 Morning, welcome to CMC Markets on Friday the 23rd of July and this quick look at the week ahead beginning the 26th of July With me Michael Houston and it's certainly been a week of downs And then ups and certainly I think when we look back at the events of the last few days I don't think we're really any the wiser when it comes to Where markets are likely to go to next we got off to Bad start to the week Largely, I think other concerns about rising Delta Variant infection rates slowing down Slowing down the the the economic recovery But I think as we move past the summer Into the autumn and the winter there was always an expectation certainly on my part that we would probably see a little bit of a slowdown in Some of the economic numbers particularly, I think When you think about the fact that as as the weather gets colder Everyone will move inside and ultimately I think the real concern isn't so much rising infection rates. It's rising hospitalizations and obviously tragically, you know a higher death rate, but I think once once you look past some of the headline risks and I think an awful lot of this week's sell-off was as a consequence of headline risk and concerns about a Lower growth lower earnings expectations Markets are caught in a little bit of a pincer movement at the moment between rising inflation expectations and potentially lower growth and not really too sure how to balance That risk profile. I think that that's no better borne out in the way that the US 10-year yield has behaved So far this week where we've seen significant drops in the level of the US 10-year Treasury yield and we can see that from this chart here if we look here to date we've seen Pretty much yield peak all the way back in March They've been slowly rolling over slowly rolling over slowly rolling over and we've hit a low of 1.126 earlier this week Now we since rebounded On the back of that and I think a large part of the reason for that rebound is that while The markets are potentially pricing Lower inflation risk. I think there is another narrative at play here. Ultimately, they're probably not pricing in the prospect of Lower prices but lower growth And I think that's where the narrative starts to get a little bit bit blurry But I think looking past the narrative and looking at the price action I think as long as you look at the price action, you've probably got a better idea of where markets are likely to go Over the course of the next few weeks and months and I think it's very important sometimes to try and divorce yourself from The narrative the news narrative the headline risk and actually look at what Prices are doing more broadly and I think you know while we can look at the fact that the FTSE 100 had a three-month low earlier this week What we didn't do is we didn't take out this 6805 level Which has been on my chart pretty much for the last two to three months You know the series of highs through 86 6805 We haven't as yet broken below what I would categorize as a fairly important pivot level And yes, we did break this trend line here that provoked a very sharp move lower But what I think was was very important was the fact that we didn't take out That support level there, which obviously neatly brings us back Pretty much where we started the week So, you know if you basically gone into an underground bunker On Friday last week and resurfaced this week We've gone nowhere You know and you think or saw the fuss about but I think it's important to understand the narrative Did change a little bit this week, but ultimately All that's done is introduce volatility as opposed to the change in direction And I think that more that is more important than anything else in terms of takeaways Now obviously we had the European Central Bank right meeting earlier this week In fact yesterday where Christine Lagarde president of the ECB outlined The central banks new guidance tools Didn't really provide too much in the way of excitement Once again, Christine Lagarde talks a lot without saying very much The new four guidance I think really I think merely outlined the fact that the ECB was likely to be ultra accommodative For a long time to come, you know Until the middle of the decade I would suggest and I think the new guidance really was I think if I could describe it As anything It's the equivalent of giving a rather battered old car and you paint job a quick engine tune up It looks nicer, but it's still the same old banger underneath So that brings us on To the events for this coming week and we've got an absolutely busy week ahead of us in terms of earnings and Central bank meeting so rather than digress and Prattl on any more Let's really get into the guts of that, but I think more than anything else I think whatever we hear next week. It's probably not going to change the overall direction for Markets more broadly, but I certainly think in terms of the FTSE 100 We're still in this 6,800 range 7,200 range that we've been in pretty much since the beginning of April April April May and for me, it's going to be very very Difficult to really sort of ascertain what's going to drive us out of that range given Some of the weaker data that we've seen this week the flash PMIs from the UK Services in particular was much softer than expected coming in at 57 Point four and dropping below 60 for the first time in several months And I think a large part of that can be down to some of the impact of the self-isolation rules Of the NHS app, which is forced Ordinarily healthy people or potentially healthy people to self-isolate because they've been pinged by the app Now the government is relaxing some of the rules around that an awful lot of people are actually removing the app from their phones Rather than have rather than having the risk of you know The life being disrupted and some people haven't even downloaded at all. I mean me myself I don't have it on my phone. That's not to say that I'm reckless in terms of who I associate with and who I don't I'm just very very careful About where I go and what I do. I don't want the government tracking me Whatever your views on the track and trace app and obviously there are also concerns about eventually forced positives and