 Good morning. Welcome to CMC Markets on Thursday, the 14th of April and this quick look at the week ahead, beginning the 18th of April. And it's gearing up to be another negative week for markets in Europe and the US against a backdrop of concerns that central banks could well over tighten the hiking ratchet when it comes to normalising monetary policy to deal with an ever-increasing inflation problem. Sentiment really hasn't been helped by the latest COVID extended lockdown measures being initiated by Chinese authorities in Shanghai and what is likely to be a fruitless attempt to stem the spread of the more contagious Omicron variant. As we gear up to look at the start of another company reporting season, I think one of the things that I've taken away from this week is it's been notable that markets are now paying more attention to how companies view the economic outlook going forward than the fact that they have done well over the past 12 months. You've only got a look at this week's market reaction to Tesco's four-year results, which prompted a significant decline in the share price despite the fact they posted bumper profits. But they're warning about lower profits for the new financial year has prompted a little bit of weakness against the backdrop of squeezed consumer incomes. Inflation, UK CPI inflation hitting 7% with the prospect that it's likely to go to 9% in April, has prompted a little bit of nervousness about the potential for these companies to sustain their margins against a very challenging economic backdrop. On the other hand, we've seen some fairly decent gains for British Airways owner IAG on the back of a significantly optimistic outlook from its US counterpart Delta Airlines, where they suggested that they could well return to profit in Q2, Q3 and Q4. JP Morgan obviously kicked off the US bank owning season this week with a mixed set of numbers. One of the notable takeaways was the fact that the bank decided to set aside an increase in credit loss provisions on the back of a rising inflation backdrop and a much more difficult economic outlook. As I record this video this week, it's pre-European Central Bank rate meeting. We're not really expecting any significant change in policy from Madame Lagarde at her press conference later today, but obviously the ECB does have the potential to surprise. Last week, unnamed ECB officials briefed that preliminary work was starting on a new tool that would cap any blowout on bond spreads, although there was little on detail as to how this would be implemented in any way that could be considered legal and within the confines of the capital key of the ECB. Italy is a particular problem in that it can at least afford the higher borrowing costs that a rate rise or a timeline for a rate rise would bring. At the same time as it's obviously also seeing the biggest annual rises in annual PPI, which are currently in excess of 40%. The ECB does have a fairly unique problem to itself. In essence, navigating the complex intricacies of a CPI inflation spread between Eurozone members of four and a half percent in France to 15.2% in Estonia. I think this helps explain why in recent years the European Central Bank has managed to turn procrastination into an art form with a degree of linguistic ledger domain that would make a politician proud, but at some point they're going to have to come off the fence. I think this will be the challenge going forward. So as we look ahead to the upcoming week, the main focus post-Easter weekend is a fairly light calendar. We've got EU CPI for March, obviously in the context of today's ECB meeting that's likely to be important, but probably not likely to be as important as the flash CPI, which comes out on the 29th of April. It's already at a record high of 7.5%. It's a big jump from the 5.9% we saw in February. And even if you strip out food and energy, core prices are still around about 3.1%. So businesses are also struggling. We're expected to see French and German flash PMIs on the 21st of April. Obviously we've got the second round of the French election coming up on the 24th. Macron still looks odds on favorite there, but having said that, I think we've learned from experience of the experience of Brexit and the election of Donald Trump as US president not to count too many chickens when it comes to politics. There is a slim chance that Marine Le Pen could gain the French presidency on the 24th of April, and I may talk about that in slightly more detail in next week's video. We've also got the Germany IFO business climate survey on the 20th of April. And I think that's likely to paint a fairly bleak outlook for German economic activity. In April, we already saw the economic activity in March created in the face of surging energy and producer prices with the IFO claiming that sentiment in the German economy had collapsed. A trend that so far hasn't been reflected in the recent flash PMI numbers, but you sort of have to wonder whether at some point that trend could well continue. If you actually look at the PMIs, they've been fairly resilient in March. We saw manufacturing in Germany slow to the mid 50s, 56.9 France to 54.7. So I think this begs the question of whether or not the PMIs are fit for purpose and obviously whether or not they're a fair reflection of economic activity in the Eurozone area. I would suggest they probably are. And to cap off the week, the 22nd of April, we've got UK retail sales coming up. And again, here, we are starting to see the impact of rising prices, rising inflation, food and energy is starting to have on UK consumer spending on the latest BRC retail sales numbers for March. We saw a decline of 0.4%. So that suggests that in the face of rising prices, consumers in the UK are starting to cut back, particularly given the fact that they're having to look at a looming 54% rise in energy bills in April, rising council tax rates in April, as well as rising utility bills, sky subscriptions, Netflix, Amazon, Disney Plus and what have you. So the cost of pretty much everything is going up and that is likely to be reflected in spending patterns in the same way that's being reflected in consumer confidence numbers. So let's have a quick look at the key chart points for this week, starting with the FTSE 100. As we can see earlier in the week, we tested retested the previous peaks of earlier this year, just below 7,680. We've since dropped back. That certainly looks like a bearish reversal on the