 Good morning. Welcome to CMC Markets on Friday the 14th of January 2022 and this quick look at the week ahead beginning the 17th of January. And once again, we've seen a fairly choppy week for equity markets. US markets have once again been driving, I think, well, they have been driving the moves higher and lower pretty much across the board. Asia markets have also proved to be fairly choppy without really giving any sort of sense of overall direction going forward. And I think the bigger question that investors are wrestling with at the moment is what sort of central bank intervention are we likely to see with respect to tightening of monetary policy over the course of the next 12 months. Certainly the narrative from the Federal Reserve has been raised a little bit or the rhetoric has been raised a little bit over the course of the past few days with a raft of policymakers pretty much nailing on the certainty that we will see a rate rise at the March rate meeting. Now I hear you ask why would the Fed not decide to go in January in a couple of weeks time given the fact that there is a meeting between now and the March meeting and there's a simple answer to that question. The Fed have guided that they are tapering off their asset purchases which are due to end in March and as such any tightening of monetary policy is not likely to happen before then. Now you can argue that the potential the Fed needs to get going and certainly there is a school of thought that suggests that they really can't afford to hold off if as some people are suggesting we could see four rate rises this year starting in March so essentially we get one in March one in June one in September one in December certainly Goldman Sachs has come out and suggested that they are in the full rate hike camp. I think the big question is whether or not the Fed is behind the curve and actually given the data that we've seen this week whether or not this inflation research that we've seen maybe on the cusp of topping out certainly looking at the US CPI numbers which came in at 7% for December this week and the China CPI numbers which actually fell back in December as did the PPI numbers there is a sense that perhaps we are starting to approach already getting near to the high watermark when it comes to inflationary pressure certainly PPI the PPI numbers do appear to suggest that we are starting to see a slowing of the inflationary narrative and could in coming months see inflation levels that start to level off and potentially tick a little bit lower. Now that's not to say that they're going to come crashing off from the levels that we're currently seeing at the moment but what we could see is a plateau whereby US inflation hits 7% and then starts to drift back down to 6%, 5% over the course of the next few months as these effects start to level off. In that context obviously we'll be looking at this week at the latest UK CPI numbers which are due out on the 19th of January that's one of the key items on my agenda looking forward as is UK retail sales for December they're out on the 21st of January as well as the latest unemployment numbers and wage growth numbers on the 18th of January so that's the key UK data we've also got China's fourth quarter GDP numbers which are due out on Monday and they're likely to come in at the lower end of expectations cast your mind back 12 months and everyone was talking about the potential for the Chinese economy to see annual GDP growth of 6%. I actually thought that was slightly pessimistic at the time turns out I was wrong on that count and something that I'm perfectly happy to hold my hands up to when the facts change I change my mind but I certainly don't change my mind on the basis of one data point but you still need to be flexible enough in your own views to say well okay the data is not actually panning out the way that I suspected it might and therefore you have to rethink your rationale or your logic for a particular trade idea and that's one of the key things about looking at markets and that's one thing the last 30 years have taught me don't let pride get in the way of changing your mind because ultimately changing your mind can save you an awful lot of money in the longer term you know it's not a weakness to admit you're wrong it's a strength I've learned more from my mistakes than I have from my successes and I think you have to try and keep that level ahead when you're looking at financial markets you know and that's why I think markets are very very difficult at the moment if you look at say for example the the NASDAQ 100 that's seen an awful lot of volatility over the course of the past few days and the bias for that is for the market to roll over certainly if you look at US 10-year yields they tried to go through 1.8 percent last week and they failed that prompted a little bit of a rebound in the NASDAQ and then now around about 1.73 percent have come off a little bit and there is an argument to suggest that perhaps on the 10-year maybe we starting we maybe we are starting to see some evidence of a topping out of the longer term section of the US yield curve I mean let's