 Good morning. Welcome to CMC markets on Friday the 4th of February and this quick look at the week ahead beginning the 7th of February It's difficult to know where to start This week given the events of the past few days. Obviously January was a bit of a negative Month for stocks of disappointing start to the year The US markets and stock markets in general apart from the FTSE 100 That wasn't really any different to what we saw A year ago January was also a little bit of a disappointing start for equity markets, but As as this week started we did start to see a little bit of a rebound Decent numbers from alphabet These coming on the back of obviously some fairly decent numbers from Microsoft and Apple Against the backdrop of markets starting to become slightly more relaxed about the idea That the Federal Reserve wasn't going to go with 50 basis points in March and looking forward to the Bank of England meeting this week and obviously the European Central Bank and While it was no surprise that the Bank of England raised rates this week by 25 basis points It was pretty much inevitable given the direction of travel of inflation What was slightly unexpected was that they came within a whisker of raising by 50 basis points and also raised their inflation expectation for This quarter to from six percent seven point two five percent then on top of that We got a hawkish tilt from the European Central Bank now Most of this already knew The Christine Lagarde the president of the ECB would find it increasingly difficult to continue to pedal the narrative that There wouldn't be any rate rises this year Something that she said back in December so This week's meeting was a key test for her Against the backdrop of a new Bundesbank president Jocham Nagel who's basically been warning about the risks of higher embedded inflation and There was there was a slight change of emphasis In this week's press conference. Yes, the ECB did keep rates unchanged They're stuck to their timeline for ending pep in March but she refused to repeat her pledge or What she said about they're not being an expectation that ECB rates would not rise this year and it's not hard to understand why But then in the aftermath of that press conference, we've got a number of briefings That suggested that the ECB might recalibrate Their monetary policy stance at the March meeting. What does that mean? Well, I think the bond markets have already told us what that means the bund has gone back into positive territory And we've seen UK guilt yields surge We've seen we've seen bond markets sink quite sharply over the course of the past two days the US two-year yield is now above 1.2 percent and The US 10 year is above 1.8 percent and suddenly Because of these elevated concerns about inflation the fact that the ECB Briefings have started to become an awful lot more hawkish concerns about Other rate rises coming in the first half of this year started to spook Markets and make them much more skittish and we saw that last night in the US Yesterday meta Facebook as is as it's previously known slid 26% In one single day, that's the biggest ever fall in a US big cap ever We've also saw big declines in snap that fell by 23 percent Amazon Seven and a half percent ahead of their earnings numbers which got released after the bell And which were better than expected and suddenly we get a 50 percent rally in snap and a 15 percent rally in Amazon such is the skittish nature of markets as they are at the moment nonetheless Despite this huge amounts of volatility The likelihood is that we could still finish this week higher albeit towards the lower end of Of what we were hoping it would be Wednesday Wednesday market close if we look at the FTSE 100 that's held up fairly well this week. It's probably been a Rather interested bystander to all the comings and goings in US markets this week German stocks have been a little bit more disappointing. I think that's not really surprising Given the moves that we're seeing in European bond yields, which are suddenly shot higher By quite a substantive amount and that's going to be really problematic going forward Particularly in the context of higher borrowing costs for some of the weaker European nations who have high debt GDP levels, which they need to finance Hopefully they've got all their funding done very early on Because otherwise they could find it an awful lot more expensive as the year goes as the year goes by Nonetheless Nothing really much to see here in terms of FTSE 100 Continues to do well Shell's earnings earlier this week were fairly positive. That's given a boost to the energy sector It's also not being harmed by the fact that Brent crude is now well above $92 a barrel And on our CMC cash contract is now above $93 a barrel I'm probably well on the way to $100 a barrel and this is this is really significant in terms of Not only interest rate expectations, but also growth Expectations of Andrew Bailey of the Bank of England Already has indicated that the reason they're raising interest rates is not because the economy is booming But it's because there is a concern that inflation is going to become much more embedded as The year goes by and it's not hard to understand why when you look at The fiscal squeeze that's going to hit households in April we've got the energy price cap We've got tax rises national insurance rises Inexplicable in my opinion And National insurance rises and while there is some mitigation measures being brought into address squeezing energy prices an awful lot of these Won't actually kick in until October, which means between April and October You're going to see a significant decline in