 Good morning. Welcome to CMC Markets on Friday the 28th of April. Then this quick look at the week ahead, getting the 1st of May with me, Michael Hewson. It's coming to the end of another positive month for equity markets, following on from a positive quarter, and the earnings numbers this week have thus far proved to be fairly resilient. We've seen a number of tech earnings this week, meta platforms, Amazon, Microsoft, all report numbers pretty much above expectations. But we also have to temper that with the fact that we are or were looking at these numbers from a fairly low bar. The expectations that these companies have been beating were set at a time when energy prices were much higher, crude oil prices were much higher, natural gas prices were much higher, had a mild winter essentially means that lower fuel prices have taken some of the edge off the tightness of consumer budgets and consequently customers, consumers have had a lot more money to spend, were not a lot more money to spend, but they've had slightly more money to spend. But if you actually look at some of the numbers that we've seen from these tech companies, there have been notable weak spots even though we have managed to beat expectations. Nonetheless, we have seen US markets rally quite strongly over the course of the past couple of days. Amazon's numbers were also fairly positive, but they did point to an outlook that was slightly uncertain, particularly when it comes to cloud growth. We can see the S&P 500 here on this chart and we can see that we saw a very strong rally on Thursday. We're seeing a little bit of a pullback today, but we still remain very much below the peaks of this year. And consequently, that means that this key level around about 4,200, it still remains the very key resistance level as we look ahead to May. And we've got a very big, big month or we've got a big week coming up next week. We've got the Federal Reserve set to meet on interest rates. We've got US non-farm payrolls and we've also got the European Central Bank looking to meet for its latest policy decision. So before we get onto that, let's have a quick preview of the markets as we see them from a technical point of view. And the NASDAQ has retested at 13,200 area on the highs of the earlier in the month. Now, there is scope for the NASDAQ to potentially return to the highs that we saw back in August. But from the previous videos that I've done, the rebound that we've seen from the October lows has been much more modest when you compare it to save the S&P 500, which was able to retrace 50%. The NASDAQ hasn't actually been able to do that yet. So there is scope for the NASDAQ to potentially push even higher to 13,600. This resistance level here, this 50% retracement level here, that doesn't mean that the rally that we're seeing in the US isn't on borrowed time. So at the moment, there is a widespread expectation on the part of the markets that we could see rate cuts by the end of this year. I'm not sure about that and I still remain highly skeptical about that unless we see a significant bout of disinflation or deflation as we head into the third quarter and come to the end of the second quarter and the beginning of the third quarter of this year. Not seeing any evidence of that in the data. And US two year yields are still at 4%, well off the lows of the quarter, which is around about 3.6, 3.5, 3.6%. So there's still around 4%. So Federal Reserve's got a big decision to make as we look ahead to the month of May. Before we get to that, let's have a quick look at the FTSE 100, which is on course for another positive month, despite today's weakness that we're seeing. Still remain fairly constructive on that. We could see a little bit of a drag back down to around about this 50 day moving average 7,700, but I think what we could be seeing today is a little bit of month in profit taking. We've had a fairly decent run on the FTSE 100 and today's price action and sell-off has been predominantly driven by the banking sector and disappointment over today's Nat West results, which by and large, when I look at them, were really positive. Profits came in ahead of expectations, revenues came in ahead of expectations. I think there was some disappointment that Nat West didn't revise up its four-year guidance, but why would it? I think given the uncertain economic outlook, it pays to remain a little bit conservative about the outlook with all the uncertainties that are swirling around the markets, then raise expectations only to disappoint later. Still remain fairly key support around about 15,700 on the DAX there. So equity markets continue to look fairly resilient. Eurodollar continues to churn between the recent peaks just below 111. We can see that there. That's the key level for me. Above 110, 110.5, it really does struggle with if we scroll all the way across here. We can see that line that I've drawn all the way back through there comes in around about those sorts of lows, February, January lows of 2022. A little bit of a pop higher there. That level's around about 111.85, but nonetheless, between 111 and 112, it's a really big barrier for Eurodollar going forward. Cable as well, finding a bit of resistance in and around that 125 area continues to find that a little bit of a barrier in the short to medium term. But again, I still remain fairly constructive on cable. We've got the Bank of England meeting in just over a couple of weeks, and likely to see another 25 basis point rate hike there, following on from similar rate hikes from the Federal Reserve next