 Good morning. Welcome to CMC markets on Friday, the 23rd of April and this quick look at the week ahead with me Michael Houston and what's going to be a very very busy week not only on a macro basis, but also on a company earnings basis because we've got an absolute plethora of Announcements over the course of the next week or so in fact It's been pretty challenging in the context of really I think what to leave out as opposed to what to keep in And and for me, I think it's given given the fact that this week has been a fairly choppy week and looks likely to Be the first negative week for European stocks in the last seven. I think it's a good time to sit back and reflect on where equity markets are likely to go to next I Think one of the things That's been borne out of over the course of the past few weeks And if we look at the German DAX is a very good Indicator of that is how much good news is currently priced in in terms of The post pandemic recovery if we look at this long-term chart and forgive the lines on that There's only a couple but they sort of give an indication of an overall direction to travel But certainly I think we can certainly see Apart from bit of choppiness at the beginning of 2021 The the line of lease resistance has been higher And we've seen seven successive weeks of gains on the DAX and this week is likely to be the first weekly decline In quite some time Now there are a number of reasons for that. Obviously we were overdue a little bit of a poor back but to hear some people talk you'd think that the That Armageddon was coming our way ultimately these sorts of corrections are very healthy and while They could be uncomfortable for long positions We are still not far away from record highs for the likes of the euro stocks 50 The stock 600 even US markets as well US markets have continued to do very very well Let's we've seen a little bit of a sell-off and I think there is a potentially a fear That may be an awful lot of the good news is already priced in and I certainly think that there could be a case for that when it comes to events perhaps In Asia which could impact on the airlines if you look at the way airline stocks have gone up over the course of the past Few weeks you could argue that they're probably priced a little bit too high Given the fact that international travel Given what we're seeing take place tragically in India and to a lesser extent in Japan where infection rates are also rising It will mean that international travel is likely to take an awful lot longer to get Restarted than say for example more domestic travel and I think that's why you're seeing a little bit of divergence In terms of how companies like British Airways I AG are performing Relatives say for example easy jet or Ryan here Ryan air Ryan here Ryan air Which has a much more domestic focus and want to say domestic focus. I mean in terms of closer to home There is also some talk that the US and the UK could open up some form of air travel corridor Given the fact that their vaccination programs on our are on a fairly similar track and Some of the data that we're seeing come out of the US and the UK is very very positive indeed this week US weekly jobless claims fell yet again. Now that that goes very very well for April non farm payrolls in two weeks time We've seen UK retail sales Jumped 5.4 percent in March despite the economy being in lockdown February was revised up to 2.2 percent Again, you know a really solid bounce back hasn't completely reversed the 8.2 percent decline in January for the UK retail sales But nonetheless it points to a direction of travel. The big question is Will that recovery be sustained? Well, I suspect that can be I think it can be maintained Over the course of the next two to three months at least so that should bode well for Q2 GDP growth certainly Q1 Does look as if it's likely to be better than expected certainly in terms of the UK and in terms of the US We've got US first quarter GDP the first iteration of that coming up on 29th of April next week and And Given the data that we've seen out of the US over the course of the past few weeks This looks set to be a bumper number for US Q1 GDP You know, it's the first iteration which means that some of the later data that we've seen in March May not be included in that number But ultimately we're still expecting an annualized expansion of 6.5 percent You know a really big jump from what we saw at the end of last year And personal consumption is expected to drive that quite significantly With a rise of 10.3 percent We've also got US personal spending and US personal income on Friday 30th of April again and again here what we've seen is that The expectations for that are likely to be fairly high indeed not that you'd know it To look at what the dollar has done Over the course of the past few days It's very much on a downward track and that makes the upcoming Fed rate decision All the more important Probably less important in the context of what bond yields are doing because I certainly think that Bond yields US 10 year yields have Found upward progress slightly more difficult to sustain than was the case say for example a month ago And I think a large part of this softening in US yields is on the basis that I think markets are slowly coming round to the idea that This outcome based guidance that's now part and parcel of the US Central Bank's new policy of not reacting to perceptions of a Not reacting to perceptions of a direction of travel But waiting until both goals of higher inflation and full employment have been achieved it's cutting through and That narrative is likely to sustain Or keep a lid on bond yields US 10 year yields for the short term But we'll do it in the long term will another one million payrolls number in April start to raise concerns About rising costs higher cost push higher cost push Inflation because we're certainly seeing evidence of higher costs Being passed on down through the supply chain So it's really just a question of whether or not that translates into to