 Good morning. Welcome to CMC Markets on Friday the 15th of October and this quick look at the week ahead beginning the 18th of October with me, Michael Houston and it's been a very decent week for equity markets. We've seen the S&P 500 post its best one day gain since March and the FTSE 100 has had a similarly positive week. And when you consider how we started the week is a little, you know, I think it's a little, it's a little bit surprising. We had a fairly choppy style to the week. Equity markets appear to be leaning towards a narrative that companies can continue to grow profits despite the combined pressures of higher energy prices supply chain disruptions and port disruptions. And even though these issues remain a long way from being resolved for the moment, investors appear content to look through them. We had the latest Fed minutes on Wednesday. Didn't really tell us anything we didn't already know the Fed's on course to taper its asset purchase program, starting either in mid November or mid December. Despite the fact that we had a very disappointing payrolls report for September 194,000 jobs. I mean, when you consider that those unemployment benefits finished the beginning of September. That's a really low number and even though the August number got revised up to 366. And pal said he and pal actually said at the last fed meeting that an even half decent jobs report could be the final piece of the jigsaw for tapering to start in November. I don't think 194,000 really qualifies as a half decent report. I mean, any other normal month pre pandemic. Yeah, you could certainly argue that case. But I certainly wouldn't say that that was a particularly strong report, even if the unemployment rate did drop down to 4.8% the participation rate still remains very low and US employment still remains 5 million below pre pandemic level like here in the UK where employment levels have recovered pretty much back to pre pandemic levels. So as we look ahead to the upcoming week, we've got a whole host of new items to keep an eye out for. Obviously, PPI prices this week of showing so showing no signs of abating in China they came in at 10.7% earlier this earlier this week. And as we look ahead to know which was a 26 year high US PPI again went higher, but weekly jobless claims continued to come down so certainly inflation is a problem. But at the factory gate most definitely and for the time being it doesn't appear to be pushing CPI level numbers up at the same rate US CPI this week came in pretty much at the same level that it's been in for the past two or three months but you have to wonder how long that that can last. We've already seen companies scaling back production with Toyota being the latest car maker to do just that and only this week Apple cut its iPhone 13 production by up to 10 million 10 million units due to chip shortages so. There's a lot really I think to wrap one's head around at the same time as energy prices which are continuing to spiral higher this chart here is European natural gas one month prices, Netherlands prices. And as we can see this week we've seen a big jump from the lows that we saw on the 12th of October we've come all the way back above 100 100 BCF, and even you and even US natural gas prices are starting to push back to levels last seen over a decade ago. So the energy crunch is still showing no signs of abating we've got crude oil Brent crude oil back at levels last seen back in 2018. And that's really the next key level for me on Brent crude around about $87 a barrel now that we've broken this downtrend line, all the way back from the peaks back in July 2008 when we had $140 $150 a barrel and Brent is basically getting an uplift simply because of substitution demand. People aren't prepared to pay the sorts of prices that natural gas prices are moving up to and are starting to move into oil and coal and the like and that in itself is causing its own problems, because you're finding that companies are now starting to shut down production, because it's because it's just too expensive to keep production going with energy levels with energy prices at current levels so we're back at levels of natural gas that we saw back in 2014. We have been higher, certainly in the US, so there's certainly some way to go there, but look at these long candles that we have on the weekly charts that gives you an indication. Of how uncertain the outlook is for natural gas prices I mean the extent of those these candles here, you know anywhere between five and six and a half BCF I mean that's quite this, those are some quite significant swings in natural gas prices but the hope is that at some point. We could well start to run out of steam anyway as we look ahead to the upcoming week we've got. We've got some fairly important data out of the UK. We've got flash PM is out of Germany and France, and we've also got China third quarter GDP and retail sales and industrial production out of China, as well as a continuation of the decent earnings numbers that we've seen this week from the likes of JP Morgan chase city group. Bank of America and Morgan Stanley. We've got the start of UK bank earnings seasons with the release of Barclays third quarter earnings. We've also got numbers