disposable income for some or quite a few UK households, so we'll just have to hope that we have a mild spring and a warm summer And that we don't have to use an awful lot of gas or electricity so that really I think is A real headwind coming for The global economy not just the UK economy the global economy because the same problems and the same The same headwinds and only hitting the UK. They're about to hit Europe and they're about to hit the US and Probably going to hit China as well once the Beijing Olympics are out of all the winter Olympics are out of the way Because China's so-called zero covid strategy is in no way sustainable and The sooner they drop it Hopefully the sooner the Chinese economy will start to pick up because while We're seeing the Federal Reserve Bank of England ECB or moving in a tightening direction The People's Bank of China is actually looking to ease monetary policy try and kickstart or engineer a little bit of a rebound in Chinese economic activity, so that's the proof that sort of the backdrop to where we are at the moment As we look ahead to what is likely to be a fairly big week not so much for the macro But in terms of company earnings before we start on that We've got non-farm payrolls this afternoon as I record this video We've already seen a really disappointing ADP report earlier this week. The US dollar has been absolutely battered this week on the back of The shift in hawkish expectations Away from the Federal Reserve and to pretty much everywhere else in the global economy And you can see that borne out in the CMC dollar index chart that we have here On the dollar index we've also seen a very big decline probably on course for the biggest weekly decline since March 2020 which is pretty much in line with the big the decline in the Nasdaq 100 that we saw earlier this week The biggest one-day decline since 2020 there as well so US CPI next week is likely to be the next key mark potential market mover and If we get a number With a seven handle we've already got a number with the seven handle is currently at 7% in December If we get another handle Of 7.3% which is basically was what are what the estimates are on a call that actually moves within touching distance of 6% Then all that chatter of potential 50 basis point rate hike by the Fed in March could well come back Onto the table Fed policy makers for the time being have suggested that it's not on the table at the moment But they've also insisted that it will be data dependent. So an awful lot is riding on The CPI number that we've got coming out on the 10th of February Non-farm payrolls expecting a disappointing number 125,000 Compared to a couple of weeks ago when it was 178 this week's ADP report minus 301 could actually see as print a negative number on non-farm payrolls But Federal Reserve officials have already Prepared the ground to set to say that they are they're expecting a poor number And they expected to bounce back as people return to the workforce after Omicron related sicknesses and absences so Hopefully the January number will be a one-off. It was a couple of years ago. We got a bit of a week number I think it was a year ago or two week two years ago and then we got a subsequent rebound and the week number was again as a result of a previous variant which caused an awful lot of absences post Christmas and early January so Week number probably not not a particular game changer unemployment expected to remain at 3.9 wages is going to be key If we see a big uptick in wages, then obviously that will reinforce the inflationary narrative So US CPI is on the 10th So the declines that we've seen in the dollar over the course of the past few days Which have been largely related to hawkish tilts by the ECB the Bank of England and potentially Other central banks like the SMB in the Bank of Japan Could well quickly reverse if the possibility of a 50 basis point move in March comes back onto the table on the back of a Very strong CPI reading next week. We've got fourth quarter GDP from the UK. That's on the Friday the 11th Not expecting a good number there simply because of the Omicron wave that hit in December and which pretty much wiped out all the retail sales growth that we saw in October and November there was a collective 2.7 percent gain Between October and November. We saw a 3.6 percent decline in December So we saw a 1.1 percent expansion in Q3 best we can probably see a Stagnation in Q4. I think in a best-case scenario. There is a risk. We could actually see a modest decline We've already seen a big decline in German GDP for the fourth quarter as well So given the cost of living squeezes coming GDP numbers They're going to be very they're going to be challenging in terms of the growth numbers in the first quarter first and second quarter of this year for the UK economy So what does that mean for the pound well The shift in the ECB has had the biggest effect on euro sterling The several weeks now I've been talking about potential euro lower euro sterling And in the aftermath of the Bank of England decision, we did see a brief spike lower Towards the downside to these lows back in 2020 but crucially, we didn't break below those lows there and Once madam Lagarde started to speak We got a very sharp short squeeze in euro sterling which has the potential to now bring us all the way back to 85 and Potentially these peaks back here in December last year the narrative has shifted quite significantly between The pound and the euro now you can argue whether or not the ECB will actually be able to implement a rate hike this year There is it there is a significant that I mean the gap the interest rate