 Good morning and welcome to CMC Markets on Friday the 12th of June and this quick look ahead with me Michael Houston at the week beginning, the 15th of June, got quite a bit to digest this week been a very very choppy week seen an awful lot of volatility. We've had to dissect the contents of Fed Chair Jay Powell's press conference, the very dark economic outlook that he painted with respect to the US labor market and the fact that inequality could last another four decades and that millions of people could well be out of work for quite some time. And I think that rather downbeat outlook despite the fact that the Fed's economic projections, while significantly lower than they were in December, weren't really out of the realms of what most people were expecting really did paint a picture of a great deal of uncertainty. But that's not really surprising I mean when you look at when you look at the data that's coming out the uncertainty about a second wave, and I think the fact that markets have been rising fairly steadily. Since those lows in March on the premise that we're going to get a V shaped recovery. I think the fact that we're on course to post our first negative week since early May is actually quite healthy. You can argue that the worst one day decline in US markets since March is probably slightly over over cooking things, but big declines have been nothing new. Over the course of the last three months, you've only got to look at this FTSE 100 chart here on the screen in front of you seen a big one day decline there back at the end of April. We've seen a big one day decline there back at the end of March. We've also seen a couple of big one day declines here in early June. And I think, you know, harking back to my comments last week about the fact that, you know, I don't particularly like this rally. But the fact remains that now we've broken above some key resistance levels and we remain in buy the dip mode that still remains the case irrespective of the declines that we've seen in the past two or three days. The buyer still remains very much to buy the dip but I think what today in this week did offer us was a timely reminder that stocks can go down as well as up. And I think, you know, with all this, you know, irrational exuberance, if you like, it's a good idea. If people remember that because there will be concerns about a second wave of infections, which will slow down some of the reopenings or easings of the lockdowns that we're going to see. I have seen over the course of the past couple of weeks and are likely to see as we head into the middle of the summer and into the autumn. This is not going to be a one way ticket back to the highs that we saw earlier this year. Now you can argue that the NASDAQ has done very, very well to post new record highs. But if you take the NASDAQ out of the equation and you look at European markets in particular, you can see that while we've rebounded quite nicely, we still remain well short of the record highs in Europe, less so in the US. But the fact of the matter is with US markets, even though there are a lot of frothier, it's going to take a significant down move to undermine the upward momentum that we're currently in. So let's look at some of the key chart points for the week ahead. We've talked briefly about the FTSE 100. We've seen a fairly big decline. We popped above the 6,500 level earlier this week. We briefly dipped below 6,000 earlier today. We've managed thus far to hold above it as well as the 50 day moving average and this blue trend line here. And I think that really remains very much the way of things at the moment. We look at FTSE 100. We've seen some big declines over the course of the past three or four days, but we still remain within the uptrend that we've been in since we posted those lows all the way back in March. If we look similarly at the German DAX, it's a very similar sort of story. The market has been overbought. We managed to find a little bit of resistance up around 12,900, which also coincidentally happens to coincide with the lows that we saw in early January and February. So I think if we do go back to those sorts of areas there, the highs that we saw earlier this month, in fact earlier this week, we need to be cognizant of the fact that that's likely to be a key barrier on any rebound, but we still remain within the broader uptrend that we've been in since the lows that we saw back in March. And I also talked about Dow Theory last week as well. And I really want to impress upon you ladies and gentlemen that Dow Theory is a very important component of the way that I look at markets. And when I look at markets, I look at them in the round. So I look at them in terms of the Germany 30, the DAX, the S&P 500 and the Nikkei 225. So if we move on to the S&P 500, we can see similarly here, I talked about the 3,000 level in my video last week and it potentially being a very key support level. It also happens to be just about where the 200-day moving average is. And as you can see, yesterday's decline brought us quite sharply down nearly 200 points. But we have thus far been able to hold above that 200-day moving average and that 3,000 area. And that is likely to be a very key support level on any move back lower towards the 50-day moving average. And ultimately, this trend line that we've got here through these lows from April and May. So keeping a close eye on that. Looking at the Nikkei 225, it's again a similar sort of story held above the 200-day moving average just like we did with the S&P. So again, you're looking at some form of confirmation of a break lower. We haven't seen it in the Nikkei, we haven't seen it in the S&P and the DAX still looks