from Netflix and Tesla. And we've also got an Apple event to get our teeth into as well. So there's certainly no shortage of stuff to keep an eye out for this week. And as a consequence of that I'm just going to move that into there so I can talk a little bit about Tesla's latest numbers but before I get on to that. Let's start to look at the FTSE 100, which has managed to post its highest levels since 20 February 2020, we go all the way back here. And we've edged above 7190. We've also moved above these peaks back in August. The big question now is whether or not we can build on these gains. Certainly I think in the context of the moves that we've been seeing in basic resource stocks. So aluminium prices at the highest level since 2008, zinc prices, surging higher copper prices, rebounding energy prices, oil and natural gas prices. We've all seen fairly decent gains in the likes of the miners, BP, Royal Dutch Shell and the banks are doing well as in addition to that. So all three of those sectors are very big components of the FTSE 100 make up around about 40-45%. And the FTSE 100 is one of the few global indices that actually hasn't managed to recover back to its 2020 highs or even its record highs of 7800. So it's very much a serial laggard. So the big question is can we start to play catch up and head towards my end of year target, which is 7400. I certainly don't see any reason why we shouldn't. Having said that, when we look at say for example the S&P 500, we are below previous peaks. And even though we've recovered off the lows, it's fairly significant if we look at the monthly chart that there is a risk while we're below 4500 that we may have seen the highs for the year. That is a bearish engulfing month. Now you can argue that we've seen these before and we certainly have. We saw that back in February 2020 and we saw a very big correction towards the downside. So we do have previous when it comes to the potential for a little bit of a move lower. The key level on the downside is 4120. But to be confident that we're going to retest the highs, I'd really want to see a move back above 4,484,500 in the short to medium term. This sort of level here, take out the high there to signal that potentially a base is in just below that 4,300 level. If we look at the German in the 40 years it is now the backs, we're still below the 50 day moving average. So even though we put a low in around about where the 200 day is for me, I think we really need to see a move back through the 50 day moving average in these series of highs here to I think gain confidence that we're going to see further gains going forward. And it's a similar story for the Nikkei 225, which has also had a fairly decent week, but crucially again, it's below the previous peaks back in September and like the FTSE, which has managed to break above them. So certainly an awful lot to pay attention to when it comes to the various different indices, but certainly in terms of the weekly performance, this week's weekly performance, it's another week of fairly decent gains. As we head into the middle into the middle of October. So looking ahead, we've got Chinese third quarter GDP and an awful lot of the volatility that we've seen over the course of the past few weeks has been over concerns about the economic recovery in China. The crackdowns on various sectors concerns about a bankruptcy of Evergrande and any ripple effect into the property sector. We've seen searching power costs in China, prompting shutdowns to some of the more energy intensive industries within the country we've seen poor disruptions due to COVID restrictions we've seen supply chain issues. So, when we look at the third quarter, it's likely that we could be heading for a little bit of a disappointment. Yet when you consider at the beginning of this year is widely expected the Chinese economy will see annual GDP growth of around 6%. Now, the perception is that we could well be lucky to see that certainly in terms of the annualized number, the third quarter GDP expectations are of a number of around 5% on a quarterly basis. We could well see the Chinese economy only grow by 0.4%, which would equal the first quarter number, which was also 0.4%. If anything, I think 0.4, given the problems experienced by Chinese industry and the slowdowns that we've been seeing in retail sales, we could actually see a stagnant quarter. So, recent PMI numbers haven't been particularly encouraging when it comes to economic activity. So, it'll be particularly interesting to see how that plays out. We've also got Chinese retail sales for September. Now, in August, these slowed sharply, coming in at 2.5%. Now, that was down from an 8.5% rise in July. So, it was also very short consensus of 7. So, 2.5% when you're expecting 7% is a pretty huge mess. And industrial production, again, likely to be a very disappointing number given the various shutdowns of Chinese industry that we've seen over the course of the past few weeks. That's expected to come in at around about 3.8%, I think even that could be optimistic after the 5.3% that we saw back in August. But nonetheless, these numbers could be very instructive when it comes to expectations for the fourth quarter for the Chinese