the interest expectations gap It's wider now than it was six months ago, but it's the expectation now that the ECB will be forced to hike twice Between now and the end of the year now the Bank of England is potentially going to go again in March and May market surprising in base rates of around about 1% by the by the end of June this year Which is still a significant gap between the UK and the euro area but it's about expectations and Huge short positions in the euro are having to be dialed back And now we're getting a move back towards the top end of the range that we've pretty much been in for most of 2021 so expect that range to continue to prevail over the course of the next few weeks and months with a potential test of 85 now that we're back above the 50-day moving average and obviously these peaks here at 84 20 Now they're about above 84 20 the potential is to go back to around about 84 70 84 80 In terms of the euro dollar and see what the this week's change of narrative is brought in the euro dollar What's significant about this particular move is that we need to take out these two peaks here around about 1480-1490 To really push on back towards 1605 which potentially would be the next target for a higher euro and a weaker dollar We'll see how that plays out next week because as I say if we get a particularly hot reading in the CPI Then all of those all of that speculation about a 50 basis point move by the Fed Could actually start to come back into play again The pound has suffered a little bit on the back of the move in interest rate expectations More broadly, it's still in the uptrend. It's been in since the end of December But it's really struggling to really gain a foothold above 136 and that is a little bit of a worry I think for me to be confident about further progress and pound against the dollar I'd really want to see a move back through the 200 day moving average which also caps the The move higher in January so the sterling rally is causing me a little bit of a Giving me a little bit of a cause for concern at the moment and they're slightly to be reflected in slightly a Move higher in euro sterling Particularly if you're a dollar continues to move higher and cable is unable to they need to pay particular attention to that S&P 500 Starting to roll back again. We did go back above the 200 day moving average, which is encouraging So far we've held above that We've managed to reverse an awful lot of the bulk of the losses from the early part of Thursday And obviously we've seen some fairly decent gains here What's more worrying for me is the NASDAQ 100 that is starting to look Very challenging. It's Tried to get above the 200 day moving average It hasn't been able to do so and it needs to do so to diminish the downside risk that we're currently seeing More importantly, we're still below This series of lows through here. So 15,500 probably for me is more important 200 day moving average We're going to get an awful lot of noise an awful lot of volatility Over the course of the next few trading sessions, but for me to be confident that the NASDAQ is managed to Maintain a degree of stability what we need to see is it to move back above 15,500 but when I look at us to yields It doesn't give me cause for encouragement Particularly if you then strip it all the way out Over the course of five years because at the moment that the possibility is that Market starts effectoring much more aggressive US rate hikes and we head back to 1.5 and what does that then do for Some of the more elevated valuations that we've seen in the US tech sector We've already seen the wheels fall off in spectacular fashion of some of the smaller Names in the US tech space And now we've seen the walls the wheels fall off Facebook or meta So begging the question Who could be next? And that for me, I think is the big the big question while the S&P is managing to hold Above the 200 day moving average the NASDAQ could act as a significant Anchor on any further Rebounds so let's look at that Let's let's look at what's coming up next week because apart from GD fourth quarter GDP out of the UK We've got some more earnings numbers This time from BP rolled up shell posted some fairly decent numbers earlier this week Largely on the back of higher energy prices gas prices The restart of the Gulf of Mexico operations for BP is expected to boost its Q4 numbers It's broken above 400p It still has room to go To get back to the levels it was pre-pandemic when it was around about 500p but Given where oil and gas prices are and given where BP's break-even prices, which is around about $60 a barrel and could actually get revised lower You've got to think that this is good news For shareholders in the short to medium term and while there are concerns about the transition of these energy majors BP and Shell ExxonMobil gave us a flavor of what they should be doing and by pledging to boost production in the Permian Basin to try and take advantage of higher prices and potentially keep a lid on prices as well because Let's make no mistake unless you've got an alternative to renewables in the form or a transition alternative to renewables and You're not investing in future production Future resource prices are only going to go one way now. You need a sustainable Alternative nuclear obviously has been touted natural gas. It's not zero carbon, but it's certainly lower carbon and At the moment oil companies are likely to benefit from that going forward so I would imagine a lot of good news is already priced in but certainly I think there's potential for BP to Go even higher based on where it was back at the end of 2019. So that's their full