higher higher yields I'm digressing ever so slightly So personal spending and income on the Friday now Expected to see a big jump in personal income not surprisingly a rise of 20% We're expecting there. We saw a 7.1% decline in February now The 20% rise that we're expecting to see in March is largely down to stimulus checks hitting the door mats of US consumers in March So that will disappear in April what I'm particularly interested in is the US personal spending Component how much of that rise in income Translates into additional spending now if you look at US retail sales For March they were fairly decent. They were fairly decent indeed But the estimates for personal spending for March is slightly more conservative and we saw a February decline of 1% Economists are predicting a 4.2% rise in March now That could be that that could be as a direct result of people not spending it all at once But ultimately that money is still there and it's still available to be spent or to go into the stock market or go into crypto currencies I mean, let's not talk about crypto currencies this week. They've had a nightmare And a large part of that could well have been down to that announcement on Thursday night that came after European markets have gone home The Joe Biden was looking to increase the rate of capital gains tax to thirty nine point six percent for those Americans earning One million dollars a year or more and that prompted a little bit of a little bit of weakness in US stock markets Last night a slight over reaction I would suggest and you can see that you can see that there But what this tells you is we've been very choppy this week I mean, obviously this is Monday Tuesday down Wednesday up Thursday down and now we look as if we could well go high You know capital gains tax rates when Democrats talk about raising capital gains tax rates You know, that's all well and good but You know talking about it and actually legislating for it to totally different things and I think When Investors and markets are near all-time highs. There's concerns about Slowing recovery a global recovery because of events that are going on in the Far East Asia India Japan rising infection rates their lockdowns There then it's not unexpected given the fact that we've got a whole host of earnings announcements about to hit the tape in the coming weeks The investors will start to take a little bit of money off the table so last night's reports of a potential rising capital gains tax Slightly to be an opening salvo in a guerrilla war campaign between Democrats and Republicans on how to pay for the huge fiscal stimulus plan. It's only just been unleashed As recently as a month ago. So I think talking about tax rates is all well and good But the devil will be in the detail and we're a long way From a doubling of capital gains tax hikes and even if we do get them They won't be anywhere near as high as the numbers that were being touted last night But you know never let the never let logic get in the facts get in the way of a nice little You know sort of byline in the story And I think a large part of that was obviously behind the big plunge that we saw in Bitcoin Over the course of the past Few days that started to look a little bit frothy. We saw a big sell-off. It's now below $50,000 But ultimately what we do have now is Where do we go to from here because ultimately this week's price action has seen a little bit of a pause on the Upward momentum that we've seen over the course of the past few days and weeks, but it is just that It's a pause Nothing more and ultimately if you're not going to put your money in stocks Where are you going to put it? given the fact that bond yields and now Now now appear to have found a little bit of a level so For me it's important to pay attention to the headlines and the narrative But don't lose sight of the price action and the price action Ultimately is still by the dip and that's essentially You know my my my mindset hasn't changed on that We are still very much in an uptrend for markets in general And if we look at where the support levels are on the S&P 500 we can see quite clearly Through these series of loads through here. There's a nice area of support in and around 4,110 It's the low four thousand one hundred and eighteen there four thousand one hundred and twenty there And then you've got this low here four thousand one hundred and twenty one And then you've got the low here four thousand one hundred twenty three to the big big low Or between forty one ten and forty one twenty So for me we're still in an uptrend and we still look fairly positive while forty one hundred holes If we drop below forty one hundred then we may need to reassess our overall strategy But at the moment There's a decent area of support all the way through these series of loads through here And if you want to basically show that in slightly better detail We can we can show it in the form of a four-hour chart where you can see the number of times That level has found a little bit of either resistance or support all the way through there So forty one hundred is going to be a very key pivot in the course of the next few days If we fall below that then we could we'll see further declines in US markets more broadly And this is this is why looking at charts is so important. It's about identifying a level and Then adapting a strategy to fit a Move either off that level or through that level So let's look at the footsie one in that context Let's look at the footsie one hundred because seven thousand was a bit of a level for me last week We went above it. We weren't ultimately able to sustain a move above it Which is disappointing. Obviously, that's a big down move on Tuesday We've seen a little bit of a recovery back in the course of the past few days But for me now, I think the big level is six thousand eight hundred as long as we can hold above six thousand eight hundred And this trend line here the 50 day moving average the current uptrend remains intact So while this set off is not particularly