 Good morning. Welcome to CMC Markets on Friday the 3rd of November and this quick look ahead at the week beginning the 6th of November with me, Michael Houston. We've seen quite a turnaround this week. Big gains in equity markets over the last three to four days. Coming off the back of six weeks of losses for the DAX, two weeks of losses for FTSE and the S&P 500. Oil is down looking like it's going to finish lower for the second week in a row and yields are tumbling and it looks like yields could also fall for the second week in a row. But ultimately what really has changed? The economic outlook continues to look difficult. Certainly the earnings announcements that we've seen thus far this week have warned about that but I think the problem with low expectations is if you set them low enough it's quite easy to beat them and even though European markets saw their best one-day session in three weeks on Thursday with the DAX closing at a two-week high, tumbling yields, the expectation, central banks are pretty much done when it comes to hiking rates. We obviously saw the Federal Reserve earlier this week, heat rates on hold. There wasn't really too much of a surprise to that. Powell certainly wants to keep his options open when it comes to the prospect of another rate hike. Certainly there is room for another rate hike in December on the basis of their dot plots for 2023. I think a lot will depend on the data that we've seen or that we're going to see over the course of the next few weeks. But certainly based on the data that we've seen this week, particularly around manufacturing, the US economy is certainly showing signs of weakness but it's been showing signs of weakness for the past 12 months. So nothing new there when it comes to manufacturing ISMs, PMIs and what have you. It's not just a US problem, it's a global problem. Manufacturing has been struggling for a while. It's services where you're seeing some of the significant areas of growth and that was certainly borne out in the GDP numbers that we saw out of the US in October. 4.9% annualized gain in third quarter GDP for the US. We've got UK third quarter GDP out in the coming week. We'll be lucky if we even get close to that. I think we'll be lucky if the economy even grows and obviously that's a big data item out for the week ahead. We had the Bank of England this week. No surprises there again. Rates kept unchanged. There was a 6-3 split in the rate vote. Three members of the NPC voted for a rate rise. All external members, Catherine Mann, Megan Green and Jonathan Haskell. So there is still concern about elevated inflation levels. Certainly the Bank of England seems to think that the wage growth number out of the UK is probably a little bit on the high side. It's been around about 7.8% for the last three months. They estimate it that it's closer to 7%. Whether it is or it isn't, inflation still remains very high and obviously we've got the latest October inflation report due in just over two weeks time and that's likely to see another big fall or a big slowdown in headline inflation as the October energy price cap from last year drops out of the equation or the calculations and consequently I think that it's very unlikely that we will see another rate hike from the Bank of England. And really now what markets are starting to price is the prospect of okay higher for longer but when's the first rate cut coming? And in the case of the ECB I'm a little bit puzzled by the fact that the markets seem to think that the ECB's got another rate hike in it. I mean I'm sorry but I just I just can't get behind that at all and yet the euro continues to outperform. If anything the European economy and the German economy is in a worse state than the UK economy so please don't tell me that the ECB's got another rate hike in it because I think if they wanted to kill the economy even more than they already have that's exactly what they will do. So at some point in the first half of next year I think we'll see the ECB start to cut rates. The only concern that I have that the Fed might not be done is if US economic data continues to remain resilient. Obviously we've got the payrolls report later today. Weekly jobless claims still coming in around 210, 217,000. Yesterday ADP was weak but ADP was also weak the prior month and non-farm payrolls came in at 336,000. The whisper number today is around about 185. We'll see whether or not that actually gets anywhere close to what estimates are for it. Ultimately non-farm payrolls have beaten every single month this year so I'm not convinced that November will be any different. Given the fact that we've had Amazon say they're going to be taking on another 250,000 staff between now and the year end in terms of seasonal hiring. So you would think that the US labor market is likely to remain fairly resilient so there is an outside chance that the Fed could go again. Personally I don't think it's likely but it's certainly not as cut and dried as say for example the Bank of England and the ECB. I think they're done and really it's a question of when does the first rate cut come? Consequently as a result of this week's central bank meetings the fact that what's going on in the Middle East looks contained for the moment that's reflected in the declines that we've seen in oil prices over the last couple of weeks. Obviously that could still flare up that is the elephant in the room and that could really uphand all central bank inflation expectations when it comes to energy prices. But certainly if we look at what's happened over the course of the past few days we were well over to a bounce if I'm honest. We