 Good morning. Welcome to CMC Markets on Friday the 20th of November and quick look at the week ahead beginning the 23rd of November. First of all, get started with the risk warnings and the disclaimers before I have a quick look ahead at what is likely to be a week that could well be fairly high on the volatility front, given the fact that it's Thanksgiving. This week in US markets are probably going to be a little bit thin towards the back end of the week. But before we start on what's coming up over the course of the next few days, think it's important to look back at recent developments over the course of the past few days with respect to vaccine candidates because we've seen more progress on the vaccine front. We've seen Moderna on the Monday come out with their latest trial results which were 94.5% efficacy rates. And that was then followed up by further trial results from Pfizer who reported 95% efficacy rates with very good results on the over 65 cohort. I think at the moment we've got very encouraging news on the vaccine front and as a result, markets have taken some marks from that. So the big question I think now is what happens next because if we look at what equity markets are doing by and large, they've maintained their resilience. The FTSE 100 is currently up on the day after a little bit of a week, a little bit of weakness at the beginning of the week. And I think a large part of the reason for the weakness and maybe the little bit of a pause is that markets and investors are now wrestling with a little bit of duality if you like. Yes, the vaccine story is a very, very positive one. And while we've seen some decent gains in the past week or so, on the back of recent reports about several vaccine candidates, there's the AstraZeneca and Oxford University vaccine candidates, which is also reported to be looking fairly positive. Markets now appear to be turning their attention to much more short-term factors because ultimately, whatever you say about the vaccine, it's very much a deliverable that is at a significant predetermined point in the future. So you could argue it's an oasis in the distance in terms of what the markets are focusing on at the moment. The main focus now is now how do we get to this oasis, how many businesses will fall by the wayside before we get there, and what sort of economy will be left if politicians don't step up to the plate. And this is essentially where we are right now. And I think this is why equity markets are starting to lose a little bit of momentum. If you look at what politicians and what's been going on at a political level over the course of the past few days, there is no coherent response or no imminent coherent fiscal response on the horizon even in the short to medium term. The UK economy is still in the midst of a limited lockdown, as is France, as is Germany, and you've got the US CDC already urging US citizens not to travel for Thanksgiving, which gives you a little bit of a foretaste of what could be coming our way next month unless virus cases start to come down as we approach the Christmas period. So that is what we're facing at the moment. So a good part of the answer to the question of what sort of economy will be left at the end of the first quarter of next year lies in the hands not only of central banks, but politicians as well. And while central banks are still on the pitch, a lot of politicians notably in the US and the European Union have decided to argue on the touchline in a manner that arguably the team is three nil down with 30 minutes to go, and they're arguing about tactics. We all know that the fiscal response is the next key pillar to a decent rebound to get us through this quarter and the first quarter of next year. Politicians in the US are still no nearer a new fiscal stimulus plan. And now we've got the US Treasury calling time on the CARES Act by year end, which essentially means that 12 million Americans would lose their unemployment benefits and less a new fiscal response is put together between the Republicans and the Democrats on Capitol Hill. Now there are reports that the two parties are talking to each other, but they've been talking to each other since July. And ultimately nothing has come about as a result of that. If we move to the European Union and the EU recovery plan, that was vetoed this week by Hungary and Poland. So it remains no nearer being passed than it was in the summer when the idea was initially put together. And yet we've still got rising coronavirus cases, rising hospitalizations and a rising mortality rate in Italy, Spain and Greece. The three countries that arguably need that fiscal injection the most. So the moment we've essentially got US and EU politicians arguing on the sidelines, while here in the UK, we've got the UK government basically putting forward a fiscal plan at the same time as arguing for a public sector pay freeze. You could not make it up. There will be plenty of time in the future to argue about how all of this is going to be paid for. Nonetheless, for whatever reason, the overarching narrative is not about getting businesses through the next six months. It's, oh, we're going to pay for it all. Well, you know, in World War II, you know, we're politicians arguing about defending the United Kingdom economically and militarily or German bombs are being dropped. No, they won't. Deal with the problem as it is now. Worry about paying for it later. And I think at the moment, markets are sort of erring on the side of politicians will eventually arrive at the destination in the end. It may take some time to get there. But ultimately, we're more likely than not able to get there. But at the moment, there is this little bit of a push pull in terms of what's the economic damage going to be six months from now relative to what is the fiscal response and what is the vaccine? So we're a little bit of a, we're in a little