 Good morning and welcome to CMC Markets on Friday the 21st of June and this quick look at the week beginning the 24th of June And it's been another week of records for US markets We've seen a record close for the S&P 500 and the Dow Jones Got within a whisker of its previous all-time close from October last year We've seen a significant tilt in monetary policy from both the European Central Bank this week as well as the US Federal Reserve with the prospect that Markets are now pricing in The probability that we could well see an interest rate cut from the US Fed as early as next month Now that still for me seems a little bit excessive in terms of Expectations I still don't buy the narrative that the Fed is on the cusp of cutting in July I think there is distinct possibility. We will get an interest rate cut I think the only debate is around the timing and I think that's in that context the US payrolls report in a couple of weeks time will be crucial Or will be certainly a key determinant in whether or not we get that move in July US 10-year Treasury yields Went back to levels last seen in 2016 with a 10-year briefly dropping below 2% But what's interesting about this particular move here is the formation of this candle We've made a very sharp new low, but we haven't been able to consolidate the losses Down through that to level now this candle here is now starting to look slightly positive And that would suggest to me that maybe just maybe this downside thrust that we've seen From 3.25% at the end of last year to 1.97% Now or certainly on Thursday could be running out of steam and potentially We could get a bit of a correction start to play out with Yields edging back up to 2.1 or even 2.2 percent I feel that the move lowering yields has come too far Too quickly. We've also seen a significant move high in gold prices And again on the daily chart we can see that here But what's interesting is though we've broken above the 1380 level what we've got here is On the cusp of what could be a potential doji we've made fresh new highs highest level since August 2013 But as I'm speaking to you We haven't been able to consolidate Most of that thrust higher and depending on where we close today Friday the end of day Friday could determine whether or not We get a little bit of a pullback all the way back to 1350 Or any even as low as at 1320 it certainly looks overbought on the every on the on the daily Oscillator so we've seen record highs on the S&P what's interesting about the S&P move is That it hasn't been followed by a similar move on the US small cap index And if you think that this move into risk is Denominated pretty much across the board and is widespread then you would expect to see a significant move higher in the US small cap index We're not seeing that we're seeing significant divergence between big caps Like the Dow Jones and the S&P 500 small caps aren't investors aren't as Enthusiastic about and that's a little bit of a red flag for me So we are still in an uptrend don't get me wrong US stocks still remain fairly well supported as Do European stocks we've seen a nice little move higher in the FTSE 100 But what's interesting about this move is again We haven't really been able to follow through on the moves higher despite the implicit easing bias that we've seen from central banks this week the Bank of Japan the Federal Reserve and The Bank of England and the ECB have all been a little bit dovish when it comes to Downgrading growth forecast. What was interesting about the Fed was they didn't downgrade their growth forecast They kept it unchanged Even though they revised their inflation forecast slightly lower So I think the Fed has bowed to political pressure to a certain extent to try and Go more dovish the big question is is whether the market is correct in pricing in three interest rate cuts as Opposed to maybe the one or two that I would expect to see and I still feel that July is Potentially too soon and I think if the data continues to improve for the US That could increasingly start to get priced out. So What's what am I keeping an eye out for over the course of the next few days? Well, obviously there has been a slight softening of tone around trade and that could be another key factor that determines Where bond yields go? We've got the G20 meeting on the 28th of June and US trade negotiators and Chinese trade negotiators are now talking to each other So the big question now is whether President Trump and President Xi of China will meet and attempt to draw a line Under and diffuse the recent deterioration and the rise in the tension between the US and China trade talks Optimism is high. That's reflected I think in some of the moves that we've seen this week that some form of detente will be arrived at which keeps the prospect of a deal on The table now, I think a deal is unlikely But certainly I think a commitment to talk further would be fairly well received by the markets The one elephant in the room at the moment is something can entirely unrelated To the China US trade talks and that's the unrest in the Middle East Which has been ramped up a little bit higher in the past few days after Iran shot down a US drone With the prospect that the US might retaliate now We've seen a significant rebound of the lows in Brent crude We've managed to get back above 64 dollars a barrel But ultimately what we need to see is a significant move above the 250 day moving average and momentum Has still turned negative on Brent crude people talk about a hundred dollar oil if a shooting war breaks out at the moment You can't really price that All we can do is look at the price action and the price action is we're still getting lower highs We are still getting lower lows albeit. We weren't able to make a new low this week So we do have a little bit of a short-term base in and around these lows here And that's something that we need to we do need to be aware of we were able to stay above $63.80 we could squeeze a little bit higher 67 or 68 dollars a barrel. So That's one of the other key I Think one of the key and factors in the geopolitical picture going forward as far as events are concerned Haven't really got an awful lot this coming week apart from the G20 We've got final revisions to us first-quarter GDP and you've UK first-quarter GDP They're not really expected to tell us much more than we already know The first quarter the final revision to US first-quarter GDP is expected to remain A wrap up around 3.2% after that big jump that we saw in the second revision from 2.3% So not really expecting any change there UK first-quarter GDP again Expected to come in at 0.5. It's really the business investment numbers that are a cause for concern at the moment Against what we're seeing with respect to the political paralysis around Brexit We also have an IPO which goes on conditional trading this week the train line IPO that starts on the 26th of June and on Conditional trading we saw it really jump out of the blocks from 350p to trade At around about 400p in the first day of conditional trading and this is one of the thing with this train line IPO Is this one of those rare beasts? It's an IPO. She's actually profitable So probably means it won't be very popular, but I digress it's valued at an estimated 1.68 billion now around about 2 billion because obviously it's traded at a premium and The company made a profit of 10.5 million pounds Last financial year on revenues of 3.2 billion pounds and that's the first annual profit It's made after three years of losses and the company's raising 75 million pounds in order to help improve the technology and Potentially expand into other areas of travel like buses and aviation So has the potential to be a significant disruptor in the travel sector. We've also got full year earnings from carpet, right? and As you may well recall They went into administration Earlier this year But the business is now starting to turn itself around. So those full year numbers Should give us a good indication Particularly in the most recent quarter as to whether or not the turnaround plan that's been Undergoing at this moment ongoing at this moment is Continuing to bear fruit. We've also got four year earnings from stagecoach and we also have Quarterly earnings from the likes of semiconductor micron technology Nike Q4 and FedEx Q4 now FedEx will be particularly interesting given the rebounding US retail sales that we've seen in the past couple of months because generally Logistics companies tend to be decent bellwethers of economic activity in an economy the more parcels that get delivered the more parcels that are Across the country generally tend to give you an indication of how optimistic people are and whether or not people are buying goods and services So Those are the key things that I'm keeping an eye out for over the course of the next few days That's it for me this week. Thank you very much for listening. It's Michael Houston talking to you from CMC markets