 Good morning. Welcome to CMC markets on Friday the 20th of August and this quick look at the week ahead beginning at the 23rd of August with me Michael Houston or we get started just do a little bit of housekeeping with risk warnings and what have you. And also have a look back at the events of the past few days because only days after setting new record highs pretty much across the board for European markets US markets and what have you. We've seen a bit of a turnaround in sentiment this week and while the record highs that we saw last week were based on very low volume. So are the declines that we've been seeing thus far this week. Now you'll hear an awful lot of narrative from various sources who want to know better I think that the reason we're seeing the declines. This week is largely as a consequence of the Fed minutes and that they're concerned about a Fed taper but to my mind that's our nonsense it doesn't really tell the whole story. And, you know, I think if that was the case. You would see US bond yields higher and they're quite clearly not as can be seen from this chart here. In fact from a week ago, all the way back on the 13th of August. They're at 137 US 10 year yields and they are now at 123 and a half and at the bottom end of the week so if the markets concerned about a Fed taper it's got a funny way of showing it. So, you know, when you read headlines about European markets stock markets decline over Fed taper concerns. I think by and large you can take it with a large bucket salt. There are any number of reasons as to why markets are lower this week Fed taper is certainly not top of my list. There's been various cross currents this week that have been affecting market sentiment. And we can start with concerns over a slowing global economy. Now that would cause a fall in bond yields because bond markets therefore pricing slightly weaker growth outlook. And that's why we've seen weakness this week in stuff like basic resources particularly miners, particularly copper prices and iron ore prices as well have fallen quite sharply. Now if we look at copper, copper prices are at a very key support level from the highs we saw back in April. They're on the 200 day moving average so I think where copper prices go to next could be a key bellwether in terms of the overall direction of the markets next week. And obviously next week is a fairly big week in terms of the focus on Jackson Hole Symposium, which starts on the 26th. But nonetheless, you know that the Fed is a factor in all of this, but it's only one very small factor in the wider scheme of things and this is why it's very, very important to understand why we're seeing the market declines that we've been seeing this week. So starting with increasing concerns over a global economy, prompting a fall in basic resource stocks, we've seen declines in copper prices, iron ore prices as well have fallen back quite sharply, as have Brent crude prices. We can see that in this chart here. And again, falling back towards the 200 day moving average and also trading at the lowest levels since May. So there is an underlying cross current of concerns about the strength of the global economy as we head in to year end. You've got concerns about rising Delta virus infection rates in Asia, you've got concerns about vaccine durability, not efficacy, durability. When will people need a booster shot? Those Pfizer people who've got double jabbed in January, February and March are likely to have to need to see another one. As we head into the autumn, how easy will it be for countries like the US, UK and obviously countries in Europe to get a booster jab into people's arms at the time that they're still giving second jabs to a proportion of their overall population? It would be easier for someone like the UK, which is double jab 75% of its population. But for countries that are behind that, it's going to be that much more difficult. We've also got to contend with China component of this overall story. And they're looking to pour sand in the wheels of its own recovery story with a crackdown, regulatory crackdowns on tech, on prices in terms of precious metals, in terms of the luxury sector talking about wealth redistribution, which has hit the luxury sector this week. We've had Toyota this week talking about halving vehicle production in September from 900,000 motor vehicles to 500,000 motor vehicles. If that is replicated across the sector, that is going to cause a slowdown in economic activity. So you've got all of that basically feeding into this narrative this week of equity market weakness. And that's what we have to look at when we're talking about what the markets are doing. If we look at what the FTSE 100 has done this week, last week we were up here around about 7,200 and we've declined five days in a row, pretty much wiping out all of the gains of the previous week. Now, does that mean we're going to go crashing into a bear market? Does that mean we're going to come all the way back to the 200 day moving average? Possibly. But again, we're in the wider range that we've been in over the course of the past few months. So yes, we could see some further downside. There's decent support around 7,000. That's likely to be a very key support level on the downside. Similarly with the German DAX. If we look at the German DAX here, we've got another sharp fall at the moment. We're holding