 Good morning and welcome to CMC markets on Friday 17th of May and this quick look at the week ahead beginning the 20th of May And it's been a bit of a Down and up week for equity markets. We got off to a very poor start big falls on Monday, and we spent most of the rest of the week actually Chlorine those falls back and I think the macro and geopolitical backdrop has had an awful lot of Influence on how markets have actually been behaving this week I'm still at a little bit of a loss as to Why markets have rebounded given the steep falls that we saw on Monday, but nonetheless There's no question that certainly tensions in the Arabian Gulf Greater than they were at the beginning of the week with respect to Iran and And a US military build-up there. We've also seen a deterioration in the trade story with China pushing back on the US in the wake of the imposition of the new tariffs, but more importantly also the sanctions on China's biggest telecoms company Huawei and As we head in to the weekend Markets are starting to pull back After the gains that we've seen over the last three days after China state media indicated that the Chinese government Had little interest in pursuing further talks under the current climate of higher tariffs and hostility Towards Huawei So I think the calculation here appears to be that the US needs to show Some semblance of wanting to talk and any further dialogue may well not happen much before the G20 next month Where there is speculation that president Trump and president g could well sit down and start talking on the plus side We have seen the prospect of tariffs on Automative imports Deferred for six months and I think that has helped in the context of the recovery that we've seen in the German Dax Which is thus far? Respected the trend line support from the lows that we've drawn in From the end of last year and I think that's pretty much where I'm going to start as we look ahead To the upcoming week because I think as we look ahead to the week ahead There are a number of key There's a number. There's a number of key items that I will be paying particular attention to Obviously we have the European elections which are due on the 23rd That's having a significant effect on the political situation not only in Europe, but also here in the United Kingdom But also we've got the latest Fed minutes on the 22nd of May. We've also got the latest UK Inflation numbers while we will we also have German GDP Which has shown to have bounced back quite strongly in the first quarter coming in at 0.4 percent That's likely to be confirmed Alongside some flash PMIs from Germany and France which are due out also on the same day as the European elections the 23rd of May So that's really I think the backdrop that we're looking at We've seen a decent rebound off the train line support from the lows December last year in the Dax We've also got the 50 day moving average which is acting as a decent area of support as well so any pullbacks On the Dax are likely to find some fairly decent support In and around That 50 day moving average in that trend line there. So that's the key level I'm looking for on the downside on the upside obviously the previous highs Just above 12400 if we look more closely at the s&p 500 we can see that we've come back to within touching distance of 2900 But nonetheless, I think we are still looking A little a little bit a little bit toppy in and around these sorts of levels But nonetheless we have seen some big falls the oscillator is a little bit oversold and There I think there is there is certainly potential For a squeeze back higher in the absence of any further deterioration in the trade rhetoric because unless something Significantly happens over the course of the next three to four weeks I don't think the overall trade outlook Is going to change too much talk or further talks between china and the us are likely to be broadly Risk positive if we look at the footsie 100 We can also see from this chart here that we've seen a decent rebound On tuesday of this week. We had a very nice bullish Daily reversal here which rebounded off the mid 70 100 70 150 We could well retest the these peaks around about 7380 which coincides With the peaks around about here And the lows that we saw here. There is a little bit of what I would call congestion A congestion zone where buyers and sellers could find a little bit of a bit of equilibrium between 7380 and 7470 400 Okay, so let's look at The key the key the key measures for this week and let's look at it through the prism of the pound against the dollar book We've seen some big declines over the course of the past five day a drip drip drip of negative news talks between The labor party the uk labor party and The conservative government looks to be on the brisk Looked to be on the brink of collapsing, but to be quite honest. I never really held Particularly high hopes for them in any case. I think they were probably window dressing For the politicians to give the impression that they were looking to arrive at a solution But I think the politics still remains very intractable ahead of the european elections, which is due to take place on thursday And these elections are likely to deliver a significant Bloody nose to both the labor and conservative parties as they lose votes to the brexit party More broadly, I think these elections are likely to see the advance of euroskeptic parties pretty much across the block And I think going forward They're probably going to influence policy the policies of the european union european commission Over the course of the next three to four years Which whatever whatever happens with these european elections the status quo Is not likely to be maintained politics is likely to become Much more difficult and that's before we even talk about italy and the prospect of a much more disruptive core Or nexus of me peas over the course of the next three to four years We've also got the latest fed minutes now This week's fed minutes are likely to add further color to the debate about future FOMC policy expectations Much has been made of the use of the word much has been made of the use of the word transitory In recent discussions over its use and in the context of recent comments from fed chair j pow Certainly the market is pricing and the prospect that we could well see a rate cut By the end of this year now much will depend on the direction of travel on the data front Now I think if we start to see a pickup in inflationary pressures Um, then the prospect of a rate cut will recede however If inflationary pressures continue to diminish then the debate may move to the potential for a rate hike so I think in terms of the fed I think the narrative is going to be very very important Certainly coming out of the minutes as to whether or not it's likely that we see a rate hike at the moment A rate cut rather at the moment. It's a good idea to keep on keeping on us yields. They are lower Um, I think if there's any type of hawkish interpretation you could see Yields edge back up again. We've also got uk inflation data But I don't think they're really going to add to the overall picture of the uk economy. We could see cpi Tick higher above 2% On the 22nd Of may and I think that'll be the impact of higher energy prices and council tax bills feeding into the headline numbers So even though headline cpi hit a two-year low in january coming in at 1.8 percent We could see it go above 2.1 or 2.2 percent That's not really going to affect the overall narrative around the cable It's cable weakness. It's based on the politics. It's past. It's based on a perception That tereza may is in the dying embers of a premiership We're likely to get a new conservative party leader potentially a new prime minister And also could increase the likelihood of a new election and the potential for a labor government Under the auspices of jeremy corbin So there's not really too much optimism baked into the cable price And if we do break below this 127 and a half level then we're really looking back at around about 126 overall On the euro sterling, um, there's also significant resistance in and around the 200 day moving average We can see that baked into the price on this daily chart here if we can see this this red line here We are looking a little bit overboard. We've broken above the 50 day We've broken above the range highs so we could go and retest the 88 level in the short to medium term It's also a big week for company announcements royal males fully your earnings are due out on The 22nd of may and when you look back when you look at royal males share price And you look at all the hubbub and hoopla about the fact that it was given away at a cheap price You can see now that it's well below its ipo price of 330p And that's really no surprise to me Given the fact that it has a very big loss leader in terms of its letter delivery It's it's letter delivery service So the big lows currently in and around these levels of around about 230p we could well see further declines The outlook doesn't look particularly positive for royal male But an awful lot of that bad news is already priced in we've also got marks and spences Um four year numbers also out on the 22nd But I think what could be interesting and it's something that I'll be looking at given the travails Of metro bank and the prospect that we could well See moves to oust either the ceo or the chairman We've seen big declines in metro bank share price of 80 percent over the course of the last 12 months They finally managed to Raise an extra 375 million pounds to plug the the hole in its balance sheet after the incorrect weightings on It's uh On it's um on its balance sheet and the share price is starting to head higher But there are significant concerns and questions to ask about the corporate governance of that bank And that suggests the agm on the 21st of may could be a very farry affair If you want to see what other items are out that i've covered next week You can read that on the news and analysis section of the website, but until next week Thank you very much for listening to michael hueson talking to you from cmc markets