 Good morning and welcome to CMC Markets on Friday the 7th of August and this quick look ahead to the week beginning the 10th of August and this week equity markets have seen a little bit of stabilisation you may recall towards the end of last week we saw some fairly big declines at the back end of the week other concerns about the resilience of the U.S. economic recovery and I think there was concern that particularly in the face of rising infections in the U.S. Sunbelt that we may see a little bit of destabilisation when it came to the U.S. economic recovery now thus far this week we've seen U.S. markets continue to go from strength to strength and obviously that's a fairly positive thing but once again this this strength in U.S. markets has been primarily driven by the big tech giants easy for me to say the big tech giants of Apple, Amazon, Microsoft, Alphabet and what have you. So the S&P 500 has continued to head back towards those February all-time highs of just above 3400 led pretty much by the nose by the Nasdaq which has continued to push higher and is significantly above the lows that we saw in July to the tune of around about 60% so we've seen significant out performance from the Nasdaq and that has helped support U.S. markets what I would say though is if you take those big tech stocks out of the overall equation the U.S. markets probably don't look as good as perhaps they should do on initial reflection and that's no better borne out by the performance of the small cap the U.S. small cap index or the Russell 2000 yes we have continued to move higher but certainly if you look at where we were say for example at the beginning of this year we're still well shorter there and even below the highs that we saw all the way back in 2018 so certainly once you strip away the veneer of the blue chips the recovery in U.S. stocks has been much more muted now in terms of the the German Dax we've seen a little bit of a rebound at the beginning of this week after the declines at the end of last week you can see that here Thursday Friday Monday Tuesday Wednesday Thursday Friday so on the Monday we saw a fairly decent rebound after the declines that we saw at the end of last week and we look as if we probably will finish this week in positive territory I'm not withstanding today's non-farm payrolls report which is due out after I've recorded finished recording this particular video in terms of the trade picture and the economic data picture more broadly U.S. data has actually improved after the scare that we saw at the end of last week particularly around the jobs market and weekly jobless claims came in at 1.18 million dropping from 1.4 million the big question is will that will that time decline in weekly jobless numbers be sustained into August once the enhanced employment benefit of $600 a week rolls off that expired on the 31st of July currently U.S. lawmakers show no indications whatsoever of replacing that with anything else so there's a little bit of a cliff edge there in respect of there will be no enhanced unemployment benefit checks for U.S. furloughed workers or unemployed workers in the absence of a new stimulus plan going forward so all eyes will be on Washington and Capitol Hill and whether or not the Democrats and the Republicans can see past their ideological differences to try and put together some form of stimulus plan to cushion the blow of the loss of that $600 a week payment and that in that context this week's weekly jobless claims numbers are likely to be very instructive in that regard and they adieu out on the 13th of August we've also got U.S. retail sales coming out on the Friday the 14th of August and again that will be instructive in the context of the slowdown that we've seen in U.S. economic data and the lockdowns or the re the tightening of restrictions across the Sunbelt states that we saw put it put you know put together in July now in terms of equity markets more broadly and in Europe we've seen a decent rebound of the 200-day moving average for the DAX certainly the most recent Germany trade data and for June it was very positive but you would expect it to be given the fact the German economy was only just coming out of lockdown and as such you would expect there to be a significant rebound not only import data but export data as well so that's encouraging but again a data is two months old so the big question is then will that be will that be sustained into July and August and to be quite honest there's no there's no real way of telling against a backdrop of rising infection rates now in Europe particularly Spain and Italy and isolated isolated lockdowns in certain parts of Germany as well so I think you also have to be cognizant of the fact that when you see these rising infection rates while the headline number may be eye catching the reason you're seeing higher infection rates is because there's more tests being done so you're likely to see higher rates of infection even though the death rate is falling so I think it's important that when you see these headlines about rising infection rates you need to factor in how many people are dying as a result of COVID-19 but also how many more people are being tested because it all ties in to the overall picture and just because there's more infections doesn't necessarily mean that you're going to get significant a rowing back of restrictions but we've certainly seen that here in the UK the Prime Minister Johnson has rolled back the reopening of nail bars bowling alleys as a result of concerns about rising infection rates here in the UK so that could well act as a drag going forward and it's certainly a big week for UK data as well as US data so so let's let's have a quick look at the FTSE 100 first and foremost again looks like we're going to see a positive week not quite reversing the losses of the previous week but nonetheless we do appear to have stabilized just above five thousand nine hundred we've come back the big worry I have about this particular index is the lack of really impulsive move through six thousand three hundred that's a really big top there and it's proving to be a very very difficult nut to crack having said that the fact that we weren't able to sustain the move below five thousand nine hundred is encouraging on the margins but we have seen significant underperformance on the back of the FTSE largely I think as a result of the fact that the pound has