daily chart, which may give an indication that perhaps we could start to see a little bit of a drift back down to around about 7,400, 7,500, 7,400. Certainly, I think there's no indication we're on the cusp of a significant collapse. Having said that, if we look at the German Dax, we can see that while we're slightly more positive, we are still very much in the downtrend that we've been in since those peaks in early January. So I think for me, what I'd like to see with respect to the Dax is a pushback above the 50 day moving average. This downtrend line here and a move back to the peaks that we saw at the back end of March to have some degree of confidence, perhaps, that we could will see a stabilization and not to return back to the levels of the mid-13,500 that we saw in early March. So I'm paying particularly close attention to the Dax in terms of the overall trend on European markets. What we're also seeing in the S&P 500 also doesn't give me a great deal of optimism. But having said that, we are starting to look a little bit oversold in the same way that we were on the Dax. So perhaps we are starting to see an element of some sort of recovery, or are we just going to continue to see choppy trading of the type that we've been seeing over the course of the past three to six months. Certainly we're still within the confines of this range from the highs in January to the lows in February. We did briefly take out these peaks here around about 4,600, but we weren't able to sustain that. So I would argue that 4,600 I think still remains a key resistance level on the upside, particularly I think if you look at the NASDAQ whereas on the downside, 4,380 is likely to be a key support level. On the downside, if we look at the Dax, we can, sorry not the Dax, the NASDAQ, we can see that these peaks here are around about 15,240, which also happens to be 61.8 retracement of this entire down move here, as well as the 200-day moving average I think is going to be a key line in the sand when it comes to the NASDAQ. We do look as if we posted a potentially bullish candle here, which could see a squeeze back to 14,800. We are starting to look a little bit more positive and if we pull back above 20% in the same way as we could on the S&P and the Dax, then we could well see a squeeze higher in terms of stock markets in the short to medium term. I think a key arbiter of that could well be how bond yields behave over the course of the next few sessions. One of the things I have noted when I looked at bond markets over the course of the past couple of days is we do appear to be starting to see an element of topping out in US Treasury yields we've seen a decline for three days in a row. Does that suggest perhaps that we've come too far when it comes to rate-hike expectations? We've certainly seen an awful lot more hawkish rhetoric from a host of US policymakers over the course of the past week or so from the more dovish members like Layle Brainard, who's always been fairly dovish but has now come out as a significant inflation hawk, which has obviously prompted this move higher here, but this does beg the question as to whether or not the Fed will be able to get rates back to the neutral rate and ultimately no one really knows what the neutral rate is. Is it 2.5%? Is it 3%? We don't really know that and I don't think the Fed knows that, so as a consequence of that we've seen a little bit of a pullback from 2.8% on the 10-year. What's more important, I think, is that what's happened in German yields, the German 2-year has moved into positive territory and sustained that move into positive territory for the first time since 2014. You can't underestimate the significance of that particular move, so while the ECB may talk about its inability perhaps or its reluctance to raise interest rates significantly, markets are certainly pricing in and move back to zero on the part of the ECB by the end of this year. Certainly, if you look at the way that the 2-year yield has moved from minus 0.8% to 0.1% in the space of less than a month, I mean that's a 1% move, so that suggests to me that markets are starting to price in some form of tightening on the back of the ECB, so that for me is a fairly interesting chart because as I say the 2-year is probably the closest arbiter of where interest rates in the Eurozone could well be two years from now, zero. Well, they're at minus 0.5% at the moment, so we're not talking a significant shift, but in the context of that chart it is still fairly significant going forward. Looking at the Euro dollar, we still remain very much above that long-term trend line that I drew in from the lows all the way back in 2018, 2017, sorry my mistake. What's significant here is that this could be a bullish key day reversal on the Euro and could signal a significant period of dollar weakness going forward. This week we've seen dollar yen hit its highest level since 2002. What was significant about that move is we moved above 126 but we weren't able to sustain it, so I'll be very interested to see whether or not the dollar has another crack at that 126 level and whether or not we can sustain a move above 126 and whether or not we can move on to 130 and here and now I think while we hold above this this 108 area, I think the line of least resistance for Euro dollar is potentially a rebound back to 110 or 112 while we stay above this important trend line from the lows here. It's about managing your risk reward. The risk reward on this particular trade is essentially you've got to be very careful about being short while this key support area around about 108 holds because you could get well caught out in a significant short squeeze certainly by virtue of what the price action is telling me. If we look at the cable it's a similar sort of story, big big support just below 130. We did get a little bit of a wash out in stops on a break below 130 earlier this week. We hit as low as 129.70 so there were some stale stops there that got ripped out. We could well see a short squeeze here as well and if we can move back significantly above 130, 180 we could get a further squeeze back to 133. So if essentially what I'm saying here key support around about 129.80, 130, probably a stop loss at 129.50 potentially for a move back to these peaks here at around about 133. Again, I think the dollar long position is getting a little bit crowded and we could well see a significant squeeze on that if we get any significant surprises