economy. So, looking ahead to the latest UK numbers, Cable is looking much more resilient than it used to despite all the noise about the Northern Ireland protocol and a prospect of a UK-EU trade war and all of the empty rhetoric from both sides. If you look at the UK economy, I think the biggest risk to the UK economy is not so much from the data, but it's from politicians and tax policy of the new government raising taxes next year. As we look ahead to this week, we've got latest CPI numbers on the 20th and we've got retail sales for September on the 22nd. Now, UK CPI, it's likely to move higher. It came in at 3.2% in August, the Bank of England thinks it will probably exceed 4% by the end of the year. Energy prices surging across the board, it's likely to trickle down into higher costs, higher prices, which in turn will probably need to cause for higher salaries. When you consider that in July CPI was at 2%, went up to 3.2% in August. And while there is an expectation perhaps that we may flat line around about 3.2%, 3.3%, 3.4% over the course of the next few months, it wouldn't surprise me at all if we were to move up to 3.5%, 3.6% in September. Markets are already pricing in the prospect of a rate rise in December, but even if they do raise rates in December, we're probably only talking a move from 0.1% to 0.25%, which is neither here nor there, neither here nor there, really. And you could conceivably get something called a dovish hike, where basically they say, given the concerns about inflation, given the concerns that wages might start to also go higher, to preemptively move rates a little bit higher in a short to medium term is eminently sensible. It certainly doesn't mean that they're going to be back at 1% within the next 12 months. You can implement what is euphemistically known as a dovish hike. So I think there's an awful lot of stereo around the fact that the Bank of England is in danger of making a policy mistake. If the economy can't withstand a 0.15% rise in base rate, when guilt yields are much, much higher than that, then I think there's really something wrong. It's all about signaling. You can signal a rise in the base rate without sending guilt yields through the roof. I mean, they're already pricing well above base already. So I don't think a 0.15% rise is likely to make that much difference in the wider scheme of things. We've also got the quarterly inflation report coming up in November. So I think it's unlikely we'll see any moves in November. We could we'll see a move in December because I would imagine that in November, the Bank of England will raise its inflation target to compensate for the move higher that we've seen in prices. As for cable, we need to see a move through 13730. This series of peaks through here. You've got about 13750 that peak there. You've also got a peak there around about 13735. And you've got this peak here at 13739. If we break through here, then we've got a retest of this trend line here, as well as the 200 day moving average of signal and move back to 139. Got UK retail sales on Friday. The last few months haven't been great ones for retail sales growth, three of the last four months have been negative. Since the 9.2% rise we saw in April, we've seen declines of minus 1.3, minus 2.8 and minus 0.9 with only a pitiful gain of 0.2% in June. So, I mean, that's all the more confusing given that in the summer months, UK consumers haven't really been able to go anywhere but stay at home. Due to the various overseas travel restrictions in August, we saw credit card spending surge on items like cinema tickets to events and restaurants, which suggests the official numbers aren't capturing anywhere close to the full picture of UK economy spending patterns. So, as we looked towards this week's September numbers, I think we're overdue a little bit of a rebound. Most definitely notwithstanding UK consumers sucking petrol station four quarts dry due to misplaced concerns about fuel shortages. So, I think UK retail sales, including food and energy, could be a bit of a doozy. We could see a big, big bump largely as a result of the panic buying that we saw at the pumps at the end of last month. So, certainly be prepared for a fairly big number there. You've got latest flash PMIs from Germany and France. The direction of travel there generally has been more towards the weaker side than anything else. They're still fairly decent mid 50s and what have you. But certainly when we look at, say, for example, Euro dollar, we could see, given the fact that now a taper is probably more or less priced in a little bit of Euro strength or a little bit of dollar weakness more than anything else. Back to these sorts of levels here. So you're talking one 1640. That's the key resistance level for me on Euro dollar. I think if we can break above one 1640, we could go for a little, little trip towards the top side. Certainly that bullish candle there suggests that there is potential for a little bit of a short squeeze on Euro dollar. What does that mean for Euro sterling? Probably not that much, but I'm still of the opinion that the bias remains more to the downside than the upside, but really big support. And around here at 8450, we really need to break through that to