fairly well supported. So we remain very much in by the dip mode. We're seeing a little bit of weakness at the moment. We've seen a decent rebound towards the end of this particular week, but we still look set to close the week lower. And that's entirely a welcome development. Markets do not go up in straight lines. You get these pockets of volatility that will whip any weak positions out. And certainly there will be an awful lot of weak positions given the extent of the rally that we've seen over the course of the past three months. And you need to be prepared for that as we look ahead towards the rest of June. And the rest of the summer. So those are the key levels on the major benchmarks, the FTSE 100, the S&P, the German DAX and the Nikkei 225. So what are we looking ahead towards the coming week or so? Well, it's a big week for the UK, which brings me nicely and fairly neatly onto cable. The cable, it's quite notable that the cable rate has moved more or less in line with the rebound that we've seen in equity markets. And also the oscillator again is looking fairly overbought, but it's been overbought since we broke above this 123, 123, 19, 124 area. So yes, it is starting to roll over. We've seen a nice reversal after holding above the 200 day moving average for three days in a row. But for me, I think the key support level at the moment is around about 125. And while I think equity markets are looking fairly well bid, then I think cable is likely to remain fairly well bid as well. So big week for UK data. We've got inflation data. We've got unemployment data. We've got retail sales data. We've got public sector borrowing. And we've also got the Bank of England rate meeting and retail sales. So you've got the whole kit and caboodle, if you like, of UK economic data. So I'm going to deal with that first and foremost. So as we've seen in the recent US jobs report, the adding back of furloughed staff has helped the US economy add back in on for a lot of jobs. Now, the two labour markets are completely different. So I think looking for comparisons is not particularly helpful. There's also the fact that the UK unemployment numbers tend to lag quite significantly behind the US ones. So it's much harder to draw comparisons. But what I think we can say is that with furloughed workers not being included in the unemployment numbers, the UK unemployment numbers aren't likely to be anywhere near as high. In the short term, as the US ones. Now, the latest ILO unemployment numbers up to and including April is likely to see the UK unemployment rate jump up from 3.9 to 4.6% because the ILO only go up to April. I'm more interested in the monthly jobless claims numbers. Now, in April, we saw that jump sharply to 856,000 jobless claims. I think it'll be particularly instructive to see whether or not that jumps by another significant move higher in May. Bearing in mind, of course, that we've seen an awful lot of headlines about big blue chip as well as smaller UK companies announcing wholesale job losses. Those numbers aren't likely to come through immediately. They will come through in the weeks and months ahead. Companies like Rolls Royce, British Airways, even EasyJet to a lesser extent. An awful lot of these companies won't need the same level of staffing over the course of the next six months as they've done over the last few years. And that will slowly start to be reflected in the unemployment numbers. So I think the jobless claims numbers for May will be the important numbers in this regard. Also, inflation. Now, that again is likely to remain fairly subdued, expecting a decline for May to 0.6% on the headline CPI number. Again, that's not too much of a surprise simply because of the weak demand and the fact that in May the economy is likely to start coming out of lockdown. Economic activity will be slightly more elevated, but it will still be fairly weak. And in that context, retail sales for May actually could see a modest increase after the suppression of consumer spending that we've seen in February, March and April. Because in February, March and April, we've seen successive declines in retail sales. Obviously, retail sales in April were down by 18.6%. A big, big fall. We could see a bit of a rebound in May, but it's not likely to be particularly encouraging, even if it does come in around about four or five percent if you include fuel and other bits and pieces on top of that. We've also got public sector borrowing. That's due out on Friday, and that's likely to be another big, big number. In April, we saw public sector borrowing rise by £62.4 billion, which was more than the entire borrowing component for 2019, expecting to see another £48 billion added to public sector borrowing in May. As the costs of the furlough schemes continue to weigh on the public finances. At the moment, you've got three million people in the UK retail sector currently being paid by the UK Treasury. That is likely to be reflected in the May public sector borrowing numbers, bringing combined borrowing for April and May, close to £110 billion, which brings me neatly into the Bank of England rate meeting, which is due on Thursday. I know I've talked about, I've been talking a lot without really talking about this chart, but what I'm about to say I think is fairly important. We've seen and heard an awful lot of chatter in recent months about the prospect of negative rates being a tool in the Bank of England's monetary policy locker. Bank of England Governor Andrew Bailey has flipped-flopped quite a bit on this particular topic because initially he said that he wasn't really inclined to go down the negative rate route. He says he's now looking at it again, and