 Good morning. Welcome to CMC markets on Friday the 27th of October and this quick look at the week ahead beginning the 30th of October With me Michael Huston lots to get through in today's video Certainly been a busy week for earnings in the US as well as here in the UK And it will continue to be so as we head into the end of the month It's been an awful lot of volatility over the course of the past few days That's borne out in some of the price moves that we've seen so far this week particularly in Europe But also in the US, but I think with respect to the US. We've seen a much more negative bias when it comes to Further declines further weakness in US stocks than we have in Europe. European markets have actually held up slightly better than the US counterparts where The S&P 500 and the NASDAQ have seen some very sizable One-day moves lower seeing a little bit of a rebound today on the back of a positive reaction To Amazon's results last night, which will by and large pretty good Amazon Web Services revenue came in just slightly below 20 the 23.3 billion dollars expected came in around about 23.1 So that was a slight miss on cloud Yet the miss on cloud that we saw from Google or alphabet earlier this week produced The biggest one-day decline since March 2020 So it's not exactly horses for courses when you've seen some of the earnings numbers this week Microsoft's solid-setter numbers Alphabet solid-setter numbers, but varying fortunes when it came to the share price reaction going forward Alphabet sold off on the back of a Significant well a slight miss hundred and seventy million dollar miss on cloud which seems slightly outsized when you consider that The actual revenue numbers and the profit numbers smashed expectations. So an awful lot to Chew over shall we say? Also a lot to chew over when it comes to UK banks because again We saw some very choppy reactions to the results from Barclays Lloyd's and obviously today we've heard we've seen that West shares plunge to the lowest levels in 30 months after they slashed their net interest margin guidance from 3.15 percent for the year for yeah to just above 3% and certainly when we actually look at the The net West numbers Certainly on the net interest margin We've seen a really sharp slowdown from the levels that we saw in Q1 when we saw 3.27 and now For Q3 we saw 2.94. So that's a quite a sizable drop But having said that The move that we've seen thus far today does seem a little bit Outsized when you actually look at the fact that I'm the shares dropped around about 19 per cent So it's 16 percent on the open Recovered a little bit since then as we can see from this chart here open down there We know that what we're still well below that 200p level That we saw Tested earlier this year so I'm looking ahead We've got the last of the big banks HSBC and that's there. They are reporting they're reporting on Monday the Q3 numbers and If anything is a sign that there might be a downside surprise there at standard chart and numbers earlier in the week which Saw a sizable a slightly bigger revision provision for non-performing loans with respect to China real estate and Prompted a little bit of weakness there so that be paying close attention to them But also Big oil BP and Shell we've got BP and Shell's third quarter numbers coming out and The last of the big tech the magnificence that were not the last of the magnificent seven because we still got in video To work through but we've got apples Fourth quarter numbers coming out on the 2nd of November and we've also got the whole host of macro decisions that are likely to Be very constructive I think in terms of how central banks The the likelihood of further rate hikes going forward. I think most of us believe The central banks are done when it comes to hiking rates on this particular hiking cycle That's not to say that they will want to admit that uncomfortable truth Given the economic backdrop and given the huge levels of uncertainty Which has been driven by the conflict in the Middle East We're already seeing some evidence that the US might get drawn in to the conflict After the headlines this morning that saw US forces and target Terrorist bases in Syria Certainly we've heard an awful lot of rhetoric from the likes of Iran that might suggest that There's a risk that they could get drawn in and certainly that is a clear and present danger going forward looking at the US to you we've seen an awful lot of choppiness in Yields this week you can see that in this chart here if I mouse over there. We've got high of 513 and a low of 504 Yeah, we've got a high of 514 and a low of 502 so I've been shopping in a 50 You know 10 to 15 point range on yields every day this week which speaks to me I think of an enormous amount of uncertainty as to whether or not US rates have peaked certainly 4.9 percent third-quarter GDP number Suggests that the US economy is in pretty resilient mode weekly jobless claims around about 200,000 still very very low did see a little bit of a pickup in continuing claims But they're still below 1.8 million. So they're still at a fairly low level So as we look ahead to a big week for central bank meetings, we've got the Bank of Japan on Tuesday the Federal Reserve on Wednesday and the Bank of England on Thursday And we've got non-form payrolls on Friday. So in terms of macro in terms of earnings It's a huge week. So let's get started on some of the key levels That we are looking at over the course of the next few days Firstly 100 held up reasonably well thus far this week We can see that from the price action Monday Tuesday Wednesday Thursday Friday We've chopped around pretty much in a reasonably broad range top of that range is around about 74 30 the bottom of that range 73 20 and I think that will continue to be the extent of where if we look at this here We can see that we're still within the broad range that we've been in for the most part of this year And I don't think that will change too much as for the DAX Still remain very much in the downtrend. We have made marginal new lows Over the course of the past few months What's