over the course of the next few days. Here's that Dolly N chart that I was talking about earlier that 125.85 area which was the highest back in 2015. Squeezed a few shorts out on the way back up to 126.30 the big question now is whether or not we can have another go at this level here and whether or not we can go back up to the 130 level. I think at this point in time this trade is looking a little bit crowded but again time will tell on that particular score but certainly the inability to hold those highs does suggest that traders are nervous about being overly long of dollar yen at these sorts of levels and we could that could prompt a little bit of a pullback in the short to medium term. Brent crude prices not really telling us too much at the moment but they are starting to look a little bit soft. We've seen a little bit of a rebound and there is a bullish reversal there so we could well get a little bit of a squeeze back but if we look at where we were in early March around about 124, 125 we haven't been able to get back above the highs this month of around about 112. We have seen a little bit of a pullback obviously the COVID restrictions in China are starting to I think illicit concerns about demand and in a way that's a good thing in terms of prices because we could well see a little bit of a pullback but the reaction of these lows earlier this week does worry me a little bit because it suggests that while support on $98 a barrel holds we could well see further choppiness between $100 and $120 a barrel in the short to medium term. So in terms of earnings this week we're pretty light on the ground but there are two notable numbers that I will be paying particular attention to. Tesla is the first one in Q4 when Tesla reported it drew down the curtain on a record year for the electric car company an annual profit of $5.5 billion. However the company did warn that supply chain problems were likely to be ahead when moving into 2022. We've seen a decent rebound of the February lows back above $1,000. For Q1 of this year the company has confirmed that it managed to deliver over 310,000 vehicles in the first quarter that was only slightly above the Q4 number of 308,600 but nonetheless it was still an improvement but it was below market expectations and this was largely down to supply chain disruptions which affected output levels. On the plus side the new plant in Germany has finally opened albeit later than scheduled but this should still help Tesla boost its production levels as we look ahead to the rest of the year against the backdrop of rising costs and chip shortages. I think investors also need to pay attention to any reduction in automotive margins as a result of an increase in costs but certainly I think if we look at this particular chart here we are starting to see some evidence of lower highs coming in so if we do get a rebound need to pay particular attention to this level here around about $1,100 if in fact we even get that high. Another one Netflix one of my favorites we can we can look at this chart here to see that it's capped around about $400 it's got fairly decent support in and around the March lows and the slide since the peaks back in back in November and December has been quite significant obviously that was the reaction to the Q4 numbers which were fairly disappointing it's been incredibly painful for shareholders the share price is halved since those peaks despite the fact that in Q4 Netflix posted a fairly decent set of numbers just to recap $7.71 billion in revenues profits of $1.33 a share but it's subscriber numbers once again that I think really are the pinch point when it comes for when it comes for investor nervousness the Q1 Netflix says it expects to add 2.5 million new subscribers now that was well below expectations of 6.26 and I think we need to be realistic I think about subscriber numbers you know Netflix had a really bumper 2020 as a result of the pandemic lockdowns it was never conceivable in any shape or form that they were able to they were ever going to be able to sustain those sorts of numbers against a backdrop of increasing competition from Apple Disney plus as well as Amazon Prime and a whole host of other streaming services total subscribers at the end of Q4 are 221.8 million subscribers and in its Q4 investor letter Netflix said the stronger dollar over the last six months of 2021 cost them roughly $1 billion in revenue so to a certain extent Netflix are an author of their own misfortune by not hedging their currency exposure because their biggest growth market now will be its international revenues its US market is pretty much saturated so they're not really going to be making any significant inroads in terms of growth numbers there so I think in terms of Q1 for this year it's going to be their international subscribers that are going to be their key growth market and I think if they want to see significant share price gains going forward they need to have a strategy for basically hedging the growth in their overseas markets because in terms of foreign language films there's streets ahead of the likes of Disney plus Apple and Amazon Prime and I think that's going to be where the key growth metrics come around so I think in terms of its international markets 90% of its subscriber ads in 2021 came from outside the US and Canada so Netflix needs to come up with a strategy for hedging a stronger dollar because if it doesn't then it's likely to find that revenue growth could well start to suffer going forward so in terms of revenues for Q1 expected to see $7.9 billion significant improvement on Q4 last year and profits of $2 86 a share again these were both shy of what markets were expecting or investors were expecting when they when they when they released their Q4 numbers but they're still you know not too shabby they're still fairly decent so I think in terms of next week pay particular attention to their Q4 forecast Q2 forecasts rather as well as Netflix Q2 forecasts as well we've also got Bank of America earnings as we look ahead as we continue the US bank earnings theme going forward so that's pretty much that's pretty much it for this week ladies and gentlemen once again thank you very much for listening I take this opportunity to wish you all a very happy Easter I hope you hope you get out to enjoy the weather it certainly looks as if it's going to be a good one and I will speak to you same time on Friday next week thanks very much for listening