 Good morning and welcome to CMC Markets on Friday, the 15th of May, and me, Michael Houston, and a look at the week ahead, beginning the 18th of May. Before we get started on that, however, we're going to have a quick look back at the price action of the last few days, which has been choppy, I think, at best is probably the best way I can describe it. I think there is a perception, perhaps, that I think that investors are caught in two minds at the moment. I'm certainly into, well, I'm not into minds. I think that the rebound that we've seen over the course of the past few weeks is probably a little bit, is pricing in a little bit of too much optimism, but investors appear to be caught in between two stalls at the moment, if you like, with optimism over the relaxing of lockdowns, driving or seeking to drive markets higher. We're certainly seeing that in the context of some of the moves higher that we've seen over the course of the past few days, set against a little bit of concern that I think that the relaxing of the lockdowns might cause a second wave of infections. When you throw in a little bit of uncertainty about future China-U.S. relationships with President Trump talking about ending trade relations with China completely, then you've got a significant cocktail of factors that make it very, very difficult to predict with any degree of accuracy, where markets are going to go to next, particularly at a time when you've got companies withdrawing their guidance, because they have no clear idea of their earnings outlook for the course of the rest of the year. And while there have been some exceptions to companies actually giving guidance, Cisco Systems being a case in point, and their numbers this week actually gave guidance for the upcoming quarter. When you look at the economic numbers that have been coming out, another two and a half million weekly jobless claims, making it 36 million Americans a file for jobless claims in the last six to seven weeks, you've got GDP numbers from Germany, Q1 contraction of 2.2, the EU contracted at 3.8% in Q1. You know that the data isn't going to get any better as we head into Q2. Now we're pretty much almost halfway through May, in fact, we are pretty much halfway through May, and certainly there's no evidence whatsoever at the moment that the economic data is improving. That being said, we do have flash PMIs coming out in the next week or so from France and Germany, and they are likely to be an improvement on the April numbers, which I admit is a very low bar. Because when you've got services PMIs for France for April of 10.2, and German PMIs of 16.2, you're not really going to have to work too hard to improve on those two record low numbers. And as both countries are now starting to relax their lockdown procedures, you would expect to see some improvement even if it's into the low to mid 20s. So those flash PMIs are out on the 22nd of May. So as horrific as the April ones were, we do expect to see an improvement in the main numbers. But as I said, it's a very low bar. Now, if we look at the Germany 30, the DAX, as it is better known, we do, I think, have some evidence that we could be starting to see some form of topping formation coming in. And why do I say that? Because at the moment, we haven't as yet been able to take out the highs that we saw at the end of April. We have got a potential left shoulder here. We've got a head here and we've got a potential right shoulder here. So what does that put our neckline? When it put us on neckline very neatly on this 38.2, if you have an actual retracement level right here, which we pushed through in the end of March, early April, and as acted as a fairly decent pivotal support and resistance level pretty much since then. So and this week as well, when the DAX fell sharply earlier this week, we put in a low of 10,160. Now, obviously, the value on that is 10,192. We've also got the 50 day moving average. So there is some evidence of a little bit of support around about, let's say, let's call it for the sake of argument, 10,150 on the DAX. So for me at the moment, while we're above 10,150, then there is potential for us to move higher. But if we break below that, we potentially complete the head and shoulders reversal. So we've got the highs here of 11,340 and the lows here of around about 10,150. So subtracting one number from the other, and you've got basically the potential for a 1200 point move lower if we close below 10,150. And that would suggest that a short-term top is in. If we look at the FTSE 100, it paints a similar sort of picture only with a slightly more sloping neckline. But again, what you've got here is probably less ahead in shoulders and more a little bit of an uptrend that's coming in place, which is starting to trade ever more sideways. What's significant about this is this week's rebound, which we saw on Monday, fell short of the highs that we saw at the beginning, the end of last month and the beginning of this month. So again, the bias remains very much towards the downside if we are unable to take out these highs that we saw here. And it's significant that they're on exactly the same day. And it's similar sort of story, FNP 500. Here we go. And again, for me, I think rather than basically drawing a horizontal line here, I'd be more comfortable with drawing a horizontal line straight across because then it more or less corresponds with the 50 day moving average as well. So in that context, you would sort of say that the support on the S&P 500 is around about 2,720 if you draw a horizontal line straight across there because generally US markets tend to be an awful lot more resilient than say, for example, the European counterparts. And they have certainly outperformed. But again, we are still below the 200 day moving average on the S&P. And while we're below that, it's very much a case of we're in a bit of a range trade, but it does appear to be some evidence of the top being formed. It's not been a particularly good week for the pound either this week. If we look at Euro sterling, my view of Euro sterling going lower turned out to be pretty wide of the mark. We weren't able to take out these lows at 86, 70, 80 and we have since squeezed higher. So I'm going to change this for our charts with daily chart and look for potentially the next area of resistance. And we're sort of up against it a little bit at the moment. The highs that we've seen earlier this week around about 88, 70, 80, 80, 80, 80, there are there abouts. I would suggest this resistance level here, this dotted line here, is probably a better indicator of where the resistance level is. What