 Good morning. Welcome to CMC Markets on Friday the 29th of October and this quick look at the week ahead beginning the 1st of November and we've seen more record highs again this week for major US markets, US companies once again delivered numbers pretty much ahead of market expectations. UK companies have also by and large managed to deliver some fairly decent numbers. Notably, Wreckett Bank Kaiser who followed on from Unilever and Procter and Gamble the week before by posting improvements in sales and what have you showing that despite rising inflationary pressures they were able to pass on price increases to consumers. We've also seen fairly decent numbers from the UK banks this week from Lloyds from Barclays from HSBC. Now West numbers slightly underwhelming. They've slipped back this morning down around about 4% despite the fact that they managed to boost profits from a year ago. Having said that, I think the decline in the share price is more down to the fact that profits were lower in Q3 and they were in Q2 and their interest margins were lower rather than higher which was the case in the case of Lloyds Bank. Anyway, one notable thing that we have seen over the course of the past week or so is the FTSE 100 has broken towards the upside broken above that 7190 area that I have been and I've identified over the course of the past few weeks is a fairly key level. If we look at the lows from the 21st of October and the 18th of October around about 7180 that I think remains the key support in light of the gains that we've seen thus far as we're heading into the end of the week or also heading into the end of the month. So we could be seeing a little bit of profit taking on the back of that and I think that potentially could be weighing on the FTSE 100 and equity markets more broadly. We're also seeing a little bit of weakness in the S&P 500 and NASDAQ over the disappointing reaction to the numbers from Amazon and Apple overnight and one of the key takeaways that we saw from those numbers was higher costs, particularly in the case of Amazon and increased supply chain disruption in the case of Apple. iPhone numbers for Apple came in below expectations around about $38 billion. We're expecting a number in the region of $41 billion, although sales in services and iPads were better than expected and Mac sales also held up fairly well. And I think this goes to the point that while expectations around Apple's numbers are fairly high, let's not forget Apple hasn't given any guidance for the past six quarters. So I think market expectations were a little bit on the high side, but that's not to say that Apple's still listening to a very, very good company. Unfortunately, they're having to contend with the same logistical problems that everyone else is. And as a consequence of that, they're not being able to ship as many iPhones or product as demand would dictate. And I think that is the key factor here. And they've identified it as a key factor over the course of the next six to nine months. Tim Cook himself said that the various delays in supply chains cost the company $6 billion. While Amazon has said that higher costs are likely to push its cost base up in Q4 over the holiday season up by another $4 billion in terms of extra staffing costs and the like. If you look at it over the course of the year, Amazon expenses have gone up from $12 billion to almost $20 billion over the course of the past two quarters. So that gives you an indication of the challenges being faced not only by Amazon, but I think the markets more broadly, higher costs, higher inflation and supply chain disruptions. So seeing significant resistance up around $4,600 on the S&P 500, but let's not forget we're still near record highs. And while we're seeing a little bit of weakness today as we head into the end of the week and the end of the month, there's still very little sign that stock markets are losing their attractiveness to investors, despite the fact that inflation expectations are rising and central banks are looking potentially at a modestly nudging interest rates higher. Now, earlier this week, the Bank of Canada unexpectedly called a halt to its bond buying program, sending the Canadian dollar sharply higher. And I think that's the narrative that I'm going to be looking out for over the course of the next week or so, because we've got three central bank meetings having got past the European Central Bank, which was pretty underwhelming as normal. And where Christine Lagarde indicated that it wasn't for her to say whether or not market expectations of a European ECB rate hike next year will right or wrong. Certainly, we've seen a pick up in the euro from the lows earlier this month, around about 13th of October, but we are starting to run into resistance from these trend line highs in May. So keeping on the 50 day moving average and this trend line resistance here as to ascertain whether or not we've seen the highs in euro dollar or whether or not the Federal Reserve will burst the euro's bubble and basically push the dollar back up after the declines over the course of the past few weeks. We look at the