look at these candles here the weekly chart at the moment is not really telling me anything instructive we've seen some very strong moves over the course of the past three weeks we've seen a little bit of a consolidation here back to around about 169 1.69 and for the moment the charts not really telling me anything significant in terms of where we can go to next we're seeing a little bit of a sideways consolidation and certainly the highs are getting lower which does suggest a little bit of failing momentum when it comes to the 10-year so that could be positive for the NASDAQ but and there's always a caveat you look at the US 2-year yield that is showing no signs at all of actually wanting to start to roll over and I think that's the one that we really start to want to continue to pay attention to the US 2-year yield is now approaching 1 percent so buying UK government by buying UK buying US treasuries 2-year US treasuries actually gives you a higher return than it does investing in the trailing dividend yield for the NASDAQ but that's by the buy anyway on a technical basis we are approaching a very key support level on the NASDAQ 100 certainly in terms of what we're seeing here the markers are still very undecided you've got a very long lower candle there lower wick on that candle there but those gains soon gave way to a big sell-off here so the 50-day moving average on the NASDAQ 100 is going to be the key resistance level and at the moment that is you know while that acts as resistance the risk is very much towards the downside of the NASDAQ and if we break below these lows here this trend line here from the lows here we could well get to see a significant test of the 200-day moving average it's a similar sort of picture when we also look at the S&P 500 and again you know we are approaching a very key support level so looking at these two indexes in the round it's interesting how much they closely correlate certainly again we've got the very long lower shadows on the candle six charts you know and that's very very important in the context of the wider scheme of things so we need to keep particularly close attention to that on any thrusts towards the downside and potentially get a rollover in the S&P 500 so those those those the two US markets US markets are acting as a significant drag on risk appetite however that's not the whole story because if we look at the the DAX there's pretty much trading sideways there's no danger of us really going anywhere on the DAX at the moment and that still remains very much range bound but albeit with a bias towards the upside so nothing really to add there FTSE 100 is the outperformer so far this year we've broken higher and continue to track higher so on the basis of this chart here I think there's potential quite a bit of potential for further upside for the FTSE 100 back towards the January peaks that we saw just before the pandemic around about 7,700 7,690 certainly a lot more potential for the FTSE 100 to retest the 2020 highs and certainly that is my bias in terms of the FTSE 100 as long as we're hold above 7,400 which was a breakout level at the end of last year and for me the the bias remains for the FTSE 100 to continue to slowly edge its way higher going forward we've also seen some significant breakouts on the part of euro-dollar the dollar has weakened despite the prospect that we could see more than three rate hikes this year why is that I mean that does seem rather counter-intuitive that actually we could get four Fed rate hikes and and yet the dollar weakens and I think an awful lot of that is positioning based I think if the Fed hikes rates four times this year then it's much more likely that other central banks will follow suit whereas say for example if the Fed only hikes two or three times this year it's probably more likely that the other central banks will probably do nothing so what you're getting is potentially a much broader tightening the monetary policy which may not actually favor the dollar anywhere near as much now that may seem a little bit counter-intuitive but you have to basically trade and want the charts are telling you we've broken through 113.85 on euro-dollar and broken through 114 so you could argue this sort of breakout here suggests that we are going to see another move higher in euro-dollar further dollar weakness towards this series of lows previous lows through here which was around about 115.20 and in my chart forum posts on the site which are here which can be here I've basically suggested that we could see a move to 115.20 on euro-dollar over the course of the next few sessions while we hold above the 114.113.80 area which I've identified as the breakout point and the previous resistance level. Similar sort of thing with respect to cable though we are starting to run into a little bit of resistance at the 200-day moving average but nonetheless this on the basis of dollar weakness if we can break above the 200-day moving average then we can certainly retest these peaks here around about 138.30 and head back towards the 140 level in the short to medium term certainly the dollar does appear to be