managed to consolidate a foothold above 130 and that is acting as a little bit of a break on the dollar denominated earners in the FTSE 100 so let's move on to the cable as we can see from this chart here we've seen a decent move to the upside we're running into a bit of a wall at 132 also happens to coincide with these March highs here but also these peaks in January as well around about 132 20 so you've got a big tough nut to crack there but if we basically drill down into this data here 130 or 129 80 is acting as a decent area of support these long shadows on these two candles here that I'm highlighting suggests that there is a little bit of pent up demand on the back of this weaker dollar obviously yield differentials have eroded away from the dollar and that is help and that has helped exacerbate the sevens the seventh successive weekly decline in the greenback that we've seen over the course of the past few weeks but there does appear to be some evidence of a little bit of a rebound in the dollar at the moment and as such I'll be very very cautious about being overly long sterling anywhere near 132 unless we get a really impulsive move through here which is going to take us back to the highs that we saw in December around about 136 and we've also got the fact this is showing as a little bit overbought so we've seen the Bank of England the Bank of England was probably not as dovish as it could have been but nonetheless I think there is some skepticism about the Bank of England's forecast for the UK economy going forward and ultimately that's all they are forecasts and the Bank of England Bank of England prediction record hasn't been particularly great there's also the fact that we've got some very important second quarter GDP numbers out on the 12th of August along with some manufacturing and industrial production numbers for June as well as unemployment and jobless claim numbers for June and July so the 11th Tuesday the 11th Wednesday the 12th are likely to be big days for the UK economy but again and I said this before they're very much backward looking so let's start and look at the UK economy but we do really need to basically put any drop in second quarter output in context of the drops in second quarter output that we seen from the likes of Spain Italy France and Germany Spain saw a second quarter output drop of 18 and a half percent Germany saw them on what is 10.1% drop in output while the US saw a quarterly drop in output of 9% so the UK estimate is going to be anywhere between 15 and 25% that's not going to be a surprise it's going to be bad the big question is how quickly can the UK economy recover that lost output and that remains the big unknown and certainly in terms of industrial production and manufacturing output we did see strong rebounds in May of 8.4 and 6% in terms of manufacturing and industrial production that hopefully will have continued in June if it does then this preliminary GDP number could well be as worse as it gets and you could actually see subsequent upward revisions so anywhere between minus 15 and minus 25 the consensus is anywhere between that number because if we look at the monthly numbers we saw a 20.4% fall in April and a 1.8% gain in May June should be better than that which would suggest that over the course of the last three months that anything below 20% and anywhere close to 15 is probably likely to be a fairly decent number minus 15 I would say so anywhere mid-teens you know I take that given the given the slowness that some of these lockdown measures being eased has taken let's not forget it wasn't until in the middle of June that non-essential shops were allowed to reopen in terms of UK unemployment the ILO measure really isn't worth the paper it's written on it's been at 3.9% for the last three months and really doesn't take into account the number of workers that have been put on to furlough so it's really about the weekly jobless claims numbers and in June these came in around about 7.3% so certainly be looking for a further fall in those numbers in the July numbers I think in terms of the overall numbers to get a better idea of what the jobs picture looks like in the UK economy is comparing the number of people on the payroll before March and the number of people on the payroll now now this was 660,000 people lower in the June numbers than it was in May so that gives you an indication of the hit to the labour market as a result of the lockdowns so in terms of the July numbers that will be another decent comparative when it comes to estimating how many more people have returned to the workforce and we've seen certainly seen an awful lot of negative headlines about thousands of job losses from companies that have decided that there's no point in keeping these people on furlough because there's very little chance that they're going to get in the jobs back when normal service run is used so that's the pound does look a little bit negative at the moment and certainly in terms of this daily candle which would seem to suggest we may get a fall back towards 130 and a retest perhaps of 127.60 as the dollar recovers some of that lost ground certainly in terms of euro sterling we're seeing a little bit of weakness there as well finding a decent area of support through 89.80 that's really the big level for euro sterling if we don't fall below 89.80 anytime soon then the likelihood is we could go back and retest these peaks back up here just below 92 between 91.30 and 91.75 so keep an eye on that but if we do break below 89.80 and we could see a sharp move towards 88.87 euro dollar also showing a little bit of weakness it's amazing how similar this particular chart looks in the context of the cable chart finding the areas a little bit thin anywhere above 119 personally I think the euro dollar should not be this high I think the likelihood is a bit like cable we could see a fall back below these lows that we saw earlier this week around about 116.80 which was the lows on Monday we fall below 116.80 and we could see a drift back towards the 50 day moving average over the course of the next few days what we're also keeping an eye out for this week is obviously US retail sales that's going to be a fairly decent bellweather of how confident the US consumer is relative to the lockdowns or the re-lockdowns and the new restrictions that came in in July we've seen pretty much a v-shaped recovery in those retail sales