 Good morning. Welcome to CMC markets on Friday the 24th of March. And this look at the week ahead beginning the 27th of March with me. Michael Houston and what a difference two weeks makes. I mean, I go away for two weeks. The markets looking fairly decent shape. I come back a couple of weeks later or 10 days later and suddenly all the wheels have started to come off. So, as we look ahead towards the next few days and the end of the month and the end of the quarter, we've seen a significant shift in investor sentiment. And it's not quite clear why that's happened. Obviously there's been concerns about regional US bank Silicon Valley bank on the 9th of March started to show signs of financial distress. It was essentially they didn't hedge interest rate risk. So rising, rising US interest rates started to cause problems with their bond book. And that contagion effect has spread to other US regional banks. I don't think there are any concerns about the bigger US banks. They've been much more better capitalized since 2008 and I certainly think lessons have been learned from 2008. So I certainly don't think we're in a 2008 moment when it comes to the major banks. I think the bigger concern at the moment is the smaller banks and of course you've got the Credit Swiss UBS Saga, which I have written about here. But again, as in the case of Credit Swiss, there wasn't really any concerns about its solvency. There was there were an awful lot of concerns about its credibility and the fact that once investors lose confidence in a bank. It's very, very difficult to get that back. So obviously UBS have come in, picked it up, picked the bank up for a fairly low price. Initially put in a $1 billion bid for it that was that was pushed back on came back with $3 billion. The upside to it is that potentially that could be a good deal for them. But obviously given the fact that they haven't been able to do any significant due diligence on the bank does raise concerns. And I think when we look at how the markets have behaved over the course of the past couple of weeks. I think there is a concern about the effect that rising rates are going to have on the financial sector. As I'm speaking to you, the FTSE 100 is down over 1%. Most of those declines are being led by the banks, not only in the UK, but in Europe as well. UBS is now under investigation as is Credit Swiss by the US regulators over concerns that they may well have collaborated with Russian oligarchs to try and evade sanctions. So obviously I think that's feeding into a negative feedback loop when it comes to the banking sector. And I think there is, I think there's also concern that rising rates could actually slow down the global economy. But I think this is more about the fact that despite the improvement that we're seeing in economic data. And this is this is this. I think this is where I struggle with the narrative. We've seen rates go up. Markets are increasingly pricing in the prospect of rate cuts before the end of this year. Despite the fact that inflation still remains very, very sticky. The UK CPI numbers earlier today. Not earlier today earlier this week, certainly bear that out. And yet we have central bankers insisting that inflation is going to fall very sharply towards the back half of this year. Now, there's only one real scenario that I can foresee that that would happen for inflation to fall back quite sharply. And that is a sharp economic slowdown caused by demand destruction. So if markets are essentially pricing that, then obviously that would make sense when it comes to what's happening with respect to stock markets, because central banks won't be able to cut rates in the same way that they would have, say, 10 years ago, because 10 years ago inflation wasn't a problem. It is now. And although price pressures are starting to ease, certainly on the headline level, core prices are still looking very sticky and nowhere is that better borne out or better illustrated by the jump that we saw in UK CPI core CPI from 5.8% to 6.2%. So next week we've got US core PCE. I think there is a slow shift in the narrative that perhaps we are closer to the end of the rate hiking cycle than perhaps we were or thought we were two to three weeks ago. So the peak terminal rates for the ECB, the Bank of England and the Federal Reserve have come down quite a bit over the course of the past few days. But that doesn't necessarily mean that we're going to start to see rate cuts when inflation is still well above that 2% target. So I think what we're seeing here is I think an awful lot of concern about the banking sector, the bigger question is whether that concern is justified. But I think more importantly, whether or not what we're seeing now as we come to the end of the quarter will continue into Q2. I mean, when I look at the FTSE 100, I was fairly bullish on FTSE 100 at the start of this year, and it's completely unraveled. It's completely unraveled in the last two to three weeks since the beginning of March. This is obviously the end of last year. Since the beginning of March, 9th of March, when the SVB Silicon Valley Bank headlines start to hit the headlines. The last time I did one of these weekly videos, we've fallen off a cliff. And obviously