Other such Indications, but I'm digressing ever so slightly. Let's look at the markets for next week Look at the Dax again failed very very sharply to a two-month low But I think more importantly we didn't make Lower lows and I think that more than anything is the most important factor when it comes to looking at the way the markets are trading We've been very very choppy over the course of the past few weeks You know, and that's no better borne out by these daily candles here Up one day down the next up one day down down down and then up up So but more broadly, we're still respecting the overall range that we've been in over the course of the past Few weeks and while central banks are likely to remain accommodative It's hard to see Where the next big sell-off is coming from and that's not to say it won't happen But I think trying to get in in front of it Particularly in these markets is a very dangerous thing to do you have to trade what you see and At the moment what we're seeing is volatility Or be it within a fairly broad range and all the blood global markets that we're looking at here are Still very much in the uptrend they've been in pretty much since those lows that we saw in March 2020 and that's no better borne out by the S&P 500 here. I mean look at this trend line that I've drawn here 50-day moving average again You know the the price action has never really deviated that much away from the the 50-day moving average Pretty much since March last year You know, you can draw a series of lines in we're getting progressively higher lows and higher highs That is symptomatic of an uptrend in the big test will be now whether or not we can push above 4,400 the NASDAQ has already made a new record high this week despite the early week Sell-offs that we saw on Monday. So, you know once again the trend is your friend and That more than anything is the important takeaway. I think when it comes to looking at what's coming up next week And the main item that I have my eye on is the Fed break meeting And I think that is important This is the last meeting before the Jackson Hole annual symposium at the end of August and that's generally I think When we will hear whether or not the Federal Reserve is inclined to think about a tapering of its bond buying program now I Think when we look back to the events on Monday and a little bit of a growth scare that we had on Monday Talk of tapering asset purchases sort of seems rather out of kilter When you have concerns about a growth slowdown and you certainly I think there's certainly an argument to be said that We may have seen peak bounce back when it comes to the rebound in the global economy We've got US Q2 GDP numbers coming out on the 29th of July the day after the Fed rate meeting So we've got the Q2 GDP coming out on Thursday. We've got the Fed rate meeting on the Wednesday We've also got US consumer confidence on the Tuesday. So You know, what's what? What are we going to be looking at in particular when it comes to the US numbers next week? And we've also got US personal spending and income on the Friday So let's deal with each of these in turn consumer confidence Managed to hit a post-pandemic peak in June of 127.3 so the big question for the July consumer confidence is whether or not consumer confidence reflects accurately the personal spending US retail sales numbers and you've got to you've got to ask yourself It doesn't really because US retail sales numbers have been fairly patchy up one month down the next and they've also been skewed enormously By the various stimulus check payments that US consumers have been on the receiving end of this year Once in January and again in March and I think one of the things that I think the spending patterns have taught us is Or a teaching, you know telling me is that US consumer while Outwardly confident in terms of the consumer confidence numbers is still a little bit cautious When it comes to spending money as we head towards the autumn And I think that's likely to be borne out in the Q2 GDP numbers, you know in terms of GDP We saw the US economy expand by six point four percent in the first quarter Now the spillover effects of this are still going to ripple over into Q2 and as such we could we are expecting to see an annualized 8% rebound the Q2 with personal consumption once again driving it But also some fairly decent numbers out of the manufacturing sector, but but you know Stripping all of that aside Personal spending and income also tell us that the US consumer is still Probably saving more money than they're spending so more broadly I think the key takeaway for me next week is not so much the data Which is likely to continue to be patchy but still point to a US economy that's doing fairly well Or be it with weekly jobless claims that are continuing to decline But are also prone to the occasional spike, but also to a Fed rate meeting, which is likely to see a Significant Uplift or upgrade to the discussions around the timing around the tapering of asset purchases because if we look back at the last meeting One of the key takeaways for that it almost seems counter-intuitive Is that we've seen a number of Fed members start to talk in terms not only of Tapering which is going to come at some point you would imagine, but also in terms of a 2022 rate hike Now talk of a rate hike given what we've seen and the concerns that we've seen this week Seems a bit daft particularly in terms of the sharp rise in Delta variant cases that are not only being seen Here in the UK but also in Asia as well as in the US and people are talking about these rising Delta cases being the Symptom of you know a pandemic of the unvaccinated But that's not to say that even if you're vaccinated you can't get the Delta variant The difference is it's less likely to hospitalize you not the fact that you're less likely to get it And I think that is more than anything The key so some of fears over inflation have already started to subside in bomb markets We've seen commodity prices start to soften specifically copper prices nickel prices Oil prices as well come off the highs we saw a big decline earlier this week lumber prices are pretty much halved from their peaks They're still