 Good morning and welcome to CMC Markets on Friday the 24th of April and this quick look ahead at the week beginning the 27th of April. We've come off the back of a very choppy week, a bit of a roller coaster week if truth be told, driven primarily by movements in the oil price as well as changing expectations, if you like, about the prospect of coming out of lockdowns and progress on anti-viral as well as vaccines for the COVID-19 virus. Before we get started, I'll just run you through a couple of disclaimers before we get started and then we can actually get on to what is looking to be a very, very busy week for earnings. It's been a busy week for earnings this week, but next week we're really going to hit our stride with respect to company earnings announcements over the course of the next few days. But I think if I was to characterize this week, it would be as bipolar, schizophrenic if you like, because what we've had in essence is some very choppy downloads, particularly in the oil price where we've seen 20 year lows for Brent crude. We've subsequently seen Brent crude and WTI prices bounce back. WTI prices actually went negative. Whoever thought that would happen, but in fact it did. And while equity markets have been pretty choppy, they've actually been fairly range bound or weird in very wide ranges. So I think as we look ahead to the next few days, it's dominated predominantly obviously by what looks like a consistent drop in infection rates as well as death rates for the coronavirus. We've seen an awful lot of speculation about a European response or should I say an EU response, a EU recovery fund. Hopes weren't particularly high in any case, but I think EU leaders have managed to even surpass themselves by actually missing very low expectations with some speculation that they won't be able to agree anything particularly tangible much before the 1st of January 2021. Despite the fact that Spain and Italy in the weaker European economies really need a significant fiscal injection right now, not in eight months time, given how weak those economies were in the lead-up to this virus sweeping across Europe. That being said, central banks have stepped into the breach as have policymakers, particularly in the US and the UK. The UK looks as if it's going to ratchet up its business loans response from potentially 80% to 100%. We've had the US administration do another small business package to the tune of $484 billion. And next week we've got a trifecta of central bank meetings starting on the 28th of April with the Bank of Japan. And there is speculation that they might actually go a step further and signal that they might start an unlimited bond buying program going forward, as well as ramping up further equity market or ETF purchases. I mean, they're already a majority stockholder in an awful lot of Japanese companies. I'm pretty sure that they're probably going to go the extra mile and potentially ramp that up even higher. For all of this, equity markets have struggled to really move above the highs that we saw a few days ago on Monday, the 20th of April, where we saw the S&P 500 very briefly push above its 50-day moving average. But for me, the same argument still applies as it did in my video last week. The big level on the S&P for me is the 61.8 Fibonacci retracement level here from this down move and the 200-day moving average. It is finding some element of support around about 27-20, and that's going to be a key support level going forward. But ultimately, I think we do appear to be range bound until we get some sort of indication as to whether or not the virus is peaked and the lockdowns will continue to ease. And even here, a lockdown easing is going to be fraught with problems because as soon as you ease the lockdown and people start to mingle more freely, then you run the risk of the infection rate spiking again. So there is an awful long way to go. We've seen a bit of a sell-off in European markets this morning, early this morning, after a setback on the back of an antiviral drug being worked on by Gilead Sciences, which resulted in the fact that the clinical trials were disappointing. The UK is also working on a vaccine, and I think this is likely to be a familiar theme in the coming weeks, with markets swinging around on the success or the failure of antiviral as well as vaccine trials. Investors are really looking for comfort, crumbs of comfort on the treatment front amidst the incessant flow of awful economic data that we've seen this week. Services PMIs, flash PMIs at record lows. French services PMI at 10.4, UK services flash PMI at 12, you know, 12.3, 12.4, and Germany PMI at 15.9. These are record lows worse than the financial crisis. And I think they really underscore the conundrum being faced by politicians at this point in time as to the economic damage being wrought by the lockdowns and the pandemic when set against the possibility that they, you know, they're coming under pressure to at least try and engineer some sort of restart of economic activity. We've already seen some companies already starting to reopen their factories. Aston Martin have started to reopen their production lines as are Jaguar. And the housing companies, the home builders, are starting to do a limited phased reopening of their construction sites, Taylor Wimpy person. And I think that's really going to be how companies are going to play it going forward. Because I think if they stay down, if they stay closed down for any limited amount of time, that output could be gone forever and doing immense damage to the economic prospects of the country going forward. And, you know, while I think there is probably going to be an increasing debate going on about the economic merits of staying locked down when set against the future damage to the economic prospects, the employment prospects for populations going forward when set against obviously the rising death rate as a result of the virus. So it's very much going to be the politics and economics of trade-offs as we head into the second quarter of this year. So we've got a bank in Japan on the 28th of