one of the reasons why the FTSE 100 has been affected so sharply is because it has an awful lot of banks in it. Our Barclays HSBC, Lloyd's Now West, but it also is very energy heavy as well. And oil prices have come off quite significantly over concerns that all of this banking turmoil will constrain their ability to lend going forward. And that will slow global economic growth and ergo slow demand for goods and services, because essentially if banks aren't lending, businesses can't grow and consumers can't access credit in the same way that they have previously. So we're seeing some very big declines or has seen some very big declines in the past two or three weeks. The bigger question is, are we going to see further weakness going forward? And I think that's a much harder question to answer at this point in time. We are or do appear to be finding support in and around these areas here. So we're looking at 7300 7250. And we did see a little bit of a spike down back on the 20th of March down to 7205 but we closed very much on the highs of the day. So I think for me with respect to that particular day there when all of that credit Swiss headlines were hitting the headlines. There was an awful lot of concern that, you know, perhaps if credit Swiss if UBS hadn't stepped in to rescue Credit Swiss, we could have seen much heavier declines but overall, I think looking at 7300. That looks to be a very key support level going forward so I'm going to knock that line out now that it's broken. And we're starting to roll over and the big, the big, big support level for me 7300. So the first 100 has really been hammered over the course of the past two or three weeks. And consequently, we've lost all of our gains so far for this year. Now, as I say, I haven't, I haven't lost my constructive view on the FTSE 100. I still think this sell off is slightly overdone. Unless I have to be, I have to be directed by the price action and the price action at the moment doesn't look great, but we are just above support 7300. The DAX, the DAX has fallen off quite significantly. As I speak to you now Deutsche Bank is down around about 10%. There's certainly concerns about the European banking sector. And we're seeing here similar trend line support on the DAX coming in just above, just below where we are now, but also in line with those loads that we saw again on the 20th of March. Just going to knock out that blue line there now that that's gone. We no longer need it. We are a big fan of cluttering up charts with lines that have since moved past their sell by day. So we are heading back to support this trend line support from the lows back in October. And the key test for me will be whether or not we're able to hold above that trend line support, but more importantly also above the 200 day moving average. Let's just have a quick look at the weekly chart. Here that's not really telling us that much, but certainly as we come to the end of the quarter, the DAX is still higher than when it started the year. So certainly in terms of European stocks, still in the uptrend, even if the FTSE 100 is turning out to be slightly more problematic when it comes to potential further gains over the course of the next few months, the DAX is still very much in the uptrend. The P 500. Despite all of this noise around US regional banks. US markets have been fairly constrained, they've been fairly when I say constrained and orderly we haven't seen the sorts of declines in the US that we've seen here in Europe. And again, I'm not really not really sure why that is apart from the fact that obviously US yields now are much, much lower than they were at the start of the month. The US markets haven't really seen the benefit from that, but then again US markets are much more highly valued relative to the European peers. So we still remain very much in a range on the S&P 500. We could potentially draw a line through these highs I'm not going to do that because it's not a particularly elegant line and it doesn't really, it really does suggest to me that we're probably still in the range that we've been in since the start of the year. I think that's likely to change anytime soon. However, if we do get a breakout be interested to see how it plays out. What has been notable, however, is how the NASDAQ has outperformed over the course of the past few weeks it's actually higher. From the 9th of March and the Silicon Valley Bank headlines hit the wires, unlike European markets, which have fallen quite sharply, but interestingly, it's still below the highs that we saw from September, January, and now. So this 12,850 level is increasingly becoming a very important level. Interestingly, it might be worth drawing a little bit of a line in through here just to see whether or not there is any evidence or convergence of support levels and there does appear to be evidence of support levels. What is also interesting is that we've had a bullish cross on the 50 in the 200 day moving average. What's interesting also, however, is the fact that it's only now that the 200 day is now starting to point higher at the same time as the oscillator is starting to roll over towards the downside. So for me, we're still very much in a range here. There's big, big