day moving average. I certainly wouldn't rule out, given the current concerns that we have about the economy, that we might not see further declines. I think, you know, October generally has a tendency to deliver huge curveballs, gives investors anxiety attacks and what have you, and we've got China ramping up the ante in an attempt to try and avert winter blackouts, basically saying to industry that they need to be prepared to pay whatever it takes to secure energy supplies for the winter. So, there's certainly plenty to be concerned about. We've got surging energy prices. We've got supply chain disruptions. We've got concerns about more persistent inflation here in the UK. We've got the shambles that is the fuel crisis or the pump crisis, the fuel pump crisis, where people are behaving a little bit irrationally when it comes to trying to fill up their cars. And as such, we've got off to a fairly negative start to October. And that's despite the fact that this morning's PMIs have been generally fairly positive in manufacturing. Looking ahead to next week, we've got the latest services numbers. And for economies that are particularly services-based, obviously that is going to be a concern going forward. Manufacturing is holding up fairly well, but rising costs, weaker consumer confidence, weaker economic activity. And also, you've got the fact that rising energy prices do tend to introduce an element of demand destruction and as such, create their own downturn. When we look at the FTSE 100 over the course of the past few weeks, it's actually performed probably a little bit better than other indices due to the fact that it's got a much higher weighting of companies like Royal Dutch Shell, BP and what have you. Rolls Royce also has had a fairly decent quarter, up 40% over rising optimism about the outlook for that particular company. So all in all, it's not all bad news. Unfortunately, we are running into a winter which is replete with numerous elements of uncertainty. So quickly look at the FTSE 100. We can see here that we are still very much within the range that we've been in pretty much for the past three to four months. The bottom of that range is around about 6,800. We did have a brief push below the 200-day moving average, but it was important that we actually didn't take out these lows through here. So despite all this volatility, ladies and gentlemen, we're still within the ranges, but we are in danger, I think, of potentially heading towards the downside. But as long as we are able to stay above these key supports, then hopefully this volatility will soon pass and we'll start to resume our upward track. So we've seen the most recent PMI numbers from Germany, France, Italy, UK and what have you, and they've been fairly solid. China on the other hand, they've been fairly weak. And as we look ahead to the week starting the 11th of October, there's going to be particular attention paid to the latest China trade numbers. I think they will be interesting given the fact that we've seen rolling power cuts across China. So they're in the week beginning the 11th of October. We've also got the beginning of bank earnings season and the 11th of the week 11th of October as well. So we need to pay attention to those numbers as well. But I'm getting ahead of myself. Let's look ahead to the data at hand and the data starting the week the 4th of October. And really, I think the keynote data item is non-farm payrolls. The US payrolls report on the 8th of October. Now there was an expectation that we were going to see a dip in the October payrolls report. Despite the fact that we got a fairly weak number, the narrative has certainly shifted in terms of the US dollar. And I think there is an expectation that we're probably going to see a fairly decent rebound or the hope is that we'll see a fairly decent rebound after the very weak 235,000 that we saw from the August numbers, though we did see an upward revision to July to over 1 million. So the initial reaction was such that any thoughts of the table were quietly getting shifted into the beginning of the next year. We now know currently that the Fed is thinking potentially of a November start or even a December start. Personally, I think we could well be looking at December, but I think whatever you think, whether it's November or December, the likelihood is in the absence of anything significantly negative that it will start this year. With the expiry of emergency unemployment benefits on the 6th of September, expectations are high that this week's September report, this coming September report will see a significant improvement in the August numbers. To be honest, it's hard to envisage that they could be any worse given how weekly jobless claims have come down into the low 300s, though they are starting to wedge a little bit higher. At the most recent Fed meeting, Fed Chair Jay Powell went as far as saying that a semi-decent payroll's report needn't be a barrier to the start of a taper this year. So that, of course, raises the question as to what a semi-decent report is. So he doesn't need a decent report, he just needs a semi-decent report. The big question is what semi-decent is it? 200, 300, 400, 500? We don't know. It's such an arbitrary phrase that it means what he wants it to mean. The bigger thing is unemployment is continuing to fall down at 5.2% and wages data edged higher as well. So wages are starting to go up. The various labor shortages that we're seeing not only in the US, but it pretty much across the globe is helping to push wider wages higher. And that has to be a good thing. I think if you're relying on low paid labor to get your job done, then there is significantly something wrong. And that is, I think, part of the reason why we've seen increasing populism over the course of the past decade or so, that people at the bottom end of the pay scale have seen their pay kept low, while those higher up have started to move higher. So I think any indication that some of these lower paid jobs are having to be paid more, I think, is welcome. Yes, it will feed into wage inflation, but I think that's inevitable unless you're talking about levelling down as opposed to levelling up. So expectations are ranging for around about 510,000 jobs and for the unemployment rates fall to 5%. It's also worth, I think, ladies and gentlemen, keeping an eye on the ADP report two days before, which also saw a fairly low reading