April. That's followed by the Fed on the 29th and followed by the ECB on the 30th. Now I'm not really expecting too much from any of these meetings. Recent Fed meetings have become a little bit of a sideshow in recent months because the central bank has preferred to act outside of its timetabled meetings. It's made these announcements in between meetings outside of U.S. trading hours. The last such action was on the 9th of April, which was an hour before the U.S. market opened on the Thursday just before Easter when the central bank announced a $2.3 trillion program to support Main Street and undertook to basically expand the scope of its bond buying program to exchange traded funds that specialize in lower-rated or junk bonds. So I think the meeting is probably going to be more instructive in terms of how U.S. policymakers view the outlook for the next few weeks, months in the context of the 26 million rise in weekly jobless claims that we've seen over the course of the past five weeks. So that could have significant consequences of the way the dollar performs over the course of the next few weeks. And we can see that panned out in the way the CMC U.S. dollar index has traded over the course of the past few days. It is much more heavily weighted towards Chinese one and less against the Euro. There's pretty much a 50-50 split now between the two of those. They make up around about 22% or 23% each of the actual index. So it means the Euro is a much weaker component than it is for the dollar index where it has a 57% rating. And that's not really representative, I think, of the overall trade-weighted index of the U.S. dollar. So paying particular attention to that as we will the Euro. What can the ECB do that it hasn't already done with its new pandemic asset purchase program? In recent comments, President Lagarde has said that central bank remains committed to doing everything necessary, but ultimately she warned this week EU leaders that they were running out of time to come up with a policy response to rescue the economies of Spain and Italy. And if they left it too much longer, it could well be too late. Certainly the ECB has expressed concern about an increase in non-performing loans. We've already seen credit suites this week in unit credit, set aside money in respect of non-performing loans, unit credit set aside 900 million euros in respect of that. And the ECB has already talked about the creation of a bad bank, something which markets are likely to be significantly concerned about when German banks report their latest numbers over the course of the next couple of weeks. Italy still remains the Euro area's kryptonite as far as I'm concerned and I think there's to deal with the problems here could well be ruinous for the entire block. So let's look at Euro dollar. I mean basically nothing much has changed here apart from the fact that it still looks weak and I think it's likely to continue to remain weak over the course of the next few days and weeks. We've now broken below that 107, 6070 area is very very gradual but we can see from this daily chart here that the highs are getting progressively lower. That's probably better illustrated in say for example a two hour chart where you can see that every subsequent rebound continues to out of steam. As we can see here these are the lows, these are the lows here and every single subsequent peak gets lower than the previous peak. That's a classic case of weakness and ultimately unless we get a break back above 10840 in the not too distant future then I think it's quite likely we could well revisit the lows that we saw earlier this year. The European policy response has been fragmented I think at best. I think you can safely argue that an incompetent at worst and I think that's why you will still find that euro sterling will probably continue to remain under pressure for all the faults of any UK policy response. At least we do have a joined up response between fiscal and monetary policy and that is likely to I think benefit the UK probably in the longer term which means that any upside in euro sterling is likely to be limited to around about 88 and a half and move towards as I say the lows that we saw in the early part of March in the end of February. So very much a case of sell the rallies on euro sterling. Now cable is very much driven by the vagaries of the movements in the US dollar. We can really see that here 50 day and a two a day moving averages are proving to be a little bit of a barrier. We have seen a bit of a death cross on the daily chart but I'm less concerned about that simply because of the fact that 200 day moving average is very very flat. It's not really going anywhere it's been fat for quite some time and when a moving average is as flat as that you're inevitably going to get the faster moving average cross over it over the course of a period of time. So you know there is a little bit of what could be a head and shoulders forming here on this particular daily chart with the left shoulder here a head here and a right shoulder forming here which is why it's really important that we hold above this 122 to 30 area and take out the previous highs at one round about 126 127. We also really need to take out 125 to move above this series of peaks that we saw through here. The market does appear to be rolling over a little bit we could see a little bit of further weakness but I think as long as we stay above this low here from 7th of April which is around about 121 60 then I think the range that we've been in over the course of the past few weeks is likely to continue to hold sway as we go forward. Other things I'm keeping an eye out for next week is obviously the final UK manufacturing PMI which when you compare it to the services PMI is really stellar it's in the mid 30s it's over triple the level of services activity and manufacturing and construction now does appear to be starting to go back to work on a fairly limited scale so the downside in those particular PMIs should be so should be should be fairly limited. We've got first call to US GDP also on the 29th of April the same