year numbers for 2022 and they're on the 8th We've also got the big story is obviously got numbers from GlaxoSmithKline and Unilever and obviously that is topical on the back of The recent bid by Unilever to buy the consumer health care division of GlaxoSmithKline now obviously the bid since Since it was made has been withdrawn We've heard reports that active in active investor Nelson Pelts as Secured a stake in Unilever with a view to potentially Making changes Since then obviously Unilever have announced 1500 job cuts in a major management overhaul to streamline the architecture of its business model in response to obviously the shareholder disquiet to last month's events So the big question is can it break this downward cycle that it's been in and that hasn't really affected its peers of Proctor and Gamble and Nestle well, I think The outlook is fairly positive when we look at the third quarter numbers Unilever they were able to pass on Price increases and Boost their sales So the big I think I think the big question that Mr. Joke needs to answer is to get a handle on his cost base Cutting out middle management is a start, but he needs to go further. He needs to find out which of the underperforming businesses Need reform and either get rid of them or Basically cut costs in them. So maybe we'll get some detail on that But the key downtrend line here for Unilever is this line from the October hose They need to break it October highs. They need to break out of the cycle Glaxo, well, they're looking to spin off Their consumer health unit sometime later this year and I have a feeling they may regret Not ripping Unilever's arm off When they bid 50 billion for it because in the current fee brawl environment, you've got a question as to whether or not they'll get the valuation For when they come to spin it off in Q this and again, this is Glaxo's four-year numbers It's been a fairly decent decent year for Glaxo Q3 sales rose 5% It up his four-year guidance For this year for an adjusted EPS decline of between two to four percent and reconfirming its outlook for 2022 consumer healthcare division, which is obviously the Focus of all the attention saw sales of two and a half billion pounds, which was a rise of three percent. So We could get an additional insight into Unilever's Glaxo's plans for its consumer healthcare business in terms of when they look to spin the time the timeline for spinning the business off We've also got numbers from AstraZeneca Find out how the Alexia the Alexia the Alexion easy for me to say the Alexagon Alexion Integration is going I'm really struggling with that. But again some fairly decent share price Advances over the course of the last few months and Pfizer or Pfizer is very much a vaccine story It's not hard to see why Pfizer hit record highs in December since then obviously with the mildness of Omicron and The new COVID pills the share price has come off a touch But if you want to pick a winner share price winner because there are no winners in a pandemic But if you had to pick a winner from a pandemic Pfizer's out there at the top of the pile Its revenues have been absolutely staggering from the covid vaccine in 2019 its total revenues 2019 with forty one point nine billion dollars Okay, 2020 the end of the end of year 2020 41.9 billion dollars this year They're expected to post annual revenues of 82 point eight billion dollars. That's almost double and COVID-19 vaccine four-year revenue is expected to make up 36 billion dollars of That increase Which is an absolutely astonishing number, but then again, it's not surprising really when you consider that it's 22 20 quid a dose or 22 euros 50 a dose You know so I have to ask the question how much money is too much money in a global pandemic? And when you consider that AstraZeneca has been charging cost and is now only now Starting to turn a profit on its on its astro vaccine I think that gives an indication as to why AstraZeneca's share price has underperformed relative to Pfizer We've also got Disney's numbers Playing particular attention to the streaming To the streaming numbers in light of Netflix is disappointing results In its last quarter only 2.1 million new subscribers signed up for Disney plus 2.1 Which is well below expectations of an improvement to a hundred and nineteen point six million so they pushed it up to a hundred and eighteen point one From 116 they're expecting a significant much better number than that more importantly The addition of star Certainly helped boost its contact library and there and I have noticed there is an awful lot more content now on Disney So hopefully their first quarter should be better than its last quarter But it also operates in India now India is a low margin low cost business and it operates at a loss there It's now got increased competition from Netflix in India and that's likely to make things worse So really it needs to in up its game not only in terms of its streaming But also in terms of a theme park revenues, which were also disappointing in Q4 But you have to think at some point The it must be near a short-term base and could well start to take higher because ultimately it's not just a pandemic stock It's also a recovery stock in terms of the theme parks as we had towards the summer months And you've got to think that perhaps you could start to see a rebound in theme park and holiday numbers Which should help offset the slowdown in its streaming numbers as well. So that's pretty much It I think for this week. Thank you very much for listening and I have all I hope you all have a great weekend and speech you all same time Same place next week. Thank you very much You