welcome It still remains very much a by-the-dip opportunity to you buy into weakness in an uptrend You sell into strength in a downtrend. It's not rocket science You're not trying to reinvent the wheel if we look at the line through these lows here You can actually draw a horizontal parallel line through the highs as well So we're in a very nice upward channel in the footsie one hundred So the upward momentum that we saw put saw us push through seven thousand is still intact despite the dips that we've seen this week Okay, so I've talked about Potential hurdles risks and what have you with respect to what's coming up in the week ahead There's a fed rate decision on the 28th Again, I don't think we are going to see too much of a change in tone From Fed chair J. Powell when the Fed last met in March Their biggest concern was trying to balance the optimism of a strong economic rebound against rising expectation But the central bank might start to look at tapering its bond purchase program or start to raise rates will before 2024 Now the data has moved on since then and obviously Fed policy makers will have to adapt their messaging To fit the narrative of that bumper payrolls report that the strong ISM numbers that we've seen over the course of the past Few weeks as well as the strong retail sales numbers But they are only one or two months of data and central banks by and large in my experience don't generally tend to react To a single data set or even a multiple day or one months Set of data no matter how good it is the Fed will be pleased how the economy is looking And with a number another burn for payrolls report expected For April, I think they will be keen to temper any enthusiasm or foster any expectation of a change in stance So we might see some Fed policy makers alter their dot plots to signal a slightly earlier taper But it's more than likely the messaging will remain exactly the same with respect to this outcome-based guidance which I referenced earlier so For me the narrative remains the same when it comes to equity markets more broadly at the moment the trend continues to be positive Despite the set off that we've seen this week and while if we look at the candlestick chart There's nothing particularly concerning here in terms of a potential reversal Then the bias remains very much towards buying the dip as we can see from from the DAX We didn't stay much belong We didn't we didn't even get close to testing 15 000 So at the moment it's very much the trend is your friend. So in terms of looking ahead to company earnings, it's an absolutely huge week for Company results both UK and US we have got BP's first quarter numbers on the 27th of April. We've got royal Dutch shells First quarter numbers on the 29th of April. We've got Lloyd's banking group Nat West group We've got Barclays first quarter numbers. We've got AstraZeneca's first quarter numbers We've got Microsoft's third quarter numbers. We've got Apple. We've got Amazon. We've got Facebook. We've got Tesla I mean, where do you want me to start? What do you want me to leave out? So what I've done is I've basically gone through big oil first and foremost and looked at BP share price and certainly I think the rebound in the oil price has certainly done an enormous amount of favors over the course of the past few weeks very much In an upward trend here oil prices continue to look fairly robust and ultimately after overseeing a 5.7 billion dollars annual loss at the end of its last year accounts um, I think most of the attention now Will be on BP's debt levels overall debt levels because I think one of the one of the targets that CEO Bernard Looney set When looking ahead to 2021 was getting overall debt down to 35 billion dollars and that gearing level down Um as well now we've seen further progress on this front sale of a 20 stake in the amount gas block um and in april it was announced um that the intention to get 35 billion the debt levels down to 35 billion pound Was expected to come at the end of this quarter q1 So we'll get an update on that whether or not they've hit that target my biggest concern about the oil mage is is how How slow they are being in terms of trying to adapt their operations to um a slightly greener business model Um, and I think this is the thing they spent billions of dollars over the years on trying to source new fossil fuel Resources, but they're not spending anywhere near as much In terms of green energy. Yeah, but you know, they're they're buying You know, they're buying various small companies In terms of Charging networks for electric vehicles and what have you solar businesses in spain in the case of BP Um, you know, they've expired a 1.6 gigawatt portfolio across spain from r i c energy But they're spending a very small amount of money to do this So really it's a question for me with BP. It's about the dividend obviously Um, and it's the same with raw Dutch shell dividend, but ultimately what we've got here looking at the price action We still very much remain in case of we're in an uptrend refining support in and around this 286 area here We can where I've drawn that line in there It's acted as a decent area of support all the way through here Can it continue to do so or will BP disappoint in its first quarter numbers when it releases them on the 27th? Um, certainly looking at the looking at the the highs here We're starting to run out of steam a bit. So my concern is if we do drop below 286 We could see a little bit of a slip lower but overall um We're enjoying a little you know fairly decent recovery when it comes to BP I wouldn't surprise you to know that raw Dutch shell is probably fairly similar Trading in a little bit of a range So I think in the in the case of this particular chart. It's very easy to Um define your trading boundaries. We've got fairly decent support in and around 1225 1227 1230 depending on where you want to put your line and on the upside fairly decent selling interest anywhere above 1420 1430 there or thereabouts. So Very much trading in a