numbers but I think expectations for July are likely to need to be tempered quite a bit expecting still see a positive number of 1.4 percent however I think that's a good chance that this might be a little bit on the optimistic side given the recent sharp falls and consumer confidence we've seen for that same month and those numbers are out on Friday earlier this earlier today we saw the latest Chinese trade numbers for July once again a little bit disappointing imports fell short of expectations and that would suggest to me that internal demand continues to remain a little bit on the light side retail sales and industrial production for July again on the Friday one thing that I think has struck me about this recent Chinese retail sales date was how weak it's been relative to where it was a year ago you know ever since the lockdown was eased we've seen declines of minus 7.5 minus 2.8 minus 1.8 between April and June expectations for July for a measly gain of 0.2 percent that still suggests to me that even though the industrial side of the Chinese economy has recovered or appears to have recovered because certainly demand for oil and other raw materials has bounced back quite nicely the same can't be said for consumption that combined with the fact that President Trump has announced bans on TikTok and WeChat which is owned by Chinese company Tencent I think what I'll be looking for with respect to the July numbers that we need to get an idea of whether or not these retail sales numbers tally with this week's latest market updates from the likes of Tencent and Alibaba because they are both set to report to the market this week as well and that should give us a better insight into consumer spending patterns of the Chinese consumer Chinese retail sales data or any sort of Chinese data you can always argue it may be it may not tell the whole picture it's much more difficult to fudge data from Chinese e-commerce companies like Tencent and Alibaba so I think they could be a much better a bellwether or indicator of what the Chinese consumer is doing than the actual government official data so let's get we'll certainly be keeping an eye on that going forward in terms of the earnings picture I quickly look at this week's earnings announcements we have got we've got intercontinental hotels prudential and lift those are the three that stand out wouldn't be a weekly market update we're looking without looking at gold more record highs this week I've written about that on the news and analysis section of the CMC markets website and its relationship with silver and the prospect for further gains there but certainly I think what we're seeing at the moment is it's looking a little bit overextended but I would still expect to see it to go higher now that we've broken above the previous record highs of 1920 any dips are likely to find support in and around that area there but in the short to medium term the trend is your friend and it's pretty much the same for silver prices as well with the likelihood is that we could see we could we'll see a move towards $30 in the not too distant future in terms of the companies that are reporting as I say three stand out intercontinental hotels they own Holiday Inn and Crown Plaza and obviously they haven't had the best of time in its last quarter revenue per room was down 24.9% as a result of a various lockdown restrictions airlines also have been hammered as well but I think what we've seen from hotels is they've managed to hold up better than airlines simply because I think even if you can't get international travel you should be able to get any somewhat income from your domestic market so the big question that we need to ask ourselves as we look towards the second half of the year because this will be the first half numbers of intercontinental hotel is what sort of improvements have they seen in the greater China region because obviously greater China has been open an awful lot longer certainly in terms of the US and they expected revenue per room to be down 75% year on year and 52% down on the first half so I'll be interested to see whether or not they come in close to those expectations in terms of the actual key levels on that you can see that there 3473 intercontinental hotels we've also got Prudentials Asset Manager and Reinsurer Prudential had a little bit of a week rebound again as significant exposure to the Chinese market and in May Prudential said that Asia sales had seen a 24% four year on year to the problems due to the problems in China and Hong Kong the interest to see whether or not we've seen a rebound in that though management I think have played down expectations of what to expect in Q2 so in July Prudential also completed $500 million equity investment by Athene life into its US business it's divested its UK operations and really what happens in Asia and what happens in the US is particularly important for this particular asset manager and reinsurer here last but not least in light of Uber's results earlier this week people will be looking for Lyft's results to see how much of a hit their revenues took as a result of the shutdowns that we saw in the first quarter of this year active ride is in April fell by 75% for Lyft so it'll be instructive to see how much of that they've managed to recover in May and June so as I say I don't know what the non-farm payrolls number will be like when this as I'm recording this prior to the payrolls number the expectation is of around about one and a half million new jobs an ADP disappointed earlier this week 167 000 only against an expectation of about one and a half million but off saying that there was a two million up with a revision to the June number so you know on horses for courses on the balance of probabilities is actually better than expected over a two month period even if the July number was disappointing so I think the big question as we look forward is how much disruption will there be as a result of some of the lockdowns that we saw in July this July payrolls number probably won't reflect that given the fact that it only goes up to 14th of July so we'll probably see the full effect of that in the August numbers in any case in the meantime I'd just like to thank you all for your company today thank you very much for listening and hopefully you'll have a good weekend and I'll speak to you all same time same place a week from now thank you very much for listening