bit of no man's land after the initial boosts that we've seen over the course of the past few days. And that's borne out by this FTSE 100 chart here. We are trading a little bit sideways in what could arguably be considered a little bit of a flag formation. So let's drill down into that and try and do a little bit of technical analysis to try and determine where we are from a trend line point of view. So I'm going to draw in a couple of lines here and here through here and also potentially through here, through here as well. Okay, so basically we've got this period of consolidation through here. If we can break it back above 6460, then I think there's a good chance we could go and retest the peaks that we saw in mid-June. That remains I think for me the next key level going forward for further gains in the FTSE 100. So let's just quickly just get short of them. Don't need them anymore. It sort of gives you an idea of my thought processes when it comes to the next move higher or lower in equity markets. And I know that the oscillator is overbought, but ultimately it's what the price action is doing that's the most important. I will obviously rip up my script when it comes to further gains in equity markets if we break below the 13th of November lows here, which is around about 6,250. So while we're above 6,250 for the FTSE 100, the line of release resistance for me is for a move higher back towards a 6,500 level. Ultimately my end of year target for the FTSE is 6,500. And I continue to maintain that target while those support levels are in place. Similar sort of story for the Germany 30 or the DAX. What's surprising, I think what surprises me more than most is the fact that the DAX is underperformed relative to say for example the CAC Caron, the FTSE Mib and the Ibex. Not really a surprise. I think if you look at the DAX year to date, we're pretty much made back all of the declines from the end of last year. That hasn't been the case in the case of the FTSE Mib, the CAC or the Ibex or the FTSE 100. So you could argue that those smaller indexes, not smaller index, but those other European indices have much more scope to play catch-up than the DAX has because the DAX has pretty much recouped all its losses for the year. Whereas so for example the CAC, the FTSE Mib, they're still over 15% down year to date. And I think that is important, which is why you're seeing a little bit of underperformance on the DAX relative to all the other European markets. Looking at the S&P 500, we have broken above the previous highs, but we're finding it hard going. It's this 3600 level and I think to really gain confidence that we're going to see further gains on the S&P. I really want to see a big consolidated push above 3600 and for us to sustain that move above it. So we can see here that we did close above it, but ultimately we weren't able to consolidate those gains. So I would ideally want to see a weekly close above 3600. The Nikkei is broken to the upside, but it's been the only index to do so. We can see that based on this particular chart here. So we could actually come all the way back to 25,000 to 24,500 on the Nikkei without actually undermining the actual breakout higher. If we look at the NASDAQ, again, the NASDAQ is underperformed relatively speaking compared to the rest of the market. And I think that's largely as a result of the fact that we've seen a little bit of an outflow out of the tech sectors or the more heavily valued tech stocks like Zoom or have you Facebook, Amazon and the like, and more money has rotated back into the bombed out sectors. So that would be travel and leisure, retail, pubs on the basis that as long as politicians can navigate a way out of lockdown, we could well have seen the worst of the losses in these particular sectors. So airlines have seen a big rebound over the course of the past few couple of weeks as have hotels and other travel and leisure as well as pubs. So what we've seen here is a little bit of rotation out of the more heavily valued stocks, i.e. tech stocks into the more negatively valued stocks as a reweighting takes place in terms of valuations. So going to be looking ahead to next week. And we were talking about public finances and why the UK government is so fixated on fiscal rectitude. And that's because we've got a spending review coming up and that's due out on the 25th of November. And public sector borrowing is at a record high or a record post-war high. But you could argue that this pandemic is the equivalent of a war. It's a war against the virus as opposed to a war against bombs and bullets. So for me really, I think the fact that we're borrowing are set to borrow over the course of this fiscal year over 300 billion pounds. Yeah, that's a lot of money. But how much is it relative to lost economic output, permanently lost economic output? You can roll this dead over over a course of 30, 40, 50 years. Borrowing costs are at record lows. We're not in, you know, we're not the only one in this particular leaky boat. France, Germany, the US, Japan, every single country in the world is in this particular leaky boat. What makes us any different? Well, we've got our own currency for a start and we have a Bank of England and a Treasury that are actually talking to each other. So we have a fairly cohesive political monetary policy and fiscal response irrespective of what you think about the actual governmental response, the political aspect. You know, some of it's been absolutely shambolic. But the fact of the matter is we are in a much better place in terms of cohesion when it comes to fiscal monetary policy than the European Union, for example, and the US at this moment in time. Let's not forget that Joe Biden won't be sworn in as president until January the 20th next year. So it's extremely important in terms of the fiscal two-ing and fro-ing that Democrats and Republicans agree something before