CMC dollar index. We can see that born out here. It's heading towards a fairly key support level. And we can see that we've seen fairly gradual declines over the course of the past few weeks, but we still remain very much in the trend, the trend that we've been in over the course of the past few months. If we look at the lows down here and the peaks here, we've only seen a really modest pullback. And given the fact that we've got non-farm payrolls coming up, there could be an expectation that while the Fed is going to outline a tapering timetable at its meeting on Wednesday, I'll be surprised if there's a significantly hawkish tone from that meeting, but you just never know. So as we look ahead to the upcoming week, there are, I think, four key events that I've got my eye out for, notwithstanding the earnings numbers that we've got coming out as well. First and foremost, non-farm payrolls. Tune in for the webinar then. Apologies for there not being one in October where we saw a big miss. But ultimately, I think even though there was a big miss on that October payrolls number, sorry, September payrolls number, that's not really altered the narrative when it comes to a tapering of asset purchases going to be outlined at the upcoming meeting. So payrolls numbers, they've been a little bit of a letdown, if truth be told, for those who thought that the impending roll-off in stimulus measures on the 6th of September would herald a strong rebound in the US labor market. Since then, we've seen all of August payrolls coming at $366. That was a chested hire. And when Powell suggested that a half-decent jobs report would be the final piece of the jigsaw for tapering to start in November, I don't think he had a number of 194,000 jobs this September in mine. Nonetheless, whether or not the Fed starts tapering in November or announces a taper to start in December, I think the broader narrative is that it's going to start, and the bigger question is how quickly they roll it off. And if tapering starts with around about $10 billion on treasuries and $5 billion on US treasuries, then I think that will be potentially a little bit on the dovish side. If on the other hand they come in higher than that, that could well be construed as particularly hawkish So keeping an eye on the payroll's numbers, expecting a number of around about 400, 425,000. The US labor market has got an unemployment rate of around about 4.8%, saw a big fall there. The participation rate still remains fairly weak. I think what was particularly interesting, though, in the recent jobs numbers, the continuing claims, was the fact that we're now down at 2.2 million continuing claims. Pre-pandemic, we were trending at 1.7 million continuing claims. So we're only 500,000 above on the continuing claims than we were before the pandemic hit. So that suggests that we are getting a normalization in terms of the US labor market. The bigger concern for me is the fact that the participation rate is showing no signs of getting anywhere near back to the levels that we saw in February 2020. 63.7%. We're currently at 61.6%. So non-farm payrolls, that's the big number of the week. I'll be holding a webinar on that basis and that will start at 1pm on the 5th of November. We've also got the, obviously we've got the Federal Reserve rate meeting. And again, timeline for tapering. I think that's going to be the key takeaway there. And whether or not we get a move in the doplots, which currently suggests that the committee are evenly split when it comes for a rate hike in 2022. So we'll be keeping an eye on that as well. We've also got two other central bank rate meetings. We've got the Bank of England and we've got the RBA. Now the RBA, I think what we've seen in Australian dollar yields has been particularly noteworthy and particularly if we look at the Australian dollar. You know, there's been an awful lot of speculation that the RBA may look at start to raise rates from 0.1% where they are now to 0.25%. What's more broadly forgotten though is the way the RBA, at the beginning of August, back in September rather, there'd been an expectation that they would look at delaying their decision to start tapering their weekly bond purchase program from five billion Aussie to four billion Aussie a week. Now in the event they basically extend and it was due to end in November. They were due to end their bond buying in November. Now they didn't do that. They extended it into February on the basis that they felt that the lockdowns that were being imposed on the Australian dollar economy would merely delay the recovery and not undermine it completely. Now with the RBNZ raising rates earlier in October, I think the narrative has shifted now in terms of when we start to see central banks push rates higher and I think the speculation has shifted to the RBA. If you look at three-year yields, they've moved significantly higher and they're well above the levels that they were around about a month ago. They're currently around about 0.7, 0.75. So I think it's a remarkable turnaround from two months ago when markets were speculating about a delay to tapering. Now we're