 Hello and welcome to CMC Markets on Thursday the 26th of April and this brief look at the week ahead beginning the 30th of April and it's going to be a fairly busy week coming up We've got the US Employment Report got US wages. We've got the latest Fed meeting and the earnings season is Continuing on the back of some fairly decent updates this week If you look at the numbers from companies like Boeing Facebook Royal Dutch Shell They've been all pretty much well ahead of expectations. Yeah, if we look at the S&P 500 the chart In front of me right now Particularly in the US. I think there is a concern that rising bond yields rising expectations of higher rates is Feeding into a narrative that while the earnings numbers that we've seen this week have been much better Then can conceivably be expected What's the likelihood of that continuing going into the rest of this year and ultimately into next year? And I think that more than anything has got investors spooked is this as good as it gets with respect to earnings particularly when you look at US bond markets and you look at the US 10 year and the fact that it's Now above that 3% level No, we've been talking about for quite some time and we can see that here Back near the highest levels that we saw at the beginning of 2014 if we close well above 302 percent this week then there is a distinct prospect that we could well see higher rates Going forward, but the rate that I'm in particularly interested in is the US 2 year Which has really gone on a run over the course of the last few weeks and is and is actually outperformed the US 10 year and I think that more than anything is splitting opinion with respect to What we can expect to see? Effect US rates Going forward. I mean this chart really says it all when you look at 2017 and where the US 2 year yield was then where it is now Just shy of 2.5% and then you look at the US and then you look at the S&P 500 Dividend yield average dividend yield, which is 1.97% You can start to see that US stocks are becoming less attractive on a yield basis than bonds And that may account for the fact as to why we're starting to see the S&P 500 start to come under pressure And looking to retest a potentially break. It's 200 day moving average German Dachs and FTSE 100 have rally fairly well over the past few weeks But again here we are starting to see some evidence that maybe Momentum is starting to wane and one of the reasons behind this is really I think been an increase in Oil prices, which is also driving inflation re-expectations if we can look at the Brent crude chart I've got in front of me here. We can see they're going all the way back to 2014 We are now well above that 71 65 level and at the moment The next barrier that I can see on this particular chart, which is a weekly chart comes in around about the $82 of arrow mark So certainly in terms of the direction of travel, there's potentially an awful lot more upside in crude oil While we're above this is 71 65 level Okay, so let's look forward to next week and as I said, it's a busy one We've got the US employment report that's due out on Friday and I think really the markets are going to be focusing on More than anything. I think not only the headline number, which was disappointing last month We dropped from 313,000 in February to 103,000 in March And that's not really giving a clear picture as the amount of slack that we have in the US labor market We can make all manner of speculative guesses about it But certainly I think given the unemployment rate is likely to fall back to 4% Economists are now starting to look more and more at the under employment rate Which is actually at 8% quite a bit higher than the actual physical unemployment rate itself So wage growth has been lagging behind and that is a worry. It's 2.7% as we speak I think for inflationary expectations to really start to Gain an awful lot more traction. We need to see that number start to wedge ever more closer to the 3% level Why do we need to see that will simply because with us gasoline prices heading back towards $3 a gallon The likelihood of higher inflation crimping US consumer spending patterns is going to give us the wrong type of inflation and instead of inducing a significant growth in the US economy, it's going to be the wrong kind of growth It's also going to be the wrong kind of inflation Because anything that impacts consumer spending which ultimately takes up around about 65 70% of the US economy Will be bad in the longer term. So the US employment report is one of the key factors that I'll be looking at This week unemployment expected to drop to 4% average wage Average earnings expected to rise from 2.7 to 2.8 and non-farm payroll headline number 185 More importantly, we have the latest Fed meeting now. There's no press conference for that meeting. So ultimately, I think it's generally much as question of status quo The recent fed beige book Did point to pockets of a little bit of economic I hesitate I hesitate to use the word weakness but slightly softer But q1 generally tends to be softer in the US economy anyway due to seasonal factors bad weather and what have you So I certainly wouldn't read too much into the fed meeting It's unlikely that the federal reserve will toughen up their language with respect to their dot plot expectations for interest rate rises in 2018 2019 Expectations of potentially four US rate rises have started to harden a little bit But I still think that remains the outlier more than anything else even if bond markets are telling us something different Also keeping an eye out for This week are going to be BP's earnings in the light of the real bumper numbers that we saw at royal dot shell this week Higher oil prices obviously should boost the numbers there, but there is a concern about BP's exposure to Russia Will that affect the numbers in any way and also their overall debt levels which still remain very very high Despite the fact that they have continued to outperform on their share price basis also got apples second quarter earnings on the 1st of april And there does appear to be some evidence that we are going to see a slowdown reported in handset sales Now the q1 numbers they posted record profits 20 billion dollars Of profits just for that first quarter But more importantly handset sales were down the higher price of the iphone x did disguise that but ultimately I think churn rates are likely to drop off because when you're paying a thousand pounds or thousand dollars for an iphone You're not going to be changing it on a one or two year basis. You're going to make it last an awful lot longer I mean people don't even buy computers on a two year cycle So they're hardly likely to buy a thousand pound iphone on that basis What I would say is there's an awful lot of skepticism already built into apple share price We can see that in this chart here if we look at this chart here the market is starting to look a little bit oversold It's also towards the bottom end of its recent range and let's not forget iPhones are not the only thing that apple sells They also sell ipads. They've also got apple music. They've got itunes And more importantly, they've just launched launched launched the new product It's called the home pod and that went on sale on the 9th of february So we could see some good sales there which may well Offset any concern about slowing handset sales Other other items to keep an eye out for snaps first quarter numbers Will they get a facebook boost? Certainly given the numbers that we saw from facebook this week That may not seem likely but they did actually beat expectations on their previous quarter by increasing the numbers of users In the quarter a five percent rise in user growth Will they gain more users as a result of facebook? Where is the delete facebook hashtag delete facebook campaign? Away from their instagram Instagram application. Okay, so that's it for this week. Thank you very much for listening It's my Houston talking to you from CMC markets