were approaching some really key support levels on say for example the Dax and the FTSE 100 and we've seen a very decent rebound again from the low 7,200, 7,250 area and we're heading back but it's important to understand as with any downtrend you're always going to get reaction you're always going to get reactions off the support levels and that's exactly what we're getting today. So we're going to see a fairly decent rebound we've come off three months of declines for equity markets and consequently particularly the Dax and the S&P and it's about time that we saw a little bit of a rebound because as with any weakness or strength it's very it's very unusual for it to be in a straight line so we're getting a fairly decent rebound here. We could head back to around 7,400, 7,500 certainly if yields continue to fall that the way that they have been that is certainly going to be a case in point if we look at the US 10 year in the last two weeks we've gone from 5% to 4.65 so we've seen a significant decline and in the course of the past couple of days we've seen a 25 basis point drop in yields so that gives you an indication as to what the market is thinking when it comes to the outlook for rates going forward obviously that's very short term but it also ties in with the rally that we've seen in equity markets as shown on this footsie chart similar sort of story on the Dax seen a fairly decent reaction off these lows down here retested the March lows we've rebounded we can see the extent of the rebound but look still in a downtrend so we're still making lower lows and unless or until we break above this blue trend line the 50 day moving average then really what we're looking to do here is still remain in the downtrend that we've been in since August late July early August we go and look at the S&P 500 it's pretty much a similar sort of story again we've seen a really strong rebound off these lows at around about 4,100 we're trading around 4,300 we've obviously got the 50 day moving average here which could act as a bit of a cap obviously these highs back in October are also likely to be important as well as this trend line through the highs from here so again we're making lower lows and until such times as we take out these peaks here then we could see we will probably continue to see a similar sort of story play out when it comes to buying the dips because there's an awful lot of data now between now and the end of the year which could shift sentiment and ultimately that's really what we're all about in terms of being sentiment driven at the moment Nasdaq 100 bounced off the 200 day moving average is back and now back above this key support level here 14,340 so that's likely to be a fairly decent area of support we've again we've got the 50 day moving average on the Nasdaq and we've got the resistance from the highs back in July so again still in the downtrend still lower lows still lower highs until such times that pattern is changes in any way then really that's the way as a trader you have to play it you have to play the trend in place at the time and the trend in place for the moment is very much a downtrend and until that cycle is broken that's that's that's the mindset that you need to think of think of in terms of Euro dollar still in that range really 107 105 and I think you can really sort of throw a blanket over that but again as with everything else we've talked about you know July to the lows in October lower highs lower lows so we really need to see a break of this 107 40 area and sustained to retest the 200 day moving average to break the cycle of that particular trend it's the same thing on the cable as well it's amazing actually how different these are now cable does look as if it could be on the cusp of a breakout but this is really messy here it's very difficult to articulate for an aggressive move higher in cable simply because we're not seeing it in Euro dollar and generally these two do tend to move in tandem unless you see a big euro sterling move so just because you're seeing the potential for a breakout in cable doesn't necessarily mean that we will get one if anything it's probably worth drawing a line through these lows through here perhaps for evidence of a little bit of a support line and perhaps this is a little bit of a triangle through here the problem with that is it's so far into the apex now that it's almost irrelevant it looks like that we're trading in a range between 120 and 123 and this triangle is probably just going to basically peter out into nothing euro sterling similar sort of story here though we are continuing to trend higher on euro sterling so there is a risk that if we break above 87 40 in a meaningful fashion then we could held back to 87 90 88 so that I think is a fairly key resistance level on the euro sterling if we can sustain that move if we break below here then we could retest the lows back at only 620 back in october so keep an eye on that again higher highs higher lows higher highs there dolly in I mean I've basically got dolly in massively wrong this year and that's just one of those things I thought the Bank of Japan will be slightly more aggressive in terms of its tightening it's not it's basically procrastinating and obviously we've not been helped by the fact that us yields have remained fairly strong we haven't seen a significant weakness there so again with dolly in there's a bit of a cap from the highs of last year 151 95 152 so we're still in an uptrend there unless we take out this 148 75 147 85 148 area and then start to slip slip back into the Ichimoku clouds here but for the time being dolly in remains