above the 50 day moving average. But again, this is all the way back on Friday last week. So we've gone with a slow climb all the way up and then we're back down to where we started pretty much two weeks ago at the beginning of August. So in essence, we've gone nowhere in August, despite all the narratives of table concerns, this, that and the other. Similar sort of story, S&P 500. Now this is an interesting chart because we're on the 50 day moving average. But we're also on this very decent trend line that I've drawn in through here as well as this key support level all the way through here. So this could be interesting if we break below the 50 day moving average because we could see a little bit of a sharp move back to these areas. These are these lows that we saw all the way back in July 20th of July. So I think it's very important to not get too caught up in the overly pessimistic narrative or the overly positive narrative. You just have to play what's in front of you. And that's the price action price action basically dictates what the markets are feeling at any given time on what the flows are actually doing. Look at the NASDAQ again 50 day moving average. It's, you know, it's really quite something when you look at the number of technical indicators, which tend to be fairly common across the board. So we've got the NASDAQ 50 day moving average acting as a support S&P 50 day moving average acting as a support DAX 50 day moving average acting as a support. Now the fly in the ointment as has always been is offering the Nikkei 225 and I've talked about this at fairly great length over the course of the past two to three weeks. Asia is the fly in the ointment of the global recovery story. So we're seeing that played out in the Nikkei. So how we react around this 27,000 area this area of support through here could dictate how much further upside we have for equity markets in general. But certainly if we look at the way the dollars performed this week, it's been very much a case of risk off. The dollar is going higher simply on the basis of the fact that people are coming out, investors are coming out of stocks and they're putting their money in the haven trade of the US dollar. The only currency that these come even close to the dollar performance this week has been the Japanese yen, which is a classic risk off currency. The Japanese yen hasn't really gone anywhere this week. You know, and you can see and you can see that played out in this dolly in chart here in pretty uneventful traded in a fairly tight range over the course of the past few days. So that's, that's the dolly in for you. So looking looking ahead to next week we've broken some fairly key support levels on euro dollar. And that suggests to me that we've got scope to go quite a bit lower. I say quite a bit lower. It's all relative. It's this is this is these double lows here around about 116, which was the lows from 28th of September around about September, October, November, 2020. That's the next key support level on euro dollar now that we're below 117 we haven't been able to get back above 117 10. And that for me, I think if we can get back above 117 10 will get a bit of a short squeeze. Now we are oversold. It is true, but just because we're oversold doesn't mean we can't continue to go lower. So you have to basically trade what you see here. We've broken below this key support level, which the bias means suggests that we could well see further losses back towards this next area of support. 116 12. So 116 figure 10. You're really talking about that low there that very long shadow candle there from November. 116 03. So how euro dollar behaves between 116 and 117 could dictate is likely to dictate where we go to next cables at a poor week. Despite the fact that the data this week by and large hasn't been that bad. Yeah, retail sales disappointing minus 2.4% public finances are much better for July as a result of high tax revenues and lower furlough payments. So half of what they were in June, we look as if we're going to come back all the way back down to 135 70 on cable. Why simply on the basis of the fact that we've broken below a host of key support levels all the way down from here. So once we broke below 50% level at 137 70, we went back to the next one 137 30 rebounded went all the way back and then came all the way back down again. So now for cable what we really need to do is make sure that we hold above 135 70. If it drops back below there we should say should see a rebound again we're oversold but again just because we're oversold doesn't necessarily mean we can't continue to fall back. To fall back to this area of support anywhere between 136 and 135 70 you can see that through this area of lows in the candles here. The absolute lowest 135 70, but you've also got loads around about 135 90 135 80 and 135 85. So in and around between 135 80 and 136 there's some there is an area of support for cable. If we drop below that, on the other hand, then we're really looking at a much darker picture in terms of where we could potentially go to next and then we have to start looking back at around about the lows of this year, which is around about 135 30 or even 134 80. So always look for previous support and resistance levels when we're looking for breaks of key levels euro sterling confounded. My expectations and ultimately you have to admit you're wrong on