important is that we haven't actually taken out the March lows, but again here. We've got lower highs We're getting lower lows So the line of least resistance at the moment is to sell into strength and at the moment Given the fact that we've managed to hold above this these series of lows down here There is reason to suppose that we could well squeeze back towards the top of This downtrend line in the short to medium term the S&P 500 of the NASDAQ have been the real key The key charts for this week Last week I talked about the fact that the S&P 500 was trading below its 200 day moving average It tried to move back above that on Tuesday. It's failed It's now fallen back below it and has continued to track back below it. It's also below 24,200 and that for me. I think is very significant If we are to see a stabilization in the foot in the S&P 500 We really need to get back above the 200 day moving average and this series of peaks back here at around about 42 70 Otherwise there is a risk that we could actually continue to fall back towards the lows that we saw back in May of around about 40 4040 4040 on the S&P so the 4000 level on the S&P 500 is The next short-term target the NASDAQ has also seen some really sharp losses over the course of the past two days We are starting to rebound at the moment Interestingly, we've rebounded off the 200 day moving average So that could exhibit an element of support in the short term But as with the S&P 500 the fact is we've broken below this key support area through here around about 14,350 and we really do need to get back above it to signal the the likelihood of a pullback towards the 50 day moving average and the 15,000 level but certainly I think the brakes that we've seen thus far this week would appear to suggest It's going to be very difficult for US markets to rally back to the levels that we saw earlier this year The Nikkei is particularly interesting again with the Bank of Japan We've got the 200 day moving average which has continued to act as support for the Nikkei 225 We've seen a decent rebound today. Obviously. We've got the Bank of Japan on Tuesday And there is some speculation that the BOJ could look at perhaps tweaking Their monetary policy further given the fact that dollar yen is now back above 150 We've seen the way the dollars traded over the course of the past few days It's finally managed to gain a foothold above 150 Has the potential to go back to the highs that we saw back on October last year But if we notice that these are the sorts of levels that the Bank of Japan was intervening at 12 just over 12 months ago now and certainly we have seen some sharp moves lower in the past few days Perhaps on the basis the Bank of Japan could be checking rates Certainly, there's been no direct indication that the Bank of Japan is actually physically intervened by selling dollars and buying yen So I think it'll be particularly interesting whether or not They are leaning the Bank of Japan is leaning in the direction of a change in policy Even with a 10-year JGB yield currently at 0.85 percent Which is well above the upper boundary at your core of control, which is still at 0.5 You'd think that they'd basically bow to the fact that the market is already above their upper boundary and move it Perhaps to the 1% level, but I think and one of the main reasons why the dollar has continued to gain against the yen It's not because Yen yields are rising. It's because dollar yields are rising much faster So the yield differential is continuing to move in the dollar's favor Euro-dollar Quickly have a look at that. We've dropped below this trend line here So I'm going to get rid of that Certainly in the context of this the key support levels The 104.80 levels from Earlier this month are likely to be fairly key as are the levels Of around about 104.40. Certainly there's a significant area of support in and around those levels Um and the 50 day moving average is currently acting as a bit of a resistance But for me it's probably a little bit of a weaker resistance these two peaks and around 105.80 Are likely to be a much better arbiter of wider resistance on euro-dollar going forward But again the downtrend very much remains intact there Cable is going to be particularly interesting next week. We've got the bank of england rate meeting Obviously, we saw the ECB keep keep rates on hold earlier this week And I think the big question For the coming week for the bank of england is not whether or not they keep rates on hold at 5.25% Um I think the bigger question will be whether or not it's as close a decision as it was in september um It was an unexpected decision to keep rates on hold I for one felt that there's something that they would be making a mistake if they push rates much higher It would appear that a majority of the npc agreed with that assessment. I think the bank of england is done Um, I think the bigger question is how many others on the committee think that we've already heard from kathryn man Who's probably is one of the hawkish members on the npc that she still thinks further rate hikes are necessary um I I don't I don't happen to agree with that assessment I think monetary policy is tight enough as it is and it's really just a question of waiting for those 14 rate hikes To filter through going forward and there is evidence that that is happening If you look at the pm is if you look at retail sales consumer demand is very much It's very it's very much down and consumer confidence saw a big fall In earlier this month in the october numbers when we fell back to much just below minus 30 Um sticky wage growth is likely to be a concern for the central bank But even here I think there's a sense that this has seen the peak because it's remained at 7.8 For the last three months even as headline inflation has continued to slow I think there'll also be enough evidence this week for a majority decision to hold rates Um, the bigger question will be whether or not there's the hawks the four hawks From september how many of them actually move to a holding position? So instead of a five four Maybe we get a