talking about the potential for ending the asset purchase program completely and I think that could be a middle ground for the RBA as we look ahead to the second of November meeting. The RBA rather than raising rates could end their asset purchase program as a means to signal a glide path to a potential rate rise going forward. So that's something to keep an eye out for. A middle ground could be the RBA ends its asset purchase program. Will they raise rates based on what the RBNZ is a good chance they could, but if they wanted to sort of strike a middle ground, they could potentially just end the bond buying program. Now we're heading towards key resistance on the Aussie dollar. We can see here we've got the 200-day moving average. We've also got 50% retracement of the entire down move from 0.8 to 0.71. So this level here around about 75, 60, 75, 70, that's a key resistance level. We'll be paying particular attention to that over the course of the past few days or over the next few days, I should say. Cable, Bank of England, will the Bank of England raise rates in their November meeting when they basically set out the November inflation report? Well, if you look at UK two-year guilt yields, then a rate rise is already priced in. In fact, more than one rate rise is already priced in and they sort of painted themselves into a corner. So I am expecting a rate rise between now and the end of the year. It's really just a question of when. The bigger question is how the Bank of England dials back the narrative of potentially interest rates or base rates up at 0.75 or 1% by the end of next year. We've heard an awful lot that the Bank of England is on the cusp of a policy mistake by looking at raising interest rates, but that same narrative is also telling the Federal Reserve that they're on the cusp of a policy mistake because they're not acting fast enough. Both of these arguments cannot be true. You can't criticise the Fed for not acting quickly enough at the same time as criticising the Bank of England of acting too quickly. A rate rise of 0.15% to 0.25% is not the end of the world and I think markets in some respects need to get a grip. Yes, market expectations for a rate rise are a little bit on the high side, potentially in terms of what to expect by the end of next year, but certainly I don't think an interest rate rise of 0.15% to 0.25% is the end of the world either. It's how the central bank manages the message and certainly I think the change of narrative, the shift in the narrative, suggests that there is a growing concern about rising inflation expectations, which recent events haven't changed. We've already seen in Europe the German PPI prices at the highest level since the 1970s. You've got German CPI at 4.6%, the highest levels since 1992 when interest rates were 6.75%, not minus 0.5%, which is where they are now. So, you know, a small modest adjustment in interest rates is at the end of the world and I think sometimes it's very easy to get caught up and get too close to the narrative of the news flow. Sometimes it's good to take a step back. So, what does that mean for Cable? Well, we've got 50-day moving average, which is acting as support on the downside. We've got the 200-day moving average, which is the next key resistance. So, 138.40.50, as well as these peaks here, they're the next key resistance level for me on Cable. We've got modest support in an around 137.20, the 50-day moving average and the market is looking a little bit on the overbought side, but that doesn't necessarily mean that we can't go higher. So, for me, I think next week, keep an eye on the upside. I'm still moderately bullish Cable, more on the basis of a little bit of dollar softness than anything else, but overall, still modestly bullish and Euro-sterling, more importantly, has made a marginal new low around about 84. Significantly, it didn't take out the 84 level. It's prompted a little bit of a short squeeze. Now, we could squeeze back through 84.80, all the way back to the 200-day moving average, but overall, I'm still mindful of the opinion that the ECB is a long way from even considering the possibility of a rate hike, unlike, say, for example, the Bank of England. So, that should continue to push, put downward pressure on Euro-sterling. And I think that, for me, is the key takeaway. So, that's the Bank of England meeting. We've covered the RBA. We've got services PMIs and we've got payrolls data. And let's not forget also that we've got services PMIs, which showed a bit of an improvement in terms of the UK numbers in the flash numbers from a couple of weeks ago. So, those are the key macro announcements as we look ahead to the upcoming week. Now let's look at some of the key earnings announcements. I think I've covered pretty much everything in terms of the major markets. Let's just quickly have a look at the Germany 40 as it is now. I've seen a little bit of a roll-off towards the end of the week. I think a large part of the reason that we've seen a little bit of weakness in the past few days is because we've got a little bit of end of week and end of month flow. But overall, we're