I can't, what I don't necessarily understand about the weakness of the pound, even if you put the fact that the deadline for Brexit talks, the June deadline for asking for an extension is coming up and coming up quite rapidly. If you look at the UK economic numbers, yeah, they're bad, they are bad, but Europe's even worse. And the difference between the UK and Europe more generally is the UK does have a joined up fiscal and monetary policy response. Europe does not. Europe has the potential to be an absolute car crash or a train wreck. If the UK is a car crash, then Europe's a train wreck. So for me, I think while the pound is looking a little bit weak, certainly against the Euro and could well weaken further, particularly given the fact that we've broken lower on the cable below that 1.22 and a half area that I've outlined in previous videos here, this level here, we've broken below these range lows here. That means we could head back to this 1.1985 level unless we can get back above 1.2270. I'm basically adding in 20 or 30 points for good measure just to make sure that we don't get a spike through that and come back. Unless we can head back above here, then the pound could weaken further. As I say, what the chart is telling me and what my gut is telling me is just two totally different things here. So I've got to try and divorce that from what the price action is telling me. While we're below 1.22 and a half, the bias is for further weakness until such times as that price action would causes me to revise my opinion. And that's important. It's about what the price action does and what your emotions are telling you to do. And that is very, very difficult for anyone to do. I mean, I've been doing this, we're looking at markets for nearly 30 years now. And I still find it very difficult to separate my emotions from what the price action is telling me, but it's something that you have to do. That's why you have rules. So 1.225060, that's the sort of area. While we're below that, then we could well see further weakness. If we're able to recover back above 1.23, then we could well see the range come back into play. But when you look at the data that we've got coming up, the UK data we've got coming up, there's not much, if anything, to be positive about. We've got UK retail sales coming out on the 22nd of May. It's already been a difficult few months for the UK economy with the floods in February. The retail sales number we saw in March was an absolute shocker. It's led to a record low of 5.1 despite the record low of minus 4.5.1, despite the lockdown coming quite late into the month, this April's number is going to be even worse. Everyone's been at home, they've not been using their cars. Online sales may take up some of the slack with groceries and what have you. But even with that, you're looking at an April number of minus 10, minus 15, potentially even minus 20%. It would be a record low. It's very difficult to come up with estimates when faced with these sorts of economic circumstances. Again, we've got the UK claim account for April, monthly jobless claims for April. March actually turned out to be a little bit of an anti-climax simply because the reporting date cut off just before the March lockdown, which means that all of the data from March and April will encompass the entire period as when the lockdown started. So you could see a big jump in monthly jobless claims there. So with so many people losing jobs, they're likely to do so in the coming months. The main hope I think is that we see the country come out of lockdown fairly quickly without too many side effects. The big question obviously also is that we could see a delay in a jump in jobless claims because of the number of furloughed employees, 7.5 million people on company furlough, the UK government is paying their salaries. So if they're not in the jobless claims, that gives you an indication of the type of economic shocks that could be coming our way if we don't get a quick rebound in economic activity. So that's the claim account and the unemployment data, which is due out on the 19th of May. We've also got the flash PMIs for services of manufacturing for May on the 21st. Again, I would expect to see a little bit of an improvement in sales for May, but again, that may be a little bit too late given the recent relaxations in the lockdown, which means that the final figure may see a slight upward revision. So that's quickly looking at the pound and Euro Sterling. Let's have a quick look at Brent Crude. One of the things about Brent Crude is that that's been rising ever so gradually over the course of the past few days as expectations of increased demand, deplete inventories, and as such, increased confidence that we'll see much higher crude consumption and take the pressure off inventory levels going forward. But again, big level on crude oil is that horizontal red line up here, which we've got around about $33 a barrel. We are looking a little bit overbought unless we get through there, then unless we see a significant rebound in economic activity, it's a little bit hard for me to be overly optimistic about it getting much above the current levels that we're seeing, right. Now, in terms of earnings numbers, it's a quite a big number for not only UK retailers, but US retailers as well. But let's start with a good old favorite, Marks and Spencer. Marks and Spencer's are releasing their full year numbers on the 20th of May. And ever since they dropped out of the FTSE 100, there hasn't been much in the way of an improvement. We hit record loads of 74p in the middle of March. You can see that there. Since then, we've pretty much traded sideways between 74p and 100p. We've seen management take steps to shore up the balance sheet by cancelling the dividend. That really didn't cause much of a reaction because I think it was largely expected. They have cancelled 100 million pounds worth of their spring and summer catalog. That's probably prudent, given the fact that it would have probably struggled to shift it in any case. Profits are likely to come in well short of the 420 million pound forecast that we heard them give only a few weeks ago. That being said, with government help, the suspension of business rates, they're likely to save money around about 180 million pounds on that score. And I think one of the things that I'll be keeping an eye out is this agreement with Ocado to sell its groceries before the scheduled September delivery date. Can they bring that date forward? Because their food offering is very good. They have missed out to a certain extent. I think as a result of the fact they've had