that by the bullet take it on the chin and didn't follow through on the downside we're now back up towards 85 74 85 85 80. This likely to be the next key resistance level, but again, we're still in the overall range that we've been in over the course of the past few weeks and months, and ultimately we could at a pinch head all the way back up here. The ultimate short squeeze is in place here. We are now in a shorter term uptrend for euro sterling, and we can basically draw that line in like so and draw it through those loads there. There we go. Actually, you could probably draw that line in there as well. Let's just get rid of that and redraw that. On there. Touch to the low. That's through there. It's not quite so it requires a little bit of tweaking. We'll use that one. And then that one there. So I mean, that's euro sterling for you. I mean, there is there is a fairly decent resistance around 85 80 that also coincides with a series of highs through here. So fairly decent selling interest through there could well get a drift back towards this series of highs here, which is around about 85 30. So the euro sterling does tend to generally operate in pockets of 50 points. So if it fails at 80, usually drops back to around about 20 or 30. So usually it's not hard and fast for all. So something to bear in mind. Okay, so moving on to the Jackson Hole symposium. Now, I think up until recently, I think they had been an expectation that this year symposium which this year will be a limited in person program. Like last year where it was a virtual affair. Last year the the Fed outlined their new policy of average inflation targeting or a it. Now this policy has been very apparent in the past few months in the central bank is prepared to tolerate prices rising much much much higher above its 2% target for extended periods of time. I mean, when you've got core PCE levels, which is the feds preferred measure of inflation targeting rising from levels of one and a half percent at the end of last year to be currently at around about three and a half percent already. And little sign that the Federal Reserve is any mood to slow down its current bond buying program. It's quite clear where the feds priorities are. It's not in controlling inflation. It's really about the labor market and that is going. That is going in the right direction weekly jobless claims are continuing to fall. And this week's symposium could offer guidelines and how the Fed is looking at how to start tapering its bond purchase but bond buying program as we head into the awesome. Now, those minutes were from July. So they predated the two payroll, the July payrolls report of 900 of 1000 and the June payrolls report which was upgraded to 950,000. So there is a discussion going on about the composition of when the Federal Reserve is likely to start looking at winding down this bond buying program. But you also have to understand that if we continue to see the declines that we've been seeing in equity markets over the course of the past week, and we continue to have concerns about a growth slowdown in Q4. For all this talk about a Fed taper, there is a there is a there is a likelihood that it may get delayed. It may not happen until next year. So, while you can talk about, you know, markets being spooked by a Fed taper, that Fed taper may not happen if all those other cross currents that I mentioned earlier in my update start to cause concerns about a growth slowdown. So the symposium is important, but it's only important in the context of the data holding up. So in that context, the August payrolls report at the beginning of September is likely to be a key bellwether going forward. We've also got France and Germany manufacturing and services flash PMI and we've got UK manufacturing and services flash PMI on the 23rd of August on the Monday. And they'll give us a fairly decent idea of how the German economy is basically reacting to the slowdowns that we're seeing in China. And we're certainly seeing an impact in business confidence in the past few weeks in terms of German business confidence, the recent floods as well. And that on consumer confidence, obviously there is there is potential for a little bit of a little bit of a concern there. Likewise, in France, there's been increasing evidence that business activity has been declining with both manufacturing and services slipping back in July from the June level. So I'll be surprised if we don't see a little bit of weakness in the August numbers, obviously there's also a little bit of a holiday factor, as well as factories shut down over the holiday period. Not so much in the UK, there's been an increasing disconnect in recent months between what PMI is telling us in the UK in terms of manufacturing and industrial production. And the actual headline PMI numbers because the headline PMI numbers have been fairly solid coming in in the 60s, whereas we've been seeing declines in manufacturing and industrial production. So there's a little bit of a disconnect or a divergence there. Obviously the pandemic is likely to have affected services flash PMI as we saw that are reflected in a big fall in the services July PMI is and we could see that carry over into August as well. Need to also keep an eye on higher cost prices being reported by businesses as they struggle to source necessary materials for the various goods and services. And