resistance at 12,850, which does suggest we could well see a correction back down to the lows, the turn line lows from those lows there. So keeping an eye out for that. In terms of the data, we've got fourth quarter GDP final numbers from both the US and the UK. That's very much a rear view mirror stuff. I'm not expecting to see anything significant come out from any of those numbers. But I think one thing that we have taken away, I think from recent events is while we've seen all of the major central banks hike rates this week, what comes after that is slightly less clear. And I think that's more than anything is what markets are grappling with right now. Have we seen the end of the rate hiking cycle? Are we close to the end of the rate hiking cycle? How many more rate hikes are there? If you're looking at the terminal rate predictions, you would think that perhaps we've probably got one more at the very least. And then it's really the bigger question is when do we start to see rate cuts? Currently markets are pricing in rate cuts by the end of this year for various reasons, either softening inflation or rising unemployment or both. I still think it's unlikely that inflation will fall as fast as markets are currently predicting, which means that the baseline level for interest rates is likely to be higher for longer. And the bigger question is how will that affect market pricing when it comes to equity markers? As far as the euro dollar is concerned, the ECB is still talking about higher rates, another rate hike. They're not going to prioritize financial stability over the levels of inflation. Personally, I mean, Christine Lagarde has said that she said that there is no trade off between inflation and financial stability. The reality is, there is whether or not she chooses to acknowledge that is another matter. If you raise rates to the point where something breaks, you're not going to carry on raising rates if the market is falling off a cliff. That's not going to happen. So, you know, whatever she says that there is no trade off, of course, there's a trade off. There's always a trade off in anything. There's a trade offs in life. So I think it's going to be very unlikely that the ECB will be able to raise rates as much as they think they can or will. How is that affecting euro dollar? Well, once again, we've tried to move back higher and once again, we've rolled over. One of the reasons we're rolling over at the moment is because of concerns about the European banking sector and what's happening there. But also, we're starting to see a little bit of a slowdown, particularly on the manufacturing side in French, German, as well as the UK economy. Those services is now starting to show signs of life. So we're still seeing mixed messages when it comes to the economic data. For example, euro dollar still remains in the uptrend that it's been in since October. And while that is in the uptrend that it's been in since October, it's interesting that it's pretty much closely mimicking the way the DAX has been behaving since those October lows. So certainly I think using euro dollar as a bit of a proxy for the DAX, that still works. So it'll be interesting to see whether or not that dynamic breaks down over time. Moving at cable, again, cable is holding up better than expected. But once again, we're still in the range. So top of the range, 124.5, finding a few offers above 123, 123.50, rolling back over again. So again, I think with the cable, we're still very much in a sideways trading range. I don't see that changing anytime soon. Let's get rid of that red line. Don't need it anymore. It's cluttering up the chart. And as I say, if it's not really serving any useful purpose, you don't need it. So we've seen a move in cable. I've put some Fibonacci retracements on this. We bounced off this support level around about 118 in the short to medium term, which more or less coincides with this low roundabout here. So very much in the range for cable. Expect that to continue over the course of the next few days. Interesting on euro sterling, we're trading in a bit of a triangular pattern here. But again, still very much solid support from the trend line through here, but also with respect to the 200 day moving average and those series of lows through there. So anything down towards 87 offers a fairly decent area of support. Anything up near 89 decent area of resistance. I think the interesting one here is going to be dolly in because we finally broken below 130 on dolly in. So we are starting to see a little bit of yen strength. I think a large part of that could be because of its haven qualities. When when equity markets sell off dolly in the end tends to strengthen. But again, we're still very much in a little bit of an uptrend. We've we've ran into resistance 200 day moving average that did manage to remain intact. And we've now rolled over. So it'd be interesting to see whether or not we're able to take out these these series of lows through here and about 129 80. I think there's potential for further weakness and dolly in and we could well revisit the lows of 127 20. Certainly based on the chart that we're seeing here. What I'm also looking for next week is flash CPI from the EU 31st of