elevated levels, but the certainly half the level they were previously So, you know, there are concerns that the global recovery may well be weaker than was anticipated When everyone was getting really bullish all the way back in March So I'll be very interested to see what the narrative is that J. Powell talks about when it comes to any potential Discussions shall we say about the timing or otherwise or a tapering of asset purchases? We've also got German IFO business confidence numbers Coming week. I think these will be interesting in the context of the awful floods that we've seen in Europe And whether or not German businesses see significant disruption as a consequence of that Those numbers are out on the 26th of July, which sort brings me on to The earnings numbers for this week and there's a whole load of them. You can see them on my list here We've got Tesla which I Was I was thinking was going to happen this week But ultimately the numbers got pushed and they nailed you out on the 26th of July. We've also got UK banks Barclays Lloyd Lloyds and that West and we've also got some key tech numbers from Apple Amazon and Microsoft So Let's start with the UK banks because we've one of the takeaways that I think we've We've taken away from the recent US bank earnings Has been the fact that fixed income has been a little bit of a drag And I expect that to continue to be the case for Barclays Particularly when they released the numbers on the 28th Since the numbers that we saw in Q1 the Barclays share prices drifted all our So that pretty much was the peak when it comes for the Barclays share price the highest level since December 2009 And Barclays has been one of the outperformers when it comes to the UK banking sectors So we've seen a little bit of a slowdown So I think expectations around that are going to be slightly tempered So in light of the reaction to recent Q2 numbers in the US I think we're likely to see a similar pattern play out with the Barclays numbers We saw fix, you know, we saw misses across the board So we'll probably see something similar for Barclays equities trading did well in Q1 So I'll be looking for something similar in Q2 We'll also be looking to see if there is decent demand for loans As an indicator of the strength of the recovery story for the UK economy as businesses start to reopen in the second quarter of This year so key levels for me on Barclays are going to be 158p and the 200 day moving average Okay, so that brings us on to Lloyd's banking group Again, see they've seen some decent gains As far we can look at the trend line here that's currently in place Don't think we really need this line now. It's completely redundant. So let's just chop it out look at the Similar sort of narrative playing out with respect to the Lloyd's numbers that we saw In Q1 Unlike Barclays Lloyd's shares actually went higher In the aftermath of the Q1 earnings numbers hitting 15 month highs all the way back here in May Still haven't completely recovered our Pre-pandemic or post-pandemic losses, but nonetheless making fairly decent progress I think in terms of the housing market loan demand again will probably be a key indicator here Mortgages is a very very key part of Lloyd's and to a lesser extent now West's business model going forward So I think loan the loan demand story Will be quite significant and I think another thing to keep an eye out for Over the course of this earning season is loan loss reserves Barclays that Western Lloyd's Set aside quite a bit of provision when it comes to non-performing loans I think it'll be very notable and interesting to see whether or not they add some of that back Given the fact that the UK economy has performed quite a bit better Than anticipated even though we are starting to see a little bit of a pandemic slowdown Barclays didn't release any of its loan loss reserves in April Lloyd's did So it'll be interesting to see what the the dynamic is there with respect to loan loss reserves with respect to barclays When they report next week in terms of Margins in their interest margins for Lloyd's is one of the best in the UK banking sector So we'll be certainly looking to see whether or not that has improved going forward expectations around Q2 profit-starch free profits The expectation is that probably coming in around about one to one point two billion for Q2 Optimism I think over the second half could be tempered by recent events and Obviously the economic picture looks less certain as we head into the back end of the year But certainly I think on a valuation basis And you look at where Lloyd's is now and where it was all the way back there. It's still quite I've got a lot of ground to catch up and it has started to play a dividend again. So, you know You pay your money it takes your choice, but you certainly look at this chart here And even though we are in a bit of a short-term downtrend I think as long as we can hold above these lows back in April then The outlook continues to look positive for Lloyd's now west similar sort of story struggling to get through to 11 to 12 Obviously last week there was a story that the the UK government is looking to pare down It's now 54% stake in Now west and more broadly I think in terms of the overall outlook when it comes to Now west the same the same sort of dynamics apply when it comes to The the tests that we Assigned to Lloyd's so for me. I think the key support level on that west Is through these lows here We can just draw that line in there. So 184 75 keeping very close eye on that expectations of the consumers to spend more There's lockdown restrictions and demand for mortgages other loans and credit card spending are likely to be key Because one of the one of the other takeaways from q1 was the fact that both in our west end Lloyd's saw an increase in customer deposits So it'll be interesting to see whether that level drops and whether spending increases so that's UK bank numbers for next week and Which then moves us neatly on to the US now brief brief mentioned Robin Hood's IPO Is due to hit the tape 29th of july Next week those are the early indications. I have written a little bit of a missive on the Robin Hood IPO we can see that You