still on course for a fairly decent month or told for equity markets, even though that does potentially look a little bit like a bullish engulfing and we haven't taken out the previous highs. So, there is a little bit of concern there in terms of the DAX, but warra above 15,000, then the outlook still remains fairly positive. So, that potential monthly reversal does need a confirmation. And let's not forget that the S&P showed a similarly negative monthly reversal earlier this year and we've gone on to make new record highs. So, it's important to understand that these sorts of reversals always need confirmation and we didn't get that on the S&P 500. There are early warnings, but they don't necessarily signal the potential for a sharp reversal. All reversal candlestick patterns need confirmation and it's important to remember that. Okay, so let's look at earnings numbers. We heard from Royal Dutch Shell earlier this week and by all accounts, they're pretty disappointing numbers. When you've got record natural gas prices in Europe and you've got seven-year highs, natural gas prices in the U.S. and oil prices are at multi-year highs, you don't expect Shell to miss profit expectations and more than that, see them come in below the levels that they did in Q2. And I think this is the key conundrum that markets are wrestling with. How do oil majors who rely so much on legacy fossil fuels transition to a much lower margin of renewables and more importantly, what happens when the sun doesn't shine and the wind doesn't blow? And I think that was one of the problems with respect to Shell's numbers is that even with the disruption of Hurricane Ida, they were unable to really generate the type of profits that you'd normally expect from the higher prices that we've seen over the course of the past quarter and BP is going to be faced with similar problems. We've seen a fairly decent round in the BP share price. We are now starting to see a little bit of a roll over. The key support level for me is that 345 area which we've managed to hold above thus far. Certainly there is much more potential I think in terms of BP to see further gains. In the first half of this year, replacement cost profit came in at the best level since 2019. As well as the company increasing its dividends and they did go on to say that oil prices are $60. The scope to deliver buybacks of $1 billion a quarter. So I think given the fact that we've seen oil prices well above that, then really the expectation is they should do very well indeed. But it needs to use this surplus cash well and recycling it to shareholders just doesn't cut it in my book. There is going to be an awful lot more investment needed to be done in its performing while transforming strategy. But it needs to prove to shareholders in the market it can transition to renewables in a way that doesn't hammer its margins. So it needs to use the available capital in a much better way. I recently signed an MOU with Piagio to explore charging stations in India. But I think the real challenge is I think this is just as true for Shell as it is for BP. It's it's grip capacity and at the moment you know you can have as many charging points as you like and you can you know car makers also makers can sell as many electric cars as they like but unless you upgrade the grid then these all companies are not going to be able to generate the revenues from the charging points that they push out there. So solar renewables you know wind power and what have you that's not the only game in town and certainly the answer isn't with respect to Shell to spin off the legacy business because it's the legacy business that's going to fund the transition so there needs to be a certain element crossover. So we pay in particular attention to BP's numbers when they come out on the 2nd of November. Big oil in particular. We've also got next retail one of the few retailers that's done very very well over the course of the past few months upgrading guidance on a fairly regular basis but as we heard from Amazon we're seeing increased costs which are likely to impact profits going forward so management upgraded four-year guidance up to 800 million at the last set of numbers and that's a five-year guide. So Simon Wolfson CEO did warn about the risks of longer delivery times in the lead up to Christmas and stock levels are down 12% compared to pre-pandemic. They were coping costs are likely to go up as warehouse space becomes more expensive so this week's Q3 numbers from next do run the risk that we could see a potential downgrade as we look towards the Christmas period. Amazon has pointed to that and it could be something to watch out for as we look ahead to the rest of the year. Shares are still up on the earth still made really decent progress but we could start to see few headwinds in the in the in the guise of higher costs also got Sainsbury's numbers due out and they've been basically making some fairly decent gains so far yesterday an awful lot of that has been on speculation about M&A in the in the wake of the Morrison's takeover which finally completed earlier this month and which has seen