day as the Fed meeting that's going to be the first indication of how much economic damage is about to come the US's way but I think you've also got a factor in the fact that the first call to GDP number is not going to be reflective of the amount of economic damage that's been done in April because the lockdown in the US happened halfway through March and as a result of that you're only going to see a significant part of that slow down come towards the end of that reporting period so it's not really going to give you a decent indication it'll give you an early warning the shape of things to come but it's really the the unemployment numbers that really give you an idea of the tsunami of contraction that's about to come the US's way. We've also got first call to GDP from the EU as well and again same argument applies there the lockdowns happened in March and as a result the first two months will probably flatter that number slightly given the fact that we didn't really see the economic contractions really start to kick into gear until the end of that so first call to GDP out of the EU same day as the ECB meeting we've also got German unemployment for April that could be an important bellwether of the economic damage from a labor market point of view for the German economy and the last set of unemployment numbers in Germany should unemployment level study at five percent that's likely to go up quite considerably the big question is by how much and whether or not furloughed employees will be included in that number okay so we're off the economic data side of the equation it's also a big week for company earnings now we've seen US banks set aside enormous amounts of money in respect of provisions for non-performing loans we've seen unicredits set aside 900 million dollars we've also seen Credit Suisse do the same it's probably not going to be too much of a surprise when we say HSBC, Barclays, Lloyds and RBS report their first quarter numbers to see them do the same thing because over the last few years the share price of UK banks have struggled to due to concerns over Brexit it's somewhat ironic that it's not going to be Brexit it's really going to cause them the most amount of pain in the short or to medium term it's going to be the after effects or the beginning of the effects of the economic contraction that's about to come our way as a result of the corona virus pandemic so I think the only reassurance I have about UK banks is the UK government appears willing to backstop any new lending that the banks need to do to keep the economy on life support unfortunately that's not where the real problems are consumer credit provision for credit losses could be a real issue if we see widespread solvency issues for consumers as well as businesses in the coming months now all of these three banks are acutely vulnerable Lloyds, Barclays and RBS are acutely vulnerable to a consumer slowdown Barclays at least has its investment banking division to fall back on Lloyds and RBS have seen significant cutbacks to that area of the business and Lloyds never really had a significant investment bank in any case it was very much a retail bank given that it took over age boss so they will have to I think shareholders will have to contend with not only the dividend cuts that we've seen over the course of the past month or so but they're also going to have to contend with the fact that the revenue streams from investment banks are unlikely to be the buffer that they used to be in the past because simply speaking they're an awful lot smaller so record profits to really I think struggling to contain any credit losses going forward is probably going to be the best that can be hoped for as we head into 2020 I mean at its most recent trading update Barclays beat expectations on profits and revenue but it did warn that 2020 was likely to be challenging well that I think is a significant understatement so what we've got here with respect to banks is have a quick look at these lows that we've seen in April is the bad news already priced in or are the banks going to surprise us this week with much higher than expected provisions so Lloyds is around just dropped below 30 30 pence if we look at Royal Bank of Scotland it's likely to look a similar story and at least the thing you can say for Lloyds is that at least it's no longer taxpayer owned and management have full control of all the levers but even here um but you know the consensus the the inability to rally with any degree of confidence suggests that we could well see further losses on the cards for UK banks and that is a worry I think going forward can UK banks even with the relaxation of their capital buffers help cushion the economic blow and pull the UK economy out of the other side these first quarter numbers will give us a good indication as to not only how well capitalised these banks are but how willing they are to I think extend credit conditions and be sympathetic to the problems that businesses are going to find they're faced with over the course of the next few days and weeks so that's the UK banks big week for UK banks it's also a big week for BP I think unless you've had your um unless you've been living under a rock over the course of the past few weeks you will know that Brent Crewve has been on the slide so BP is going to be announcing his first quarter earnings numbers on the 28th of April and this is really bad news for BP I mean it's bad news for all oil companies in general but certainly for BP which has a large US shale operation they paid 10 billion dollars only two or three years ago for BHP's shale assets and that is looking increasingly like a rather full hardy decision as things stand with demand falling airlines cutting capacity people traveling less um the longer term outlook is also likely to be constrained by the green agenda so the company can cut CAPEX in the hope of covering costs on a short-term basis but what it really needs to see is significant rebound in the oil price and there has been talks of the US president might look to bail out the shale industry so there might be a glimmer of