signal a significant move lower. And at the moment, I'm not really seeing much in the way of potential for a significant breakout. But if we do, then obviously you've got this series of lows back here as a benchmark for a break below 8450 going forward. Okay, so that's, that's the key macro this week. Let's move on to the earnings numbers. Barclays latest Q3 results. Banks have had a good week by and large this week, particularly US banks. In the first half of this year, Barclays numbers show profits before tax came in at just under five billion pounds in the first half of the year. Bank saying it's going to pay dividend to two peer share. One of the more notable take aways from those first half numbers was a continued improvement in the investment banking division. And I think one of the key takeaways from this week US banking numbers was M&A fee revenue was fairly solid as was equities trading revenue because of the volatility in September. So, and we also found that the banks added back reserves from their loan loss provisions to boost their profit numbers. So certainly we'll be looking at Barclays numbers through the same lens when it comes to their third quarter numbers on the 21st of October. And this 200p level, it's a big, big level. We can sort of zoom on the way out and we can see here that we're almost back. We were back about 2019 levels. So there's certainly potential for further gains. I think if we can break through 200p, that could trigger quite a bit of buying interest going forward. The shares have been suffering due to an erosion of their margins. The big, big support level here is back on the March lows back in back at back at the start of the year and at the beginning of the during the first quarter of this year. So, so Unilever guided expectations for margins lower. They said that they were still confident they will be delivered be able to deliver underlying sales growth of three to five percent. And we could also get further details on Unilever's plans to offload his tea business. There was some speculation earlier this month that they in September rather the CVC partners was amongst three bidders vine to snap up the four billion pound business. It will certainly be interesting to see whether or not we get any further detail on that. We've also got numbers from Netflix and Netflix shares are at record highs. Their subscriber growth is slowed quite substantially. That doesn't appear to put investors off. Yeah, we did get a little bit of a sell off in the aftermath of the Q2 numbers. The guidance for Q3 was for 3.5 million new subscribers. Their international content is certainly doing quite well. Obviously there's Squid Game. Those of you who've seen that. Yeah, but I've certainly seen clips of it and it's certainly very dystopian to say the least. They've also invested in the last quarter signed a deal with the Royal Dow company to create a host of new content around Willy Wonka, BFG and Matilda. So they are looking to invest an awful lot more in creating their own content to try and stay ahead of the likes of Disney plus Apple TV and Amazon Prime. So there's an awful lot of good news priced in to these numbers, begging the question as to whether or not we might see a little bit of a pause. But nonetheless, Netflix still appears to be doing fairly well. Tesla, one of the more notable takeaways from Tesla's second quarter numbers was they actually made a profit from selling cars for the first time ever. They didn't need any of their carbon credits to be able to do that. So the latest sales numbers have done very, very well. Over 200,000 vehicles delivered in Q2 and with the likelihood of another well over 200,000 vehicles to be delivered in Q3. 241,000 despite the semiconductor shortage and record sales of its vehicles in China from its China factory. So the outlook for Tesla looks fairly positive. I think one of the things about it is that there are concerns about the sustainability of its margins. Nonetheless, they do appear to be maintaining them and expectations of Q3 for profit. So to come in at $1.56 a share, but obviously keep an eye on this upward trend line here going forward. We'll wrap up with Apple. Another event on Monday. Only last month we got the iPhone 13 and only earlier this month. The company cut its iPhone 13 production numbers. Now, maybe the reason for that was because at the Monday launch or launch event or whatever it is, they could be launching a new MacBook suite of products upgrades to them. So I think last week's production could simply be a question of reallocating resources towards its more expensive MacBook products as it rolls out upgrades there. But we'll see. Still very much in an uptrend on Apple shares needs to really get back above the 50 day moving average, but the direction of travel still looks fairly positive. And once again, I think particular attention will be placed on margins and how much the semiconductor shortage has affected Apple's overall business. So that's I think that I think that'll do for this week. I think I've gone on long enough. Once again, thank you very much for listening. I hope you all have a great weekend and speak to you all at the same time, same place next week. Thanks very much for listening.