it's certainly true that there is some nervousness about going down that route, but not only by Andrew Bailey, but also by a number of other members of the NPC. Now we've heard some recent comments from Deputy Governor John Cunliffe about this. He said, while negative rates were still being examined, he conceded that the financial sector would experience or might experience a great deal of pain. Well, you know, no kidding. I mean, have you looked across the channel at what's happening in Europe? Have you looked at Japan and the banking sector there? Now, negative rates haven't exactly done their many favours. So, you know, it's not rocket science to suggest that it's probably going to cause more harm than good. So I think on that basis that the barrier to such a move in terms of negative rates has gotten an awful lot higher. The bars got higher, which means it's less likely to happen in the short to medium term. That won't stop the topic from being discussed, but I think the prospect of negative rates is much further off than say it was to the three weeks ago. And I think it's difficult at the moment to determine what else the Bank of England can do at a time when the unemployment picture isn't as clear as it could be. It'll be probably clearer in September and the economy continues its reopening process. We know that GDP in the second quarter is likely to be awful. The April 20.4 percent contraction in economic activity is going to be testament to that. May is expected to be a little bit better because the economy will be reopening. But nonetheless, it's going to be a difficult quarter. And until such times as we get an idea of how well the economy is recovering, it's difficult to really draw conclusions as to what else the Bank of England can do. That it isn't already doing. So as I say, big week for the UK. Also, the Brexit talks are going to be continuing as well with Boris Johnson set to meet EU Commission President Ursula von der Leyen on Monday or Tuesday of the coming week. So there's going to be plenty of news flow to keep our sterling addicts fairly happy. But what I would say is that we are still in the uptrend that we've been in since early March. And in the absence of any significantly awful headlines, I think it's likely the cable will continue to track higher as long as we are above the 50 day moving average and hold above this trend line here. So let's also look at euro sterling in that context. Again, we've tried to push higher, but thus far we've managed to hold below this 90 level 0.9 0.9020. That was key resistance level that runs through the series of highs here. So keep a close eye on that. I think it's going to be fairly instructive as to how the euro sterling market reacts in that context, but I still remain of the opinion we're in a bit of a range. And likely we go much higher in euro sterling from where we've been over the course of the past month. And we'll continue to track the range that we've been in the past three or four weeks. OK, so we've also got the latest Chinese industrial production and retail sales numbers for May. Now, I think in terms of a forward looking indicators as to how well the European economy, UK economy, US economy are likely to respond as lockdowns are eased. The Chinese economy is fairly much very much a leading indicator. And we've got the latest industrial production and retail sales numbers for May coming out on the 15th of June. And I think if the recovery in the Chinese consumer is any guide for what may happen here in the UK and Europe, then it's likely to be a long road back. Because when you look at the retail sales numbers, they haven't been particularly positive over the course of the past three months. And the latest Chinese trade numbers showed that internal demand within China remained fairly weak in May. So let's not forget that this time last year Chinese retail sales grew an average of 8% year on year. OK, so the last three months we've seen declines of 20.6, 15.8 and 7.5%. That's a big, big drop off in demand. Now, we're going in the right direction because those declines are getting smaller and smaller. But a clear takeaway for me remains one of weak demand and a cautious consumer. So the expectations offer a 2% decline in May. Now, we could get a rebound. We could actually get a positive number. We are approaching the summer in the northern hemisphere and you could actually find that as things get back to normal, people more inclined to go out, they may will start to spend more money. So industrial production expected to remain steady at 5% up from 3.9%. That has been recovering slightly better in China than the actual Chinese consumer. So certainly be keeping an eye on those numbers in terms of the leading indicator and the glide path for a potential recovery in Europe. We've also got US retail sales for May on the 16th of June and the dollars had what I would call a little bit of a mixed week this week. Euro dollars tried to move back above 114 and again found it a little bit of a barrier. Potential bearish key day reversal on the candlestick there, which could suggest that if we do break below 1240 on the bottom of this candle here, we could see a little bit of a roll over back down to 111.5 and potentially 110. And actually if we also look at the CMC markets dollar index, we've also seen potential for a little bit of a bullish reversal here as well. So after very significant run of declines 10 days in a row, we could see a bit of a rebound in the CMC dollar index back towards the 200 day moving average and potentially higher. So I'm potentially eyeing a bit of a reversal in the dollar after the weakness of recent days. US retail sales were expected