week. And the big question really I think is whether we get 50 basis points next week from the ECB or whether we get 25 basis points next week from the ECB. That remains, I think, the key unknown. So let's look ahead to the Federal Reserve decision next week. A lot's happened since the Fed last raised rates by 25 basis points in March, and that was even that was in the teeth of concern over financial stability and the US banking system. And that hasn't gone away with all the problems with First Republic Bank and whether or not that bank could be bailed out in the coming weeks. I think the bigger question or the bigger concern is contagion. At the moment, I think the turmoil is likely to be contained. We saw numbers from PacWest Banking Core, which is one of First Republic's peers. Their deposit base actually went up during the quarter, which is encouraging and suggests that the turmoil is at the moment contained to a small cohort. So we've got Silicon Valley Bank, that's gone, Signature Bank, that's gone. First Republic could go the same way, but there aren't any other banks by the looks of it that look to be vulnerable at this moment in time. So this may well temper any sort of guidance that Fed officials might deem to offer in the aftermath of the decision this week, given what we've seen with respect to core inflation, given what we've seen with respect to the employment levels and weekly jobless claims. I think the odds favor a 25 basis point rate hike this week, this coming week, with perhaps some fairly modest dovish guidance and the Fed may well signal a short-term pause. That doesn't necessarily mean that we will see a rate cut anytime soon. I think the Fed will want to point to the resilient labor market, will want to point to the resilience in services and food prices. We're seeing weakness in the manufacturing sector, but we're not seeing weakness anywhere else. And I think that for me is the key factor that the Fed really will need to take into account when it looks at the overall economic outlook in the round. Core PCE in the Q1 GDP numbers jumped to 4.9%. So the Fed will be concerned about that. And if they take the view that the turmoil in the banking sector is confined, then 25 basis points looks the most probable decision later this week. We've also got non-farm payrolls on Friday. And last month's jobs report reset that bad data narrative of a slowing U.S. economy. Yes, GDP fell to 1.1% in Q1, but that was largely as a result of a rundown in inventory. Consumer spending was fairly resilient. And the unemployment rate fell to 3.5% back in March, even as the participation rate rose to 62.6%. So there's no evidence, even with a declining jolts number, because that's still high at 9.9 million. The labor market is showing any signs of significant, and I think that's the key level, significant weakness. Wages data did fall back, but it's still high at around about 4.2%. So I think for me, with payrolls due on Friday, the Fed is likely to go by 25%. We've got the ECB rate decision on Thursday. The big question around that, I think, is whether or not Flash CPI for April shows any signs of moderating either on the headline level or on the core level. And on the headline level, that's expected to tick up from 6.9% to 7% after falling from 8.5% in February. Core prices, on the other hand, are at a record high of 5.7% and expected to stay at that level. So I think the big debate this week is not whether or not the ECB hike rates, it's really about whether they do 25 or 50. I think the likelihood is they'll do 50. And then really, it's a question of how many more rate hikes come after that. And I think on that, the jury is out. That's why Eurodollar is still finding it difficult to go through 111, because there's a little bit of divergence when it comes to whether the ECB will be able to go by more than 50 after next week. I think we can probably assume that they will hike by 50. But if they don't and only go by 25, then obviously that could well be negative for the Euro, because it would signal that they have significant concerns about the Eurozone economy. The GDP numbers that we saw earlier today for Italy and Germany divergent. The German economy contracted by 0.5% in Q4, it stagnated in Q1, whereas the Italian economy expanded by 0.5% in Q1 after contracting by 0.1% in Q4. So we're getting a significant divergence between the powerhouses of the Eurozone economy and the southern members of the Eurozone. And to be quite honest, Italy should continue to do well over Q2, Q3. It's the main tourist season. And consequently, the economy there, particularly around services, should remain fairly resilient, even as manufacturing continues to struggle. So Flash CPI is on the 2nd of May, ECB rate decision is on the 4th of May, we've got payrolls on the 5th of May, and we've got the Federal Reserve rate decision on the 3rd of May. Earning season also continues this coming week. And UK banks continues with Lloyds and HSBC. We've seen a little bit of weakness today in the Lloyds share price on the back of disappointment over the Nat West numbers. Personally, I think the Nat West numbers were all right, they were certainly fairly resilient, and they certainly don't justify a 6% decline in the share price. Nonetheless, we are where we are. Again, with Lloyds very much exposed to the UK economy, you could certainly argue that the outlook for the UK economy remains difficult. Certainly, government tax policy isn't making things any better. And certainly there is an awful lot of doom and gloom about how welcoming the UK