losing a lip or bit of its luster and if we look at the CMC dollar index the fact that we broken this uptrend line from here would appear to suggest that further weakness is on the way therefore if you extrapolate that out that would suggest that we're going to see further euro strength further sterling strength as well which really then begs the question what happens to euro sterling well again that's a bit like watching paint dry but ultimately I still think that if we can get below 83.30 then the bias remains for a retest of 80 to 80 initially and also the these these lows back here in February 2020 at the moment 83.30 is proving a little bit of a tough enough to crack but while we're below 83.80 the series of highs through here and I think the bias remains for a slow track lower going forward so look at also looking at the looking at the wider numbers for next week I think it I think it's unlikely that any of the numbers that we see coming out on from the on the economic data front will point to anything significantly different in terms of currency moves currency direction overall so UK CPI we're expecting to see that to edge slightly higher from 5.2% to 5.3% and that will be the highest levels since above the 2008 highs levels last seen in March 1992 5.3% in March 1992 at 7.1% so I don't think it'll go that high certainly the Bank of England thinks it could go to 6% but certainly overall markets are now pricing in the possibility that we might see a move on rates from the Bank of England in early February we'll have to wait and see certainly the Fed is already indicating that it's going to move in March the bigger question is whether the Bank of England will for preempt that and go in February or while they'll wait till the Fed moves and that goes subsequently in at the following at the meeting after that unemployment is expected to remain steady at 4.2% normally seeing much change in that we could see it drop a little bit to 4.1% but overall the number of vacancies is at a record high 1.22 million so you would expect the unemployment rate to continue to fall as we head into 2022 wages on the other hand are still below the level of inflation so the negative in real terms they fell back to 4.3% from 6% in October certainly we'd want to be seeing evidence of that number holding well above 4 maybe edging back up to 4.5 or back towards 5% as I say you know with respect to the wages there is upward pressure on wages and ideally you'd want to see much higher wages numbers but I think the likelihood is that we could actually see those fall further further exacerbating the cost of living a squeeze retail sales again the December plan B restrictions could well impact the retail sales numbers certainly the recent retail updates from various retailer Sainsbury's Tesco's Darnell points to fairly decent retail sales activity in December so even though we've had a little bit of a slowdown in hospitality and leisure in December certainly in terms of online retail and in general that has actually been fairly resilient but nonetheless you're likely to see that retail sales numbers probably are going to fall back a little bit in December and even though supermarket food sales will have picked up I don't think that's going to be enough to see retail sales stay in positive territory certainly the 1.1% rise we saw in October 2% rise we saw in November we are going to see a little bit of a slide back in December simply on the basis of the fact that simply on the basis of the fact that most people will have already done their Christmas shopping already because of concerns about supply chain restrictions so you could see a little bit of a decline sorry that was 1.1% in November and 2% in October so we're probably going to see a decline or we're predicted to see a decline of 0.6% for December retail sales okay so in terms of inflation we've also got the latest CPI numbers from the European Union that's likely to remain in line with the flash number that we saw earlier this month 5% but certainly the warnings from the Bundesbank are getting louder that the ECB needs to get its act together or when it comes to acting on inflation and President Lagarde's consistent remarks that rates aren't going anywhere are cutting increasingly little ice with some of the northern European economies where you've got PPI levels in and around and above 20% certainly a lot of that is going to start trickling down into headline CPI numbers it already is in Germany which is its highest levels of CPI since reunification well over 5% and at a time when the Bundesbank discount rate was 8.75% not minus 0.5 which is what the ECB rate is right now so certainly I think the noises are getting louder about the risks of more persistent levels of inflation so we've got EU CPI out on the 20th of January so moving on to companies and we've got Netflix and Goldman Sachs in the US but we've also got Primark owner associated breached foods we've got JD Weatherspoon who are likely to have been clobbered a little bit in December earlier this week we had Michelin Butler's who own all bar one report that sales in December were down 10.2% so