 Good morning. Welcome to CMC Markets on Friday the 4th of October and this quick look at the week ahead beginning the 7th of October and The last four days have been a significant contrast to the way markets performed in September. September was a positive month for global stock markets in the space of four days we've pretty much undone all of September's gains as volatility has increased in the manner of Hurricane Lorenzo heading the south coast of England and most of the UK We've seen significant down drafts significant loss of confidence amongst investors as to the global growth story and the next move for central banks as well as future direction of Economic data as we can see from this FTSE 100 chart this UK 100 chart We've seen some big declines over the course of the past three days We saw a little bit of a rebound Towards the end of Thursday, and we are now slightly higher on the day for Friday But nonetheless FTSE 100 is on course to post its worst weekly performance since 2016 and there are a number of factors behind these sudden declines in Equity markets October always tends to be a fairly choppy month for stocks And it doesn't look as if this month will be any different this particular October will be any different So what do we got to look forward to well? Obviously markets are concerned at the moment about the Trump impeachment president Trump impeachment there was the WTO ruling that found in the favor of the United States and Basically gave the US the green light to impose 7.5 billion dollars of tariffs on a range of EU goods Now while that may or by itself or by itself not be a particularly high number Coming as it does at the time that the US-China trade talks are due to restart on the 10th of October next week in Washington It's just another downward pull on Future economic growth Expectations We've also seen a weakening of economic data Throughout the course of the week There's been widespread concern that the weakness that we've seen for all of this year in the manufacturing sector Might start to bleed into the services sector and we have seen increasing Evidence of that with the data that we've seen thus far this week certainly in Italian services PMIs French services PMIs Spanish UK and German PMIs I've all been on the weaker side raising concerns that the European economy the UK economy Could well slide into a technical recession as we head in to the end of the year US data has also been a little bit weaker But before we get too concerned about that the US economy is still Performing at around about 2% GDP at an annualized 2% of GDP So I think the concern that investors have about a US slowdown a slightly Overstated at this point in time That's not to say that the internals of the ISM reports that we saw earlier this week couldn't well Ripple out into weaker payrolls reports going forward But we aren't quite there yet and when you actually look at the prospects of a Fed rate cut later this month The the bar to that still remains quite high given the splits amongst the voting members of the FOMC Now will this afternoon's payrolls report change any of that narrative Around the possibility of a Fed rate cut at the end of the month Possibly we could be getting we've got a series of Fed speakers speaking later today after today's payrolls report and The tone of their comments could influence how markets perceive the possibility of a Fed rate cut This month later this month over the course of the next few days In particular, I'll be paying attention to Eric Rosengren of the Boston Fed. He has been much more hawkish when it comes to The possibility of future Fed rate cuts. He's dissented to the last two. So I think him He and Esther George any comments that they make over the course of the next few weeks need to be monitored closely in terms of a monetary policy Shift as we look towards Whether or not the Fed will be able to coalesce around a consensus position on a rate cut. So US payrolls later today Expectations are for around about 145,000 which I've been told apparently is the weakest consensus forecast in the last three years Well, even if it is Payrolls growth on a month-on-month basis this year is trending at 170 and the weakest payrolls report this year was around about 32,000 and that was back in February when the US government shut down and we have also seen a 75,000 print this year as well and the sky didn't fall in so the US economy is still growing US pay growth is still around about three point two three point three percent And the unemployment rate is around about three point seven percent if wages comes in weaker Then that could be a concern that maybe the US labor market is starting to weaken Also, if the unemployment rate starts to edge up that could also be another sign that US unemployment at the US economy Is starting to weaken certainly the internals of the ISM have shown that employment growth is slowing now That could manifest itself in today's payrolls report or it could take another two or three months to shake out We will know more at the end of today as we look ahead to next week We've got a couple of items to keep an eye out for actually three key items. I've got my eye on obviously the latest Fed minutes The most recent Fed decision turned out to be a rather contentious one A rate cut was widely expected, but the level of dissent In terms of the divisions on the committee was not We got dissents from the hawkish as well as the dovish side So how those dissents start to coalesce back to the middle ground of a rate cut Will be particularly Important in the context of the overall debate So I certainly think in the context of how we go going forward It's going to be very very I think the Fed minutes could well be a little bit stale given some of the data that we've seen recently We've also got the latest china trade data for september Now a lot of the numbers we've seen out of asia recently have been a little bit weak We've seen weak export growth from