hope there but there still have to be questions about the sustainability of BP's dividend when the share price is trading at levels that we last saw in the 1990s you know we are trading at 25 year lows for BP and royal Dutch shale so I will be paying particular attention to what further measures BP can take to and try and address the cash burn because it has a bake even price of 50 dollars a barrel just below 50 dollars a barrel and as you can see from this watch list here Brent Crewve is currently trading at around about 20 and a half 21 dollars a barrel so the past few months have been extraordinarily painful for BP we will find out by how much when they report on the 28 what else have we got we've got full year numbers from Sainsbury's um now they should instinct should tell you that the lockdowns should be good for the retail sector good should be good for the retail sector but Tesco's recent numbers showed us that their costs increased to the tune of nearly 900 million so um as a result of was it 900 million or was it 90 million it was it was a significant amount anyway so um I have to have to recheck that but the the increase in volumes the increase in sales was more than offset by an increase in staffing costs so Sainsbury's full year numbers are likely to be um closely scrutinized to see whether or not they had the same problems that Tesco's had and I think yes it was 900 million pounds it was it I've just I've just noticed it in my note here so it could be it could be a similar story for Sainsbury's though the business I think could also benefit from increased sales from its Argos brand due to the fact that customers bought electronics and games to see them through the lockdown as well as in my case I had to buy a desk so um because otherwise I might have been sitting with my laptop on the ironing board um so keeping an eye on the Sainsbury's share price having a look at that it's just below two pounds at the moment um keeping an eye on the key levels there and if I just change that chart to um my other saved preset for that and we can see there that it's pretty much in the middle of the range between 170 and 230 it's been quite choppy over the course of the past few days and weeks and I would expect that to continue but I think as long as we hold above 190 then I think the prospects for Sainsbury's look remarkably positive I think in the short to medium term it's also a big week for um US earnings we've got Tesla Tesla motors and we've got Apple and we've got Amazon.com I know this video is slightly longer than normal but there's an awful lot to get through and I don't want to miss anything out so let's start with Tesla's numbers which are due on the 29th now as we can see from this chart earlier this year Tesla's valuation soared to the point that it became the second most valuable car brand in the world only behind Toyota now anyone who thinks that is in any way sustainable I think must be pricing in an awful lot of forward earnings expectations and messes increases in sales now the company has shut its plant in California it did that on the 23rd of March steps have been taken to cut costs by following staff and cutting production and the hope is that operations can really start on the 4th of May now the original guidance for 2020 was production of over 500,000 cars it's unlikely they're going to be able to replicate that unless they have a really good second half in the same way that they did last year they made profits in the last two quarters it's unlikely they'll make a profit in the next in in in the last quarter so the big question is have we got further upside to go $800 is going to be a big big level I would be very surprised if we go above that and I think the likelihood is we could head lower then we've got Apple so what about Apple well they should do quite well they in first quarter they posted record net income and revenue of $91.8 billion and $22.8 billion respectively now services again showed a real strong performance and I think this is here where we're going to have to see services really ramp up with the launch of Apple plus Apple TV plus I think the problem with sales in China is going to be a real problem for the second quarter numbers iPhone sales have been in decline for quite some time and economic disruption by caused by the coronavirus could well have cannibalized sales even further particularly at the higher end and I think that may help explain why Apple's decided to launch a new iPhone SE this month one of its cheapest ever iPhone models so the deviation from the higher end probably not surprising given the intense competition in the market be interesting to see where these latest numbers reflect that and as a result we could see a little bit of a slide back towards the lows that we saw at the beginning of March last but not least Amazon you would expect Amazon to do well in the face of the coronavirus lockdown it's its first quarter numbers on the 30th I think we should see a nice boost it's certainly been reflected in the boost in the share price over the course of the past few weeks in the same way that Netflix has got a decent boost but is this a case of buy the rumor sell the fact because while Amazon Prime is likely to do fairly well Amazon has come in to come in for some criticism with respect to how their workers are treated in relation to warehousing and new distancing rules but furthermore Amazon Web Services is one of their key revenue earners now obviously with businesses being locked down or not doing anywhere near as much business you could see a hit to that particular revenue stream over the course of the last three to four weeks and that could impact its overall revenue numbers so keep an eye on that when Amazon reports its latest numbers on the 30th of April so that's it for this particular week ahead as you can imagine it's been quite a extensive quite an extensive one and with that with that in mind I'd just like to thank you all for listening wish you all a pleasant weekend and hope you have a good trading week over the course of the next few days thank you very much for listening