very much by the dips but I just I'm not comfortable buying it but that's essentially where we are when it comes to dolly in I don't know why I closed that so let's quickly just reopen that normal watch lists there so this is the coming week so what have we what have we got coming up well and I think the bigger question is obviously we've talked about it a little bit you know can these gains be sustained well yes they can but they can only be sustained in the short to medium term in the context of the downtrend that they are in and I think that's the important thing because ultimately over the course of the past few days nothing much has really changed yes the geopolitical concerns have died down a bit they are still there they are still a clear and present danger to the global supply chains the costs of oil and gas and what have you because you've got still got Ukraine and you still got the Middle East and then you've got the backdrop of a slowing global economy the economic data is not great the US numbers do appear to be showing fairly decent amounts of resilience but how long can that continue you know and I think that's the big question that we really need to ask ourselves going forward if we look at Brent Crude we can see from this chart here that yes we're seeing lower highs but we're also seeing higher lows so we are getting what I would call a consolidation between these peaks here and these lows here and we've seen a fairly decent rebound we are no longer we are now starting to become a little bit oversold and as I say there's fairly decent support in and around $84 a barrel and we're currently around about $88 a barrel on Brent Crude so we need to keep an eye on that and gold is starting to show a little bit of softness in the short to medium term we've seen a little bit of a pull back there obviously I think the fact that the geopolitical risk premium has subsided a little bit and we could see a drift back to 1960 in the short to medium term it is looking a little bit overboard and the 2000 area is always going to be a fairly psychological resistance level hence why we've seen a little bit of a pullback and a little bit of profit taking over the course of the past few days and also you've got to bear in mind that season seasonality it won't be long now before people start to talk about that tired old cliche of a center rally and you'll hear Bloomberg CNBC all the business channels talking about it to my mind it's a complete lot of old nonsense but ultimately it's a narrative that people like to run with what does it mean in the wider scheme of things not that much as we head into the end of the year with you know equity markets have remained fairly resilient it would be unlikely or unusual for equity markets to have two bad years in a row so there is an element of the moment I think that people want to hope for the best and at the moment what we're seeing is an awful lot of chop and we're likely to see an awful lot of chop between now and the end of the year so we're not hopefully we're not going to fall off a cliff I think geopolitics could play a significant part in that but ultimately we're not going to make new record highs at least not yet so as we look ahead to the week ahead for me that there's it's a slightly lighter week this week this week has been really heavy on on economic numbers obviously apple it's disappointed slightly on its China China China revenues is China sales we've seen BP and Shell mixed fortunes there the bank banking banking earnings are now behind us as well so it's really about what sort of pre-Christmas period are we going to have as we head towards year end and we're going to continue with third quarter GDP for the UK next Friday the UK economy is likely to slow sharply in the second half of this year the bank of England has made it clear that it's not in any rush to cut rates anytime soon and it wants to keep them higher for longer in the first quarter the UK economy grew by 0.1% and then 0.2% in Q2 Q3 yeah we're we're going to struggle to even get close to that we could see stagnation 0% or even a modest contraction of minus 0.1% given the weakness that we've seen in retail sales numbers since July as well as other areas of the economy individual monthly GDP numbers have struggled to claw back the 0.6% contraction that we saw in July we saw a 0.2% rebound in August and and we've got a similar 0.2 expansion forecast for September we also have September data for industrial and manufacturing production this coming Friday the 10th of November and that is likely and both of which have been negative for July and August so we're not going to get a lift there construction has also looked a little bit on the weak side so I think if we do get 0% I think that'll be a result based on the data that we've seen thus far although it is the first iteration of Q3 GDP so looking at the Australian dollar because there is an outside chance that we might see another rate hike from the Aussie dollar the expectation is that the RBA will probably keep rates on hold that we saw a slight overshoot in the recent inflation numbers and that prompted a little bit of short covering in the Aussie dollar on an expectation that we might see the RBA do one more 25 basis point rate hike from 4.1% to 4.35% certainly I think Australian dollar remains very tied to the fortunes of the Chinese economy we've got China trade for October next week that's been weak on both imports and exports for quite some time now and I'm not expecting to see an improvement there for China trade imports for these for the 7th of November are expected to see a decline of around about 6.3% and