dark trace take its place in the FTSE 100. Petrol shortages also saw could well have seen an uplift in their fuel sales the flip side to that could have seen shoppers reduce the number of visits to supermarkets as a result of that which could mean bigger shops but overall fewer visits also online sales. How does it how has Argos done now that the economy has started to reopen and they were a particular disappointment in the last quarterly numbers but Sainsbury's did upgrade their profit forecasts for the year from 620 million to 660 million so it'll be interesting to see whether or not they stick with that guidance and also more importantly what their guidance is was a Christmas period going forward so that's those numbers are due on the fourth of November we've also got IAG IAG's numbers are due out they've had a pretty poor year started off really optimistically at the start of the year in the hope that restrictions would get eased fairly quickly and obviously that hasn't proved to be the case and as we look at the way the share prices rallied in early September an awful lot of that early reopening enthusiasm has dissipated somewhat so it continues to be a challenging environment in Q2 IAG reported an operating loss of over 1 billion euros it said that it's only planning on resuming 45% of its 2019 capacity in Q3 and they've they haven't offered a financial outlook for the rest of the year so even though we've seen US and UK travel restrictions getting eased in early November and travel restrictions have pretty much been moving across the board the rising infections in Asia is obviously going to temper expectations with respect to business travel and obviously the recent UK budget and the imposition of higher surcharges air passenger duty surcharges easy for me to say on long haul flights could will impact the long haul as opposed to short haul where they've been dropped but you know it's a it's a fairly low bar for AIG which would suggest that potentially there is potential for further there is potential for further upside going forward we've also got numbers out from AMC and potentially AMC entertainment is there slated for the second of November but they could get pushed to the ninth so looking at revenues there then you know time to die James Bond film could well have seen a significant uplift there as people venture back to the cinema and certainly the anecdotal evidence would suggest that that has got people back into movie theaters certainly on both sides of the Atlantic so even if we don't get those numbers on the second of November I'll be paying particular attention to them if they come out the following week we've also got Pfizer their Q3 numbers they've been cleaning up along with beyond tech on the vaccine front at its last set of numbers Pfizer raised its forecast for vaccine sales to 33.5 billion dollars for this year from 26 billion dollars now we could see another upgrade to that guidance at the Q3 numbers which are due out on the second of November revenue estimates for 2021 are currently sitting at 74 billion dollars with adjusted their income expected to double to 21 billion dollars well when you consider that Pfizer's total revenue in 2020 was 42 billion dollars that gives you an indication of how important the vaccine is now the share price did take a little bit of a tumble along with Moderna on the back of that news from Merck that was so they've done successful tests on an antiviral pill for COVID-19 so that could be a head wind particularly if those trials end up being successful and the pill gets ratified let's face it I'd much rather take a pill than get a jab in my arm so same applies for Moderna on the 4th of November we've seen a little bit of a modest tick back in the share price on the basis of that Merck news but also concerns about myocarditis risk in younger in younger cohorts adolescents with respect to the Moderna jab there now a year ago Moderna generated 158 million dollars in revenues this year we can expect to see a number in excess of 6.2 billion dollars while profits are expected to be $10.33 this year so paying particular attention to the revenue numbers there and more importantly I think in terms of whether or not Moderna will look at potentially returning money to shareholders I mean when I looked at the Q2 numbers revenue is at 4.4 billion the vaccine contributed 4.2 billion of that number and we're expecting a number of 6.2 billion for this quarter so a $2 billion increase in quarterly revenues for Moderna that's quite something so that's pretty much I think that's pretty much it other numbers that are due out Aruba Q3 numbers on the 4th Peloton Q1 numbers on the 4th and we've also got BT Group as well but anything with this sort of stuff it's all about the timing and I think I've gone on for long enough so just to recap Bank of England, RBA, Federal Reserve non-farm payrolls the key macro numbers for next week don't forget to tune into the webinar on the 5th of November 1pm to 2pm with me until such times have a great week have a great weekend and speak to you all same time, same place next week, thanks very much for listening