in August of 374,000. So I think as we look ahead to next week's payrolls numbers, I think it's extremely important in the overall scheme of things as to whether or not we get a fairly decent report. The ADP is expected to come in around about 430, and non-farms expected to come in around about half a million. So that's not too shabby. The big thing is that vacancies are still running at around about 10 million in the US economy. So keep an eye on that participation rate as well. There will be no non-farm payrolls webinar next Friday, sadly, as I have next week off. And I will be back on Monday, the 11th of October. So I apologize for that. I wasn't able to secure someone else to cover those numbers for you. We have seen, however, with the rise in the dollar over the course of the past few days, significant potential for further dollar gains. If we look at euro-dollar, euro-dollar has continued to track lower. And I think that is likely to continue to be the case, unless we start to get an awful lot more noise about EU CPI. Now, that went up to 3.4% in September, but more importantly than that, core prices are still below 2%. So I think it's very easy for Christine Lagarde to push back on the monetary policy hawks in the ECB governing council, because core prices are almost half of what the headline CPI number is. But there is no question that central bankers are becoming much more nervous about rising energy prices causing an element of demand destruction. So one of the things that I will be keeping an eye out for, which you should be keeping an eye out for next week, is the prices paid components of the services ISM numbers, as well as the manufacturing prices paid components to see whether or not inflation is starting to top out. And I think that's another thing that we need to pay particular attention to. US CPI is also out in the week beginning the 11th October. And that again, we need to be looking for evidence as to whether or not we're getting any closer to peak CPI. If energy prices are any sort of guide, the answer to that question is no, no matter what the headline numbers say. So inflation is going to be a key narrative, I think, over the course of the next two weeks, whether it be headline inflation, wage inflation, or energy price inflation. And that does bear thinking about as we look ahead to market volatility in October. Now we've broken below the key one 16 level on euro-dollar. The big question now is whether or not we can sustain a move. At the moment, we are sort of flirting with it a little bit. If we change that to say, for example, a weekly chart, if I can actually get the mouse to work, we can see that we're now testing the 200 week moving average. So we're at a very, very key juncture in euro-dollar, the 200 week moving average, 115.80. That's a big, big level. And if we do break below that, then there's not really much until 114. So potentially another 180 point move towards the downside. Personally, I can't make the case for any further euro, any significant euro upside. I think the bias still remains to the downside. What we've also seen is been a really bad week for the pound, despite all of this narrative about the Bank of England looking potentially to raise interest rates sometime in the early part of next year. I mean, we've even had Andrew Bailey go as far as to say, don't rule out a rate hike by December. Given what's going on at the moment with petrol pump shortages and surging energy prices, the fact that furlough has now expired, I think there will be significant challenges facing the UK economy in Q4. Certainly, I think there is labour shortages in certain area and people coming off furlough will probably have to retrain, but that's not going to happen overnight. You can't train an HGV driver in three or four weeks. And even if you could, there's a backlog in testing. So this is not a problem that's going to be resolved overnight. Not everyone wants to be an HGV driver. Not everyone wants to be a fuel tanker driver. And getting an HGV licence is one thing. If you want to drive a fuel tanker, you then have to get an ADR licence, which licences you to transport hazardous materials. At the end of the day, you're driving around with a mobile bomb behind you. So you need to have confidence that not only does the HGV driver have an HGV licence, but it also has an ADR licence as well. And again, these sorts of things aren't cheap. So the break below here, 135, 136, if you take the view that this is a triangle breakout, then potentially we have further to go. And we could well go as far as 132, 130 to be precise. Now, at the moment, it's finding a third degree of support around about 134. We could go as low as 133, 175. If we zoom all the way out, cables pretty much back to where it started this year, but potentially it could go even lower. Now, is that going to be as a consequence of sterling weakness or dollar strength? That's the big, you know, that is the big question. And for me, I think it could well be partly as a result of dollar strength, not so much sterling weakness. And why? Well, simply because if we basically, sorry, I didn't mean to do that. If we go and do euro sterling, we can see that euro sterling at the moment is doing what it does best, trading sideways. Fairly decent resistance up around 86, 70, 86, 40. We've come back down again and could well retest this line here. I think as long as sterling's problems blow over, and at the moment, we've got a fairly decent barrier all the way through here, 86, 70, then we could see, we could well see a return back to these lows back down here at around about 84, 84.5 on a break down through this series of moving averages here. So I still remain of the opinion that euro sterling's range trading and ultimately any sterling strength should manifest itself while below this key resistance level around about 86, 40, 86, 70 going forward. Brent Crude. Let's have a quick look at that Brent Crude. A little bit of a concern here that we've broken this very long term downtrend that I've drawn in from the 2007 peaks all the way through here, which means that we could well retest these highs back in 2018 at around about $87 a barrel. But when does an $87 a barrel prompt a element of demand destruction? And I think that's the real key primer here. If we do go to $87 a barrel, you will start to see demand slow down. Now OPEC are increasing their output by 400,000 barrels a month, sorry, 