seven two split in terms of holding rates um I think for me they're the most likely to switch to a hold would probably be external members meg and green possibly jonathan haskell as well both of them um called for a hike in september so I think the big the biggest support level on cable is in and around this 120 area I think as long as we hold hold above that there is scope For a fairly decent sterling rebound going forward Uh, we've also got the federal reserve rate decision on the 1st of november and obviously the gdp number Of 4.9 percent does present them with a bit of a problem Uh personal consumption four percent We've got pce core inflation due out later today. I think that is expected or is slightly to have slowed further um for um the For the period in in september and I think more than anything it's more about a direction of travel For us policymakers than the actual numbers themselves pce core deflator Is expected to slow from 3.9 percent to 3.7 percent. So I think Fed policymakers have already made it quite plain That we're going to see a hold in this week's decision um I think as we head into q4 US consumption patterns while they've remained resilient are unlikely to be They're unlikely to Um continue at the sort of level that we saw in q3 And with those gdp numbers we did see a significant slowdown in pricing pressures from 3.7 percent to 2.4 percent so I think Another hold they'll obviously keep the option open for a december hike Going forward. I think that's eminently sensible but I I'm of the opinion that I think in the absence of any Upside surprises when it comes to wages Inflation and what have you the Fed is probably done when it comes to rate hikes Now, obviously oil prices could play a part in that making inflation more sticky but I think hiking rates in response to our higher oil prices Is Basically a double whammy or hard-pressed consumers and is likely to be a very fairly limited use particularly when you got us mortgage rates at 8 percent um That's um quite an eye-watering level so I think for federal reserve bank of england hold hold bank of japan outside possibility we might get a tweak on Your curve control and then of course we've got non-farm payrolls on friday, which Usually is the highlight of the week, but I think it's going to take very much second fiddle to The central bank rate meetings. Um, just as a quick praise. See obviously we will have a webinar I'm covering the non-farm payrolls numbers The webinar will start at 12 15 not 115 because of the uk clock change um us clocks don't change um for another for another week So it'll be 12 15 to 12 45 not 115 to 145. So please bear that in mind Expectations are for october payrolls to slow from the blowout number that we saw in september 336 000 in september For 185, but I should also remind you that we're expecting to see 185 in september and we got 336 so um and august was also revised up to 227 so um another resilient labor pot, you know a labor market report is likely to keep um Expectations of another fed rate hike very much on the table for december um The bigger question will be whether or not the fed wants to deliver that sort of christmas present um Just a week before christmas, but they have done it before so I wouldn't put it past them to do it again um, so keep an eye on wages One of the notable I think one of the notable factoids that I took from the fact that We saw a very strong employment report in october was the fact that part time positions rose 151 000 And it could also explain why wage growth continues to remain fairly lackluster relative to What we've seen thus far one warning No, I would say Is that an awful lot of these wage agreements that have been recorded in recent months with the airlines with the auto workers Could start to push wage inflation higher And that could force the fed into another rate hike now We've not seen any evidence of that so far But that doesn't necessarily mean that the fed might not go out Might not close 2023 With another rate hike because of the 25 30 percent pay rises that have been awarded and as there's ups and fedex as well They've granted their staff a bumper Pay rises so that could start to feed in over the course of the next few months thus making us inflation That much stickier We've also got a ucpi um flash cpi For october that has also been slowing sharply in recent months. We call cpi slowing to 4.5 percent in november Which made I think the september decision to hike rates All the more I think surprising I think going forward It was very much a surprise for me, um, I think we will see a further slowdown in EU cpi in uh october as I say we slowed we slowed to 4.5 in september um And we could well slow even further In the october numbers with estimates for core cpi to slow from 4.5 to 4.2 And for headline cpi to slow to 3.1 Cent And obviously if we do see sharp slowdowns there that could well undermine the euro even further Euro sterling has aged higher more on sterling weakness than anything else Remaining the fairly decent uptrend here But there does appear to be significant area of resistance in and around 87 40 87 50 So we nearly really crack that To continue to push higher, but if you actually look at what euro sterling's done this year It's been in a range and I don't think that will change going forward You can throw a blanket over that range and trade it accordingly The elephant in the room has obviously been the move higher in oil prices were up today On the back of those us strikes inside syria Um concerns that the conflict may widen, but if we look at the moves that we've seen this week um They've been quite big in terms of the wider moves between 90 And an 85 87 dollars a barrel in terms of the moves are 91 and 87 So a lot of choppiness there We haven't Reached the peaks that we saw back in september even allowing for obviously what happened on the 7th of october Um, so there is an awful lot of concern I think at the moment that higher oil prices could signal demand destruction And that is what is keeping a lid On oil prices currently as well as concerns about a slowdown overall I