is to overseas investment and to business in general. We look at this chart here for Lloyds, still remaining the uptrend that we've been in since the October lows. It's had a difficult share price, it has had a difficult quarter. Obviously, it was affected by the turmoil in the banking sector. We've only seen a modest rebound. And to be quite honest, I would suggest that the UK banking sector is completely different to the travails that have been felt in the US and to a lesser extent in Europe with the credit Swiss debacle. We had our banking crisis in 2008, the banks are in much better shape. They've continued to set aside provisions, albeit at a fairly lower rate, so it'll be interested to see what provisions Lloyds set aside. On the outlook, Lloyds said it expects to see net annual interest margin to improve to greater than 3.05% up from its previous estimate of 2.8. Operating costs are expected to remain static for the year, around about 9.1%. And on tax years, the bank is likely to pay obviously a higher corporation tax rate, although there is a slightly lower bank levy as a consequence of that. So it'll be interesting to see whether or not Lloyds beats profit expectations in the same way that NatWest does and whether or not the market seeks to punish it for being overly cautious about the outlook as it goes forward. We've also got important numbers from BP and Shell, and I'm sure we'll get the usual cacophony of quarterly pearl clutching from politicians about the obscene profits being made by the evil oil and gas companies. Completely deaf to the fact that it's the same energy policies enacted by these politicians over the last 20 years that prompted the energy price spikes that we've had to absorb as consumers over the course of the past 12 to 18 months. We start the week with BP's first quarter numbers. I think given the sharp fall that we've seen in gas prices as well as oil prices, we aren't likely to see the same level of profits that we saw last year. We saw a record set of full year numbers for BP, and they did raise the dividend and now it's another 2.75 billion share buyback for Q1. In a sense, BP and Shell are the authors of their own misfortune when it comes to the criticism heading their way with these buybacks. Unfortunately, it hurts the more local oil and gas providers like Harbour Energy, Serica Energy, who've decided to cut back capital expenditure in the North Sea, which actually will keep energy prices much higher in the short term as a consequence of this windfall tax levy. Nonetheless, BP still managed to post a loss last year due to the write-down in its Rosnef stake, so on paper it actually didn't make any money even though it did pay quite much higher levels of tax. I think the bigger question going forward is how BP transitions to renewables. It has announced it's splitting its investment this year of between $14 billion and $18 billion, evenly between its transition growth engines and oil and gas with spending of up to $8 billion a year. Now, obviously it really depends on how it defines transition growth engines and we could get more detail on that with respect to the first quarter numbers. We're also seeing the first signs that oil companies are pushing back on the narrative of no new capacity by saying that new gas resources will be needed to help the energy transition and keep energy prices low. I think this is something that's hopefully going to be heard more of because it's certainly needed. The last thing that consumers want to have to contend with is permanently higher oil and gas prices at a time when food price inflation is trending at above 15%. We've got BP on the 2nd of May, first quarter numbers, we've got Shell on the 4th of May. Again here, looking for higher spending on renewables and revenues are likely to be lower, again like BP than they were in Q4 given weaker to barn and lower prices. We're going to finish off with Apple. I've seen some fairly decent tech numbers this week. Will Apple be able to deliver in the same way that its peers have? It's certainly much more recession proof and I use that quote in inverted commas. Q2 numbers generally tend to be a little bit on the weaker side in the aftermath of the big jump that we normally see in its first quarter which is usually pre-Christmas and Thanksgiving where spending on iPads, iPhones and Macs tends to go up. What I think will be particularly interesting is Apple's foray into banking. For the upcoming quarter Apple said they expected to see a 5% decline in their Q2 revenue numbers and that will be the first time we've seen such declines since 2016. On a side note, Apple may have benefited from the recent banking turmoil because it's launched a new banking service and a new savings account with a 4.15% interest rate although you do need to have an Apple credit card to qualify for this. But certainly I think in terms of the diversity, the diversification of Apple, I think it will do well to continue to push back up towards the highs that we saw last August. But as with anything with Apple, it always pays not to underestimate Tim Cook and the Apple juggernaut. They're a cash machine and the big question is whether they continue the share price rally that we've seen thus far over the past few months. So that's pretty much it for this week, ladies and gentlemen. It's a long weekend here in the UK and certainly things probably in parts of Europe as well. So I'd like to thank you for listening. Wish you all a nice weekend and speak to you all same time, same place next week. Thank you very much for listening.