can find that here And as I say that is expected to go live on On thursday of next week. Okay, so let's move on to the US numbers and Tesla our old favorite tesla now. This is a really good line that I've drawn in here. It's from the march lows of last year and We've already seen we've already heard from tesla that deliveries Deliveries in q2 Came in at 201,250 vehicles That was short of expectations, but it was still the first time that tesla pushed above the 200,000 mark for quarterly deliveries The new model s Also accelerated in q2 And I think more importantly than anything else. I think the big thing as far as i'm concerned is Whether or not The decline that we've seen in operating margins has stopped and actually whether or not tesla is Starting to make money When it comes to selling its cars because at the moment The only thing it makes money on is carbon credits and obviously is exposure to bitcoin Which does appear to have found a little bit of a base around that 30 000 level. So um, and also there's the fact that what what a chinese sales looking like look looking What are they looking like because? um, the china love affair appears to be souring a little bit for a Elon musk there's been A number of how should we say setbacks when it comes to china There's a chinese regulator ordered the company to fix the safety issue And all of the cars sold there due to a problem that means the car's autopilot can be enabled remotely Now this would require a fix on over 285 000 vehicles, which is likely to be costly So i'll be interested to see what tesla has to say about that um They've held up reasonably well the quarter the shares the share price But this level that we're approaching here is likely to be a fairly key one. It's sort Trading rather messily around the 200 day moving average. We break this trend line. We could see the sharp move lower we've also got numbers from apple and Expectations there are very very elevated As we can see this week's volatility has pulled the share price around quite a bit over the course of the past few days and there's the fact that They've they've released a whole host of new operating system upgrades Including ios 15 watch os8 a new health app hosted new features for apple tv home pod mini and What have you so expectations of a double digit growth for this quarter chip shortages may Play into the sale of the new 5g iPhone Certainly they may have been late to the party when it comes to that but Certainly the numbers have been playing fairly decent catch up So be interested to see whether or not we crack through 150 next week Going forward amazon.com Similar sort of story with respect to that. It's been one of the big gainers from the shift to home working We can see that here again the trend is very much your friend. Yes. The oscillator is pointing down But these lows are continuing to get higher so In terms of the outlook for amazon Um, it's ramping up its prime video offering and an attempt to take on netflix um Spending apparently spending 500 million dollars on a new lord of the rings tv series apparently is amazon And obviously it's also just acquired mgm studios for nine billion dollars though. There is apparently some um investigation Into that in terms of its q2 sales forecast amazon was bullish So we're expecting somewhere between 110 billion and 116 billion dollars With profits expected to come in around about 12 dollars 20 Yeah finishing off with microsoft Again, there's a common theme here, isn't there? That's it new record highs yesterday at around about the same time as Uh, the nestack hit a new record high and it's a big quarter For microsoft as it looks is round off a record year for the business It's been able to post two successive quarters of over 40 billion dollars profits 14.8 billion dollars from They're from q3 38 rise from the previous year Productivity cloud computing workplace subscription services Xbox gaming consoles huge demand for pcs I could go on when it comes to microsoft. So I think in terms of where we look next um Yeah, the key the key support on the on the microsoft um on the microsoft The share price is back down here around about the monday lows, which was around about 275 And of course not forgetting of course windows 11 What does microsoft have to say about the windows 11 and the upgrade path there So that's what's coming up next week. Just quickly take you quickly take you quickly through Some of the trends when it comes to the pound still very much in a downtrend Found a little bit of support around here starting to edge back a little bit towards the upside But we can see from here sterling continues to remain in a sideways trend What was critical about today's weakness or this week's Weakness in the pound was the fact that we didn't take out um this 1 35 70 area Which also happened to be the february lows um, it also if we zoom all the way out It's a fairly key fib level From this entire move from the lows that we saw back in 2020 To the peaks that we saw earlier this year It's 23.6 Fibonacci of a tracement level of this move here, but it also coincides with a much broader Fib level from all the way back 2008 to The lows here. So we've got a fairly key level there And a fairly key level there. So 135 70 when we look at the cable Is a fairly key level when it comes to this long term down move fib retrosment there But also if we drill in a little bit further It also acts as a fairly key level in and around here as well as being the 50 week moving average support So we've identified a fairly key support level on cable 135 70 135 140 is probably on the wide of it And then we have euro sterling Which continues to trade in the broad range that it's been in over the course of the past few months three months to be precise And I don't think that is probably going to change too much Over the course of the next few weeks though. My bias is for a slightly stronger pound and a slightly weaker euro Okay, so um, I think that's pretty much I think that's pretty much it for this week's weekly Market update I'd like to thank you all very much for listening Speak to you all at the same time Same place Next week and I will have a great weekend. Thanks very much for listening