to shatter an awful lot of their general merchandise stores, but their food halls have remained open. So maybe we could get a lift from that. We've also got Royal Mail's four-year numbers coming out next week. Now, their share price has taken a little bit of a move higher today on the back that Rico, back their CEO, will be leaving the company in August. He's had, shall we say, a bit of a love-hate relationship with the unions as he's tried to bring in significant changes to working practices. I don't think the unions will be sorry to see the back of him. And it's one of the few organizations that has continued working through the COVID-19 crisis. One of the things that I will be paying particular attention to is their letters division that's likely to have seen a significant drop-off in turnover, but on the plus side, their parcels division could well have added a significant uplift to the bottom line. So in the context of that number, the company still has its profits target of around about three to £340 million. It'll be interesting to see whether or not they come in in line with that expectation. But certainly if we look at this chart here, there is some evidence that we could well be coming into a short-term base, but we are running into a significant barrier between 180p and 200p. Let's not forget this company IPOed at 330p. And at the time, people said we were giving it away. I think they'd take 330p right now. Looking at Burberry Group, they're also due to announce their four year numbers as well. And again, one of the main companies that's been basically going through a fairly tough time, not only in its domestic markets, but its Asian markets as well. Obviously the Hong Kong disruption last year saw significant impairment charge of 14 million levied in November. So we know about that. Four year guidance was kept unchanged. So operating profit expected to be in the region of around about, well, it was £203 million for the six months to the end of September. So, if they can come in anywhere near £400 million, I think they'll be doing well. In March, the company said retail sales in Asia stores were down 40% to 50% over the previous six weeks. Now they have taken some mitigating action. They've come out of the crisis well. The Castleford factory has been continued to operate manufacturing non-surgical gowns for the NHS. But I still can't get over the feeling that revenues and profits could well come in short when the numbers are released on the 22nd of May. In terms of US earnings, we've got targets, first quarter numbers coming out on the 20th. And we've also got Walmart's coming out on the 19th of May as well. And I think Walmart is particularly interesting in the context of the fact that it's one of the few retailers that has been able to take the fight to Amazon. And retailers in general have had a pretty tough time. And companies like Walmart have generally been the exception. We can see that with this chart here. Record highs in April. So, it's proved to be fairly resilient pretty much everything that's been thrown at it. Its Mexico unit, for example, saw a 15.4% rise in its first quarter profits at the end of April. So, in terms of its online operations, they're on a par with Amazon's. However, its profit margins are going to be an awful lot thinner. So, profits are expected for Walmart to come in around about $1.16 a share. So, I'll be paying particular attention to that to see whether or not we can revisit these highs or whether or not we're gonna get a correction back to the 200-day moving average. So, that's the look at the week ahead. All on the major thing, which I almost overlooked, Fed Minutes. How could I forget Federal Reserve Minutes? Last Fed meeting, right, saw Jerome Powell pledge to ready new credit facilities to help the economy through the slump. Now, we've heard an awful lot from Mr. Powell over the course of the past week. He made a statement earlier in the week and it's struck a very, very sympathetic tone to the problems facing everyday Americans over the number of job losses. The fact that the Fed is launching a new ETF corporate bond buying program. There's been the chatter about the prospect of negative rates in certain areas of the Fed funds market going into negative territory. Now, this has prompted, I think, calls on the part of some investors for the Fed to push back quite significantly on this chatter of negative rates. And I certainly think it's a valid, I think it's a valid call for people to make because I see no benefit at all from the disaster of negative rates. To my mind, there is no reason whatsoever for the Federal Reserve to go down that route. Simply because if negative rates worked, then the European economy, the Japanese economy would be in much better shape than they are. Now, despite all of this talk of negative rates, the dollar is still holding up fairly well. So in terms of the minutes, while they are dated, I think they could give us a better insight into the thinking of all Fed members with respect to the prospect of negative rates. And while Mr. Powell's comments this week were instructive in that he felt that there weren't really any benefits to negative rates, he didn't implicitly rule them out. But given the problems in Europe, given the problems in Japan, why would you? They don't offer anything. The problem is that that won't make speculation about negative rates go away. We've had it here in the UK with the Bank of England Governor Andrew Bailey talking about the prospect of ruling out negative rates. And yet UK guilt yields, two-year guilt yields are in negative territory. Fiscal stimulus, monetary stimulus in terms of asset purchases is probably a much better way of achieving the goal of stimulating the economy than negative rates. Negative rates have an awful lot of, I would argue, unforeseen consequences. So we've already seen the damage negative rates can do in Europe. It'll be very interesting to see the type of debate that Fed policymakers are having around that along with other fiscal measures, I'm sorry, monetary policy measures that US policymakers might be tempted to consider as we look ahead to the next meeting, the next Fed meeting, which is in June. But looking at the CMC Marcus Dollar Index, there's not much to see here. The dollar is still performing fairly well, which is not really surprising given the fact that it's probably the best of a pretty crummy bunch. So that's it for this week. Ladies and gentlemen, I'd like to thank you very much for listening. I hope you all have a pleasant weekend and I'll speak to you all at the same time, same place next week. Thanks very much.