the end of this year to replace the existing CARES Act legislation. So pay particular attention to that. So anyway, we've got the UK spending review. That's due on the 25th. Obviously, we've seen an awful lot of announcements in the last few days about a green revolution. The spending review is going to be a one-year spending review. It's going to look at budgets over the next 12 months. As I say, it'll flush out. It'll probably flush out last week's announcement by the Prime Minister of a Green Revolution. And we'll cover key areas like energy, infrastructure, the NHS education, and other public services. What does this mean for the pound? Well, I've got to be honest, not much. We've also got news about a potential Brexit deal between the UK and EU with a number of newspapers saying that the 23rd of November is one of the last possible dates to agree a UK-EU Brexit trade deal in order to get ratified in time for the end of the year. You can believe that or you can't or you don't. Ultimately, I think that it's unlikely that they'll agree something next week. But at the moment, looking at the way the pound is behaving, we're still in very much by the dip mode, very much in by the dip mode. So I think a lot of people have been briefing that the final cut-off date is going to be next week. I have a feeling it's probably going to extend a little bit longer than that. And as a result, I think that if we can say that the UK has agreed a deal with Japan and Canada, we will ultimately agree a deal with the European Union. The big question is really a matter of when. And I think it will behave either side to walk away without some form of deal, given the current economic circumstances that we're currently being faced with at the moment. So for me, the big level on the cable is 133.20. If we're able to break above 133.20, then we could well see a retest of the September peaks here and a potential move higher. The dollar is looking a little bit soft at the moment. Certainly, if we look at, say, for example, the CMC sterling index, that still remains very much in an uptrend, looking to retest these peaks around about 980 in the short to medium term. If we look at the CMC dollar index, I talked about this bullish reversal here. Since then, we've gone all the way back down here again. But I think as long as we hold above 970, then the dollar could go for a little bit of a rebound at the moment. It's pretty directionless. And I think it's hard to really establish any really short term direction. But I think as long as we hold above the support on the CMC dollar index, then we could we'll see a bit of a rebound back to 980 and back to 990. We've got the latest Fed minutes coming up over the course of the next few days. That's also on the 25th of November. And I'm not really sure how much value these minutes will offer. They came, you know, a mere 24 to 48 hours after the presidential election result was known. One thing I think we will need to keep an eye out for is obviously, just prior to the election, the Fed lowered the minimum loan size of its Main Street lending program to $100,000 from $250,000 in order to catch more of the smaller businesses which ran the risk of swarming through the cracks of any aid package. But of course, given recent events, there's no guarantee that that loan, that Main Street lending program will continue after the end of this year. That's one of the programs outlined by the CARES Act. So I think whatever new fiscal measures are agreed, the US Central Bank will still be at the forefront of not only the US policy response, but also the global policy response. So I think the discussions between Democrats and Republicans about a new aid package from the 1st of January next year are likely to become much more important in the days and weeks ahead rather than the Fed minutes. All these Fed minutes will do is highlight the importance of these various lending programs. Also coming up, we've got flash PMIs. Flash PMIs are always important. They give you a decent indication of economic activity at any given time throughout a month. They're likely to be pretty rubbish from Germany, France and the UK, particularly on the services side. I'm not worried so much about the manufacturing side, even with respect to many lockdowns. Manufacturing generally does and has tended to perform better even when the various economies were in full lockdown. There was always a significant outperformance in terms of manufacturing relative to services, but services France, Germany and the UK in November have all been in partial states of lockdown. So the services numbers will give us the first indication this month as to the economic shock in terms of economic output for the services sector. Now in the most recent October PMIs, the services PMI for Germany slipped back into contraction territory of 49.5. Manufacturing was a really blue high to 58.2. So even if you get a little bit of a slowdown in manufacturing, the fact that we saw 58.2 in October was fairly positive. It's really how much further into contraction or Germany's numbers slip into November. In France, similar picture services remained weak in October, slowing to 46.5 from 57.3 in July. They were also in contraction in September as well. So with the rising infection rates prompting localised lockdowns restrictions and everything else as we start out into Q4, it's clear that the recovery that we saw in Q3 is pretty much gone. And now we're into much weaker economic activity for Q4 for November. And that is likely to be borne out in the services PMIs, France, Germany and the UK as well, where we also saw a slightly weaker October number, which came in at 51.4. We certainly won't be in expansion territory for November. So the England-wide lockdown came into effect on the 5th of November. Services is likely to be disappointing. And the hope is that everything will start to reopen again in