I would expect to see similar numbers from JD Weatherspoons certainly I think in October they posted a record loss in October of 154.7 million pounds the most notable statistic from them was a 40% drop in revenues that you know to 772.6 million pounds and if you compare that to what it was in 2019 where that when it was 1.8 billion you know that's quite a significant loss so the announcement of December restrictions did prompt Weatherspoons to issue a trading update at the time to the effect that this week's numbers could see the business slip to a first half loss so you could argue that the bad news there is already in the price Deliveroo what a nightmare Deliveroo Floparoo whatever you want to call it record lows for the share price here the IPO was 390p we are now at 172p and despite a brief recovery in August which saw a delivery hero by a 5% stake the shares have pretty much gone one way which sort of begs the question is the why Deliveroo Delivery Hero thought it was a good idea to to buy into Deliveroo having said that despite the declines that we've been seeing in the share price the company's been raising guidance consistently in Q3 Deliveroo raises guidance for the for raiders guidance for GDP for this number to between 60 and 70% gross profit margins unchanged at 7.5 to 7.75% plan B restrictions could have actually boosted Deliveroo's GTV transaction volumes and they've also signed deals with Amazon and Morrison's so big question is how much further can can the share price fall well looking at that trend probably quite a bit lower but at some point you're probably going to see some interest start to trickle in and then we'll move on to Primark again here you could have seen a drop-off in you could have seen a drop-off in footfall as a consequence of the December plan B restrictions as more people stayed at home to avoid getting sick at a Christmas nonetheless seen a fairly decent rebound there if we look at four-year revenues for last year this is this is going to be the first quarter update for 2022 four-year revenues came in at 13.9 billion for last year which was only slightly lower than the previous year so certainly ABF have done very very well in managing to recoup all of that lost revenue as a result of the lockdowns and also there are other businesses have been doing fairly well as well so there's certainly scope for them to continue to move higher netflix this is getting caught up in the tech sell-off so that could be interesting there's low expectations around the latest numbers from netflix and i think this needs to be put into context revenues have been growing they improved in q3 coming in at 7.4 billion are unexpected to come in at 7.7 billion in q4 they're investing an awful lot in new content high spending on content will probably see margins decline to six and a half percent during this quarter from 23 and a half percent but four-year operating margins are still expected to come in at 20 percent or slightly better profits expected to come in quite a bit lower again as a result of this investment in new content to 80 cents a share and also they're a little bit more cautious about subscriber numbers subscriber number growth certainly that is going to be a concern but certainly in terms of the the the new content that's come out this quarter we've seen new series of the witcher cobra kite tiger king lost in space still waiting for the new series of stranger things so i think even when measured against subscriber growth numbers i think the real focus here needs to be less on subscriber growth numbers and more on revenue growth and at the moment there doesn't appear to be showing any signs of a slowdown there so big support in and around this trend line here which currently comes in just below five hundred dollars a share so keeping an eye on that that that one there goldman sacks bank earnings starting this week with jp morgan and city group as i'm talking now i don't know what those numbers are but certainly i think the recent report this week that goldman sacks commodities trading revenue for the year came in well above 2.2 billion dollars at a record a record does bode well for the the the 18th of 18th of january q4 numbers um q4 q4 profits are expected to come in lower than q3 again most estimates for goldman sacks usually have tended to miss the mark by quite some way they've usually tended to fall um the profits have usually tended to come in well above expectations so i don't expect this to be any different um nonetheless anything above 11.60 a share is likely to be fairly well greeted but again sideways trading in terms of goldman sacks share price over the course of the past few weeks so keep an eye on 3.70 a share that could well see um a bit of a test if the numbers disappoint so keep keep an eye keep an eye on that key support level there 370 dollars a share for goldman sacks okay so that's pretty much it for this week ladies and gentlemen um once again thank you very much for listening hope you all have a great week a great weekend and a great trading week and i'll speak to you all same time same place next week thank you very much listening