think the range is here. It's the lows back in back in the beginning of the month 85 Obviously significant resistance to the previous highs back in september I think that will continue to be the way of it unless there is a significant escalation And iran gets drawn in and there's concerns about Oil flow through the straits of hormones gold has been a significant standout trading near the highs of the week And the past few months For me, I still think gold has the potential to move through 2000 dollars I'm back towards the levels that we saw earlier this year. I can't see any Scenario whereby We're going to see much of a dip and if we do Then the lows that we saw earlier in the week around about 1950 Could well be the extent of it, but again expect to see further chop through here Terms of earnings. We've got obviously I've talked about HSBC I've seen quite a bit of weakness over the course of the past few days Managed so far to hold above the 200 day moving average and certainly We still appear to be in the uptrend that we've been in over the course of the past few months but Obviously, I think the big test for HSBC Is its exposure to China real estate and obviously the we've heard an awful lot about The concerns about the finances of country garden and evergrande so That could be a that could be a risk or HSBC. We've got the numbers from BP And shell Be very interesting. I think in the context of whether or not either of these companies Can beat the numbers that we saw in q2 both companies Actually posted some fairly disappointing numbers In q2 BP has underperformed Quite significantly they've had Problems of their own Bernard looney being forced to step down after failing disclosed details of past relationships with colleagues A few weeks after looney stepped down the boss of BP's us operation. They've all are also resigned So I think this uncertainty helps explain why BP share prices has underperformed relative to shells There's also no indication That any new CEO Won't continue to persevere with the performing while transforming policy of his predecessor Bernard looney When BP reported in q2 it was widely expected to come in short of expectations And It still failed to clear that lowered bar 48.54 billion dollars in q2 revenue Underlying replacement cost profits led to 2.59 billion dollars missing estimates by almost one billion dollars so I think Higher prices in gas and oil will obviously mean that q3 has done an awful lot better Um on guidance the q3 BP said it expects upstream production to be broadly flat Compared to q2 With oil production output expected to be lower and gas and lower lower carbon energy to be higher Big level for me obviously for BP Is these peaks that we saw back in october as well as back in february this year But certainly I don't think there's any reason to suppose that we won't see a much better set of q2 numbers for BP Shell new record highs And continues to go from strength to strength And you can put the game I think you can put the acceleration and the gains down to that time when the new CEO Um Well sarwin pushed back on the previous strategy of renewables at any cost back in june We look at june And this was when the pushback happened and since then we've seen a significant acceleration are On the gains in the shell share price like BP shell reported a shortfall In profits and revenues in q2 Largely due to lower natural gas and crude oil prices that occurred over that corner Obviously since then we've seen a fairly solid rebound It also I think blamed Problems in its chemical chemical's division which had a difficult quarter which slid to a loss of 468 Million dollars. So, you know, there was a little bit of a weak spot there For q3 on the outlook Shell did downgraded expectations of capital expenditure by 1 billion dollars to between 23 and 26 billion dollars It announced a 15% divvy increase as well as a three billion dollar share buyback program for q3. So it should have completed that um upstream profits should Probably be better than they were in q2 as in downstream whether or not there'll be anywhere near as Big as they were last year is a moot point, but ultimately I think the the desire to focus on the legacy business More to and and away from renewables It's certainly good in terms of the gains that we've seen in shares The bigger question is whether or not that will continue to be sustainable Certainly, there's an awful lot of pushback On that from external forces, but I think what one of the things the ceo has shown is he's not really afraid To make difficult decisions when it comes to delivering for shareholders. We're going to finish off with apple This is interesting the fact that the apple share price has dropped below the 200 day moving average Obviously their q4 numbers are due out. Um, they've had problems with The new iphone platinum overheating has been talked about that Um q4 revenue is expected to fall modestly to 89.29 billion dollars With profits expected to rise to one dollar thirty nine That's a share on an annual basis because obviously these are the q4 numbers Revenues are expected to fall to three hundred and eighty three billion dollars Unprovised is six dollars and seven cents a share. So I think one of the notable features of this particular quarter will be or the particular focus will be on iphone demand because this will be the first full quarter That's that um apple has had to go up against the new Huawei device which could have well have cannibalized its chinese sales and china sales Poor apple make up 20 of its overall revenue. So this break below um The september lows and the 200 day moving average could be significant Over the course of the next few days Particularly if the shares do miss expectations on the q4 numbers going forward So That's pretty much it for this week a lot to get through lots of chew over there a lot to get through um, so um, I hope you all have a nice weekend um, and don't forget non-farm payrolls next week starts at 12 15 not 115 because of the clock change. So have a great weekend and hopefully speak to you all next week. Thanks for listening