japan. We've seen weak export growth out of south korea So I'll be paying particular attention to the export numbers out of china for september Also the imports data for china has been worrying as well every month this year We've seen big declines in imports with one particular exception, which was Which was in which which was in around about april which saw a rise of four percent so Is internal demand in china continuing to remain weak on the 10th of october us-china trade talks restart So that's at the time of writing. We could well find that they could get delayed But at the moment chinese officials including chinese vice premier lee here are due to lead a chinese delegation to Washington to restart those trade talks now earlier this year talks broke down When they were in the words of steven manukin 90 done So the big question for me is whether or not they pick these talks up from when they were 90 done or whether they start from scratch We've also got some important data out of the uk manufacturing production for august We certainly know from the pm is the manufacturing manufacturing sector Is certainly In contraction territory. I think the big question is whether or not We see a little bit of a pickup as we head towards that particular deadline, but we are talking about august here So we could we could get a weak reading on the back of maintenance shut downs What have you so again important not to read too much into one piece of data given that manufacturing only makes up 12 Percent of the uk economy So let's look at some of the key chart points that i'm particularly going to be looking out for over the course of The next week or so and there have been some significant ones We've seen some big rebounds of some very key levels in the case of the footsie 100 We saw a nice rebound off the 7 000 level also coincides with the february lows, so Keep keep an eye and the january highs here and here So you've got this january peak here beginning of In the 11th of january and then we got another peak on the 21st of january when we phone when we broke above 7 000 We pushed quite a bit higher so 7 000 a very key level This looks potentially like it could be a bit of a hammer On the daily charts if we're able to hold on To that 7 000 level we could start to wedge back up But certainly I think in terms of the overall direction of travel momentum is starting to fade It's a similar sort of story on the dax bounced off the 200 day moving average earlier this week And you'll find that that's going to be a common theme In terms of the charts that I've been looking at over the course of the past Few days bounced off the 200 day moving average We need to really recover back above 12 000, 12 100 But we're still in the downtrend that we've been in since those peaks all the way back in July We haven't been able to sustain a move back above this downtrend line here. So again The direction of travel for stock markets looks a little bit on the soft side In terms of the overall trend that we've been in since the middle of the summer If we do break below the 200 day moving average Then obviously this area of support around about 11 400 is likely to be the less target What's more concerning is the fact the 50 day moving average is starting to lose momentum And is starting to roll over towards the 200 day moving average And if that crosses we could well see a death cross over the course of the next few days and weeks S&P 500 similar sort of story again We've rebounded off the 200 day moving average this week Managed to hold above it a nice long shadow on the downside there every time We've seen one of them over the course of the past few months We've seen a decent rebound, but again the 50 day moving average is starting to show signs of rolling over We could get a rebound around about back to 29 40 or 29 50 29 50 60 is a key level for me If the rebound that we were getting at the moment could sustain and move higher Then we could get it We could get at least a little bit of a respite from the selling that we've seen over the course of the past few days And it's a similar sort of story for the us 30 as well Again, if we look at the 200 day moving average, we're able to hold above it and we're able to rally back so In summary There's some very key levels that we've got to keep an eye out for over the course of the next week or so 200 day moving average on the us 30 the s and p 500 and the dax and the 7 000 level on the footsie Obviously, we also have brexit brexit's always on the menu when it comes to talking about the markets And certainly the recovery that we've seen in the pound over the course of the past few days would appear to suggest that there's rising optimism that even If we don't get a deal in the course of the next few days will get an extension But certainly in the context of the moves that we've seen over the past three or four days You can see these long shadows Either size of the open and the close will tell you that sterling volatility is going to be significantly high Over the course of the next few days in fact Over the next few weeks until we get some clarity as to whether or not the uk leaves without a deal On the 31st of october or whether or not there is an extension If there's an extension then you can expect the cable to get a decent pop back through 124 30 Back towards the highs that we saw in the middle of september Certainly, I think there does appear to be some decent support in the mid 122s for the time being In terms of other things that i'm looking out for over the course of the next week or so We've got some Some reports from the airlines easy jets q4 numbers on the 8th of october. We've also got international Consolidated airlines or british airways latest Latest traffic stats on the monday and we've also got delta rail lines q3 numbers on the 10th of october Otherwise, that's it for this week. Once again. Thank you very much for listening. It's michael qson talking to you from cmc markets