we also have the German PMI not German PMI German IFA business climate for August as well and that is likely to be a fairly instructive affair in terms of German business confidence, particularly ahead of next month's German elections. Angela Merkel is stepping down. And who knows who's going to replace her, but from what I've seen of the various candidates, their political pygmies in comparison to Angela Merkel who's been like a colossus over German politics for the last 16 years. You know, you can argue as to how effective she's been. She's certainly been effective at maintaining the status quo, but she's certainly what not what I would have called a transformative Chancellor. And maybe that's what Germany needs and certainly there's no evidence that that is going to happen. We've also got second quarter US GDP the second iteration of that. That was a little bit of a disappointment on the first on the first draft came in at 6.4%, which was a little bit disappointing. I'm sorry, 6.5%, which is a little bit disappointing because we're expecting a number of around about 8.5. That being said, personal consumption was stronger than expected at 11.8%. But the fact that it fell short the GDP number, I mean, suggests that there are headwinds that US businesses having to contend with, particularly in the areas of the economy like manufacturing construction, where I think people were expecting a slightly bigger contribution. So supply chains disruptions, shortages of key parts, prompting factory shutdowns, business disruptions, still expecting a slight up revision to around about 6.6% annualized revision. So that by and large should be fairly positive and that's due out on the 27th. And we've also got US personal spending, as well as PCE inflation. And obviously the PCE numbers are likely to be closely watched after coming in at 3.5% in June. Now what struck me about them was that they slipped back in June, while PPI went up and CPI sort of flatlined or only increased very, very, you know, in a very marginal manner. So there is a little bit of uncertainty overall about US PCE deflator, core PCE deflator. And it's been trending higher for several months. And as I say, as I said earlier, you know, in the space of eight months, it's more than doubled from the levels it was at the end of last year when it was at 1.5%. We slept back in June, will we do the same thing in July, given the fact that on PPI measures, prices are still continuing to rise. You know, I think that is the big concern overall, you know, the Fed can look at the PCE as much as it likes. But there are underlying inflationary pressures, not only in the US economy, but globally as well because of supply chain disruptions, container ship fees and what have you, you know, freight fees, they are exerting underlying pressure on company profit margins and that's not currently being reflected in current stock market valuations. So, yeah, as I say, one one good thing about the recent decline in commodity prices is the fact that the energy components are starting to come down quite a bit and that's likely to be welcome news or consumers like you and me who need to basically fill up their cars every so often. In terms of earnings next week, it's fairly light. We've got Best Buy US Electronics retailer, which is done fairly well, tends to operate in the shadows of Target and Walmart. But nonetheless, still expecting to see some fairly decent revenues, online sales have been good, they jump 37.2% in Q1, revenues in Q1 are $11.6 billion, share price pretty uneventful. Fairly decent support in the share price anywhere through the June lows, July lows there and heading back towards this week. So talking around about 106 as a decent area of support for Best Buy. We've also got a recent IPO here in the UK, Bridgepoint Private Equity Company, own stakes in Fatface and Hobbycraft and just just bought a stake in fast food chain. It's Sue, been looking to update the market on its latest first half numbers, as well as potentially providing an update on its plans with respect to the Burger King franchise which it owns here in the UK and which is reportedly looking to sell and off low. Company currently has 27 billion euros of funds under management and a presence across the US, Europe and China. In 2020 the company generated 192 million pounds in revenues and profits of just under 50 million on a much lower figure for assets under management so it'll be very interesting to see whether or not and what happened there with that graph. We just reset that. Doesn't like that for whatever reason. Yeah, so as I say IPO at 350, it's quite comfortable at 5500, 500p. So that's that's Bridgepoint we've also got snowflake q2 numbers on the 25th we've got Salesforce q2 numbers on the 25th. And we've got US consumer chain, William Sonoma, which specializes in a range of household cookware bakeware and furniture. If you've ever heard of pottery barn, Western brands. That's the company that owns them. So, as I say that's it for this week's weekly market update. I had some technical problems this morning so I'm actually quite relieved. I've managed to get through this without too much in the way of incident, shall we say, but thank you very much for listening. This is Michael Houston, wishing you a very nice weekend, and speaking to you and hope to speak to you same time, same place next week. Thank you very much.