little bit of a range when it comes to the oil majors banks um Lloyd's banking group it's been one of the serial under performers When it comes to the uk banking sector now, this is where we were Just over a year ago. So if you look at How people are perceiving the uk economy now And how they were a year ago um well over a year ago Lloyd's bank shares are still well below The february peaks the pre-pandemic peaks that for me makes no sense whatsoever. None zero um If we look at Lloyd's bank if we if we take us banks as a template and obviously you you're comparing apples and oranges because obviously Lloyd's bank doesn't have an investment banking division But one of the key takeaways that I took from us bank earnings was the fact they're rotating capital back out of um potential impairments Back onto the balance sheet um ultimately us banks are much more optimistic about not taking As many impairments as they thought they would a year ago and I think the same probably holds true for The uk banks as well um, you know Lloyd's set aside 4.2 billion pounds In terms of non performing loans for 2020 now I would be very surprised If they use all of that So the big question for me then is What happens with that money? Do they pay out in the terms of an extra to the term in terms of dividends? Do they rotate the capital back onto the balance sheet? does There's there has the recent increase In bond yields actually improve profitability for these banks. I mean if you look at the way Lloyd's um Interest margin has been it's one of the better ones in the uk banking sector So there's no reason to suppose that won't improve either. So certainly in terms of first quarter The trading I would be very disappointed if those numbers Didn't actually put a flaw around about 40p on the share price and send us back up towards The highs that we've seen earlier this month in april and back towards 50p Very surprised indeed given the data that we're seeing coming out of the uk economy Given the fact that the impairment numbers may not be anywhere near as bad Or I was budgeted for It's going to be a similar sort of story for nat west group as well With nat west there's been probably more outperformance there because of the fact that the evaluation on nat west and say for example Barclays has probably been slightly more bombed out. But if we look at nat west group We've seen a much better outperformance in terms of the share price Where it was at the end of september and where it is now we virtually we've almost doubled the share price, but we're still Below the levels that we saw in february all be yet We've come back an awful lot more than say for example Lloyd's house, but we can see from this chart here that there's still potential for us To go a little bit higher. We're earning a bit of a barrier Just below 200p. That's probably more psychological than anything else and certainly nat west have had their fair share Of negative headlines over the course of the past few weeks So that's probably holding it back as well. But if you look at Barclays, which does have an investment banking division We have recouped all our post pandemic losses. So certainly I think when it when it comes to good news A lot of the good news for Barclays is already in the price probably less so in Lloyd's But again, they they set aside Quite a bit in terms of non-performing loans as well 4.8 billion pounds So again here, you may find that get revised. You also may find That they could pay out a bigger dividend. So again here. I think there is potential potential Nothing more for a significant, you know beat towards the upside. We'll see certainly us banks have outperformed I see no reason why UK banks can't do the same thing based on that same model So I'll be paying close attention to bank earnings over the course of the past few days And then of course, we've got AstraZeneca, which has been in the news by and large for An awful lot of the right reasons, but also for the wrong reasons And you know, whatever whatever your views on the AstraZeneca oxford vaccine Certainly their PR has probably Been less than impressive But ultimately they are they are they are supplying a vaccine at cost They're not making any profit from it It's not something that they're particularly known for in terms of vaccines And ultimately, I think the share price has underperformed say for example relative to It's peers like Pfizer nonetheless If you look at the way the share price has gone it's one of those share prices that's really You know, I struggle I struggle with enthusiasm for it. So I think irrespective of the numbers that we get out on on on Friday um The expectation is that total revenue is going to rise by a low teens percentage So we're talking about 12 or 13 percent and one of the things that I think will be particularly noticeable will be How Is COVID-19 vaccine costs And such like are included In this quarters numbers because of the in the four year numbers None of those none of those costs were actually included um at the end of last year And it's something that AstraZeneca said that they would include in the next set of numbers So i'll be interested to see what the dynamics are in terms of Whether or not there's been a significant impact on revenue and profit from the sale of its COVID-19 vaccine In this particular quarter So That more than anything I think probably won't dictate the share price too much But it's ultimately interesting in any case we've also got apple and tesla earnings So let's go with tesla because I think these could Again here nice little uptrend for tesla And if we look at what's expected Last year So it's only just missed out on meeting its target of selling 500 000 cars In a single year now obviously was helped in this by the addition of its chinese factory the q1 The hope is well In q1 the company said it's delivered 185 000 vehicles with most of them being the model 3 and the model y Now the model x and the model s saw about 2000 Deliveries in the first quarter with the hope the production and