March. Obviously, we've seen a 50 basis point rate hike from the ECB at the last meeting in line with its previous guidance in January. The timing slightly unfortunate. They decided to look through the banking turmoil between Credit Swiss and UBS headline inflation has been coming down. It fell to 8.5 from 9.2 at the end of last year. However, the noises from various ECB policymakers while becoming increasingly hawkish. We have also started to see a lot more divergence between some of the northern countries and some of the southern countries. So the bigger question I think remains about what data the ECB is now more concerned about. They've on the face of it said that they're not really that concerned about financial stability or Lagard has said that I don't buy that for one moment. The bigger question is core CPI that hit a new record high at 5.6% in February. The bigger question is whether we start to see a softening in the flash numbers for March. So that's due out on the 31st also on the same day is core PC from the Federal Reserve. That in January unexpectedly jumped higher from 4.4% to 4.7%. Let's also also forget that in January US retail sales surged quite strongly as well. And it briefly sent the US two year yield up towards 5%. In the aftermath of that big jump in US core PCE now 5%. I mean, that's essentially where we were at the end of January. Now look where we are. We've fallen off a cliff pretty much and it more or less coincides with the eighth ninth of March when the Silicon Valley bank. The US regional bank woes started to hit the headlines. And now we're coming crashing off and approaching 3.5%. I mean that is a significant turnaround in sentiment when it comes to US two year yields with more or less 20 basis points down today. If we look at a weekly chart, the move is even starker. Let's look at it. Three big declines, you know, and his potential for us to move even further down. I'm looking at it on the month. Now let's look at it on the quarter. So we, you know, I mean that basically that's quite that's quite an interesting chart. And it'll be very interesting to see how that plays out as we come to the end of the quarter and we head into Q2. So those are the key charts. There's a couple of earnings numbers out next week. Next PLC has been doing particularly well. And actually, despite the declines in the FTSE 100 has held up reasonably well. It's reporting its full year numbers when next reported at the start of this year. The shares did react fairly positively and have spent most of this court pushing up to the highest levels in 12 months for price sales grew by 4.8% in the nine weeks to the end of December. And they also increased their four year profit before tax guidance by 20 million to 860 million pounds for the rest of this year next as it expects to see four year sales to decline by one and a half percent and profits before tax to four by 7.6% to 795 million They also said that cost price inflation is expected to peak at 8% in the summer before slipping back to 6% in the second half of the year, which sort of doesn't particularly chime with Andrew Bailey's recent comments that inflation is going to fall back quite sharply in the second half of this year. You know, you talk about sharply or 10% to 6% OK, it's not quite half, but it's still fairly high when wage growth is still around about between 5% and 6%. But certainly next does appear to be weathering the squeeze on consumer incomes much better than most and it'll be interesting to see what they say in this statement on the 29th of March. We've also got Ocado, again, that's not had a particularly great quarter thus far, got off to a good start in January here, pushed higher since January, it's come down quite a bit. And it'll be interesting to see whether or not it's able to stay above the lows that we saw back in October. This is this will be Ocado's first quarter numbers. It's four year numbers at the end of February saw the shares come under further pressure over concerns about its ability to grow its revenues, even as it spends more money on new deals. Just as a reminder, four year group revenues came in flat just over two and a half billion pounds. The company blamed higher costs as well as smaller basket sizes and its joint venture with Mark's and Spencer's along with the addition of new investment in the expansion of the solutions business. Obviously the shares have come under pressure because its US partner Kroger said it would not be rolling out any new fulfillment centers in 2023. So it'll be interesting to see how the markets react to its first quarter numbers when they are released on the 28th of March. We've also got John Wood Group. Those of you will remember that the last few weeks have seen quite a bit of volatility in this share price. Because the Aberdeen based oil field services and engineering company has become the target of private equity fund Apollo capital management and where the company has rejected for bids for the group over the course of the past few weeks. So that's it for this week. Ladies and gentlemen, thank you very much for listening. I hope you will have a great weekend and a good week and speak to you all same time, same place next week. Thank you very much for listening.