December. So the Flash PMIs, paying particular attention to, we've also got US consumer confidence on the 24th of November. And that is for the month of November. Still seen some fairly decent gains in US retail sales. You would expect consumer confidence to reflect that. We've got the US economy gearing up for Thanksgiving, however. And I think there is a risk we might see a downside surprise in the consumer confidence numbers. There is expectations that it will remain resilient coming in at 101.5. But when you've got the Mayor of Chicago calling for a lockdown or the rest of November, and for that to cover the Thanksgiving period with New York Mayor Bill de Blasio following suit, then I think it's hard to imagine that consumer confidence won't actually take a significant impact on the back of those announcements by the respective mayors of Chicago and New York. And that won't ripple out across the rest of the US as well. I mean, we've got California as well. And the counties there in various states have locked down. That's got to have an effect. That's got to have an effect on consumer confidence. So that's going to be a very big number for the US economic numbers that we've got out next week. Also got personal spending for October and the US final quarter, final third quarter number for GDP on the 25th. That's not really going to tell us anything we don't already know. Personal spending has seen a strong rebound in the last five months. I think that will continue to be the case given the fact that retail sales have continued to remain strong. So let's have a quick look at Eurodollar on the basis of the numbers that we've seen and are expected to see over the course of the past few days. Again, we're in pretty much a sideways range for Eurodollar, but 119 remains a big, big level on the upside. So pay attention to that trend line, ladies and gentlemen, because I think that's going to be particularly key. Every time Eurodollar gets up near 119 or near 120, there is significant interest to sell Eurodollar at those levels. So for me, I think while this trend line, this downtrend line remains intact, then it's pretty much sell the rally on Eurodollar. Trade the range between these lows here and these peaks here. We're in very much Zedsville, Arizona when it comes to Eurodollar. Eurostirling, again, still in the downtrend that we've been in pretty much since September. The big, big level is 8860. I still maintain that while we're below this trend line here, we remain very much in sell the rally and looking for a break lower. And what could be the catalyst for that? Well, a deal. I don't think we're there yet, but that's not to say that we won't get there over the course of the next few days. But it says with everything with the European Union. Nothing is agreed until everything is agreed. We're not at five minutes to midnight yet. The fat lady's not getting ready to sing. She's not even clearing her throat. So at the moment, we just got to wait and see and just trade the levels and try to ignore the noise around the various headlines. In terms of gold prices, we've seen a little bit of a slowdown on the back of more positive equity markets. Again, the big level on gold is this series of lows through here. This is around about 1840. If I draw a horizontal line through there, we can see that quite nicely. There it goes. So 1840, 1836, there are their abouts. While we're above those key supports there, then I think it's very much by the dips. If we do break below these lows here, then we could well see a retest of the 200 day moving average. I don't anticipate gold slipping significantly sharply over the course of the next few days. It still remains, I think, fairly well resilient. On the earnings front, we've got a host of numbers out next week. None of them particularly catch the eye. We've got AR World. They're reporting their first half numbers. Online electrical retailer. It's been one of the big winners in the face of the economic lockdowns. You can see that on the basis of the share price moves that we've seen thus far this year. If we look at that, this is where it was at the beginning of the year. Around about 91, it's now over 400p. So very much a winner there in terms of AR World. So the big question, I think, that really needs to be asked is whether or not all of the good news is already in the price and whether or not we do a little bit of a rebound, a little bit of a pullback given the fact that the move higher has been exponentially significant. Certainly, I think in terms of these highs here, this high here and these highs here, there is potential that we might see a little bit of a topping formation starting to form. It's not confirmed yet, and it won't be confirmed unless we break below 350. But certainly the air is starting to get a little bit thin for AR World. And we've also got the latest numbers from Aviva. And similarly, I think with respect to Aviva, it's their third quarter numbers. When profits in the first half fell 11%, insurance claims rose by £165m, dragged down operating profits. Be looking for news, I think, with respect to Aviva on disposals. In their first half numbers, new CEO Amanda Blanc suggested that she wanted to focus more on the core markets of UK, Ireland and Canada, which might suggest that they may be looking to get rid of the businesses in France, Italy and Singapore. So might be looking for news with respect to that when they report their third quarter numbers on the 26th of November. It's Thanksgiving next week, so US trading is likely to be thinner than normal on Thursday and Friday. But overall, I think this is pretty much it for this week. I hope you all have had a very good week. I hope you all enjoy your weekend. And with that, I'd like to thank you all for your time. Thanks very much for listening. This is Michael Hueson talking to you from CMC Markets, wishing you all a very nice weekend.