deliveries can be ramped up Further so looking ahead tesla says it's going to be hoping to start production of its new crossover suv model A new plants in austin and at brandenburg in germany now the plant in brandenburg in germany Apparently is rolled into delays. So it'll be interesting to see whether or not Elon muska revises down his expectations for the number of cars sold this year It'll always be interesting to see how much the recent slide in bitcoin As a cost of the company as well given the fact that mr muska said that he's a big supporter of bitcoin I think the one thing that I would say about tesla is that despite the fact that they've made Profits In every single quarter over the course of the last five or six quarters The market cap their market cap is still in excess of the entire automotive sector So for me Can they can they sustain this sort of valuation at a time when the likes of general modes ford and damler Are starting to ramp up their own electric vehicle offerings and have the ability to scale that much quicker I mean, I think that's the thing for me You know tesla's scale Means that they don't have the same production capacity Even now There's the big automakers. So does that justify the current valuation at the moment still in uptrend? So there's still capacity for us to dip back to look towards The 200 day moving average and while we do so We still remain in the uptrend and the if if the past few Years have taught us anything it's always foolish to bet against Elon musk But at some point his luck is probably going to run out and the big question is when will that be So that's tesla still in an uptrend Still fairly decent support in and around 700 dollars So keeping on that and then let's pick out our old favorite apple seen some fairly decent gains over the course of past few months broken a little bit of an uptrend here Bounced off the 200 day moving average and rebounded back above the 50 day moving average in the process and they have Also announced a whole host of new upgrades in the past week or so So the launch of a new ipad pro and ipad mini a new iMac as well as air tags Which are bluetooth tracking devices. So in terms of their expectations for q3 their q3 Coming up They'll be wanting to really push out these new upgrades and these new products and what have you and certainly they blew the doors off expectations for q1 with 111 billion dollars of q1 revenues Three months ago. You know, I mean I was I was absolutely amazed by that. I really was I mean I'm I'm an apple i'm an apple user. I wouldn't say I'm a fan But I certainly like their products um and There's five g iphone Continues to be its biggest revenue earner it it accounted for about 65 billion 65.6 billion dollars Of the overall revenue that we got in the first quarter. So it's still a big revenue earner um and Services are also expected to do well though given what we saw with netflix and maybe it won't we'll have to wait and see With respect to that, but certainly I think the netflix numbers were shot across the bowels The streaming services if anyone needed When economies unlocked very much very much still in the case of an uptrend for apple And ultimately I think even with all this talk of capital gains taxes and what have you apples valuation still Even if you think it looks frothy, you know, it's a cash rich company. It generates lots of free cash flow And has in recent months been acting more like a safe haven Than anything else in the same way that amazon has also Attracted a similar sort of flow in terms of the way the nest egg has been performing as well So we got amazon first quarter Facebook first quarter. I wish I could go into more detail. Some of these we've got microsoft It's an absolute plethora of earnings announcements that we've got coming up In the next Few days, so it's going to be a busy week A lot of these earnings announcements expectations the bar is very very high Remains to be seen whether or not those Those expectations will be valid, but overall Expect to see a fairly decent decent indicator of Guidance in terms of how these companies Expect to perform over the course of what's likely to be a bumper quarter for personal spending and consumption Going to finish off with a quick overview of currencies Because at the moment the dollar is continuing to look a little bit weaker. We've already seen euro dollar push higher Finding decent area of resistance between 120 60 and 120 70 See where we react here, but even if we do push higher, we've also got this up a line here So even though the dollar is looking a little bit weak at the moment Bear in mind what the price action is telling you and while people are talking about euro dollar back at 125 I'm not in that camp not yet Not by any stretch of the imagination I might revise that opinion if we break through here, but for the time being We're still in that downward channel for euro dollar. So it remains very much a case of sell rallies for euro dollar in cable We are starting we are still we've still got a fairly solid base in and around 136 70 Now if we can get through 140 20 Then we can revisit the highs of 142. So 140 20 on the upside 136 70 on the downside. That's the range Um, but overall I'm still very much in a case of buy the dip on cable Sell the rally on euro dollar, which obviously means sell euro sterling on rallies and here again We've got fairly decent resistance At 87 20 87 30 as well as we've got the 100 day and the 200 day moving average So keep an eye on those particular levels there 87 30 on the upside euro sterling Finding support around about 85 80 but again I'm of the opinion that euro sterling probably goes lower over the medium term and Until such times we break above 87 30. That's the narrative that I think will play out So that's pretty much It for this week. I know I've gone on a little bit longer than perhaps I should have done But thank you once again for listening I hope you all have a pleasant weekend and I'll speak to you all same time Same place next week. Thanks very much