a similar decline in exports as well for October we've also got CPI and PPI out of China I think that's two days later and again we're seeing signs of deflation or disinflation there so you've got this disinflation reimpulse spreading out from the Chinese economy that will and is already starting to manifest itself in the PPI numbers which generally tend to lead CPI numbers in the UK US and the euro area so that's 65 level 65 level on Aussie dollar is a very key resistance level going forward in the wake of any RBA decision which is due on the Tuesday I've got services PMIs coming out on the 6th of November European services PMIs they're likely to remain remain weak in France and Germany services activity were solidly in contraction territory at 46.4 and 48 respectively in September Spain and Italy are also expected to remain lackluster although they are much more resilient around about 50.5 and 49.9 in September so it'll be interesting to see whether or not we see a slowdown in those numbers on the earnings fronts slightly slightly quite a week coming up we've got UK retail with marks and expenses who've had a really strong year to date their turnaround plan finally appears to be paying dividends not so sure about their Christmas video I have to say but ultimately I'm also not frothing at the mouth about it either however there is a fairly decent area of support all the way through here is this the makings of a potential head and shoulders left shoulder here head potential right shoulder here so I'll be very interested to see whether or not the first half numbers managed to meet the expectations the markets clearly have got or started to price in so let's just stick a line through that there we go so around about 210p there on the mark suspense of share price that's going to be a fairly key support level when they report their first half numbers on the 8th of November we've also got itv been hit hard by drops in advertising revenue if we zoom out there we can see that it's not been particularly interesting they have been diversifying their business model in recent months investing in small businesses like plant-based food brand this pain relief brand brand flaring pet care company pip pat and I suppose if you boost the profiles of these small brands by allowing them to advertise on itvx to grow their turnover the hope is that the people who use these brands will obviously start turning their their eyeballs to itv content I'm not totally convinced about that but you know each to their own itv studios continues to do well and is likely to be the key area of growth in that particular side of the business but as we can see from the share price pretty uninspiring we've also got the first numbers from arm holdings post IPO it's been fairly fairly uninteresting the performance of the share price for arm holdings and in the first quarter of this year it showed a 65.5 million dollar loss total next total net sales declined to 10.8 percent in the quarter ended the ending the 30th of June with most of the fall being down to a 19.3 percent fall in royalty revenues now arm generates a lot of its revenues from licensing its intellectual property and the slowdown in mobile phone and other electronic device sales impacted this revenues in the most recent so hopefully a pickup in phone demand will help offset that in the second quarter q2 revenues are expected to rise from 675 million that we saw in q1 to 749 million in q2 with royalty revenues forecast to account for 449 million dollars of that total so that's arm holdings looking a little bit overbought but again you know that's not to say that we can't head back higher towards those peaks of earlier in september october last but not least we've got disney and obviously disney plus revenues it's not been doing particularly well it's been shedding subscribers hand over fist over the course of the past two or three quarters unlike netflix which has continued to go from strength to strength disney's been putting up its prices also brought out an ad supported version and recently as early as this week to basically bought out the remaining part of hulu from comcast that it didn't already own for eight and a half billion dollars i'm not really sure what they're thinking there because hulu can only be seen in the u.s the u.s content market is at saturation point and with the best will in the world we're never going to make that eight and a half million dollars back in terms of revenues given the tight margins in the industry so looking at the lows here fairly decent support in and around this 78 dollars which has managed to contain the weakness that's thus far that we've seen so far this year i think it'll be very interesting in disney's q4 numbers as to whether or not it can start to draw a line under its loss of subscribers and start start start growing its revenues again q4 revenues are expected to come in at 21.42 billion dollars which is almost which is 900 million dollars lower than it was in q3 obviously the park's business is winding down so you're not going to get as much as much turnover there and we're expected to see profits of 72 cents a share so that is it for this week ladies and gentlemen suffice to say obviously i don't know what the non-farm payrolls numbers are for later today a weak set of numbers there could well keep the move higher alive in equity markets but if we get a strong number we could see yields pop higher and markets start to track lower after the gains of the last three or four days so that's it for this week thank you very much for listening this is michael houston talking to you from cnc markets thank you