400,000 barrels a day on a monthly basis. Another 400,000 barrels of output is coming on October the 1st with another 400,000 barrels a day on November the 1st. And output still remains 3 million barrels a day below where it was pre-pandemic. Unfortunately, the ability OPEC to scale up output is not directly proportionate to the ability of OPEC to cut output, simply because the lack of maintenance and what have you has meant that they're finding it very difficult, especially the smaller OPEC countries to increase output as quickly as they reduced it. So that is fueling a little bit of a squeeze in inventory. And as a result, that's why we're seeing a little bit of higher prices. So if I look at the daily chart here, we can see that maybe we've hit a bit of a peak, wasn't able to gain a foothold above $80 a barrel, but it also hasn't been able to really sustain a move much below $78. So we're going to probably get a little bit of a tug of war now here between $78 a barrel and $80, $81 a barrel before we get a clearer idea of where we're going to head to next. We've also got an RBA rate meeting coming up. Not really expecting too much from that. If we look at the Australian dollar, we can see that there's fairly decent support in and around 71. At the last meeting, there'd been widespread expectation. The RBA might look at delay its decision to start tapering this weekly bond purchase program from $5 billion to $4 billion a week due to the various lockdowns being imposed. This did not happen. They carried on with their tapering, but instead of ending the bond buying program in November, they've extended it into February next year. So there was a little bit of a dovishness, a little bit of a hawkishness ultimately given the stresses and strains facing the Australian economy. They decided to extend the program, which was an entirely sensible thing to do since then, obviously the Australian dollar has lost a little bit of ground. Could well retest those lows that we saw in early August. Okay, so that's the Aussie dollar. Keep an eye on that particular one there. The only earnings of note that we've got in the week coming up is Tesco's. Supermarkets have been front and centre pretty much of the pandemic. What surprised me more than anything else is how disappointing Tesco's share price performance has been, even when you consider that there's been takeover speculation on the part of Morrison's, but also Sainsbury's as well and the wider food sector. Now, I personally think that Morrison's, that bid is madness. They're paying an awful lot of money for a fairly low-margin business and that's not going to improve over the course of the winter, but each to their own. Costs for the supermarkets have already risen sharply over the past 18 months. As a consequence of COVID, the move online, employing extra staff to upscale the online delivery part of business and food sales have also slowed as restaurants, pubs and cinemas have reopened. Now, Tesco is really in the enviable position, easy for me to say, of seeing this effect offset. It's Booker operations because Booker is a supplier to the cinemas and restaurants and bars. So, whatever Tesco loses on the supermarket side, it generally gets a pickup on the other side of the business. So, I think for me, I think the risk for Tesco still remains predominantly towards the downside in terms of market reaction. Personally, I think they're a well-run business. They've got fairly decent numbers and their latest sales numbers according to the Cantar world panel, Tesco and Waitrose saw their sales numbers rise in the last reporting period. The only supermarkets to do so. So, key support, I think in and around this 240 area and 250 area through here, looking potentially for further gains in the Tesco share price, certainly an undervalued business, certainly when you consider it and compare it to companies like Walmart and some of the big US food retailers, which you could argue may be overvalued, who knows? And maybe the truth is somewhere in the middle. We've also got Greg's third quarter numbers on the 5th of October, Carnival on the 8th of October and PepsiCo on the 5th of October as well. We'll quickly do a quick brief summary of what's coming up with respect to the US banks. They're coming up on the 13th, 14th and 15th of October. Certainly seen some fairly decent gains on the part of Goldman Sachs, JP Morgan and what have you. One of the key takeaways from the Q2 numbers was the amount of loan loss provisions that were recycled back onto the balance sheet. Also, the Fed has obviously lifted restrictions on the amount of money that can be paid back to shareholders in the form of dividends and buybacks. And more importantly, I think when we're looking at these big banks of Goldman Sachs, JP Morgan's and Citigroup is less so much on the Goldman side, what's business lending looking like? Because one of the key weaknesses that we saw in the Q2 numbers as we look ahead to Q3 was that business loans were looking a little bit on the soft side. Investment banking was pretty decent across the board. Retail banking revenue was a little bit soft. And I think when you look at how the US consumer has performed over the course of the past three months, it's been reflected in fairly weak retail sales, lower consumer confidence, and as such that could well be reflected in the retail numbers. So I think for me the key consensus is that while investment banking revenues may be fairly positive, fixed income could be weak because of the fairly low volatility up until the last few weeks, but also the domestic economy could be reflected in the numbers as well. So I've tried to cover an awful lot of ground. Hopefully I haven't covered too much and made this video too long. One other quick thing I'll look at is US natural gas prices. It's not just Europe that are suffering from surging natural gas prices. We've also seen big gains in US natural gas prices, but more significantly though, we haven't quite reached the highs for US natural gas prices that we saw back in 2005, 2006, 2008. So while the US is suffering, it's certainly not suffering anywhere near as much as it was in the mid-2000s. So on that basis, quickly wind up this video and hope to speak to you all same time, same place in a couple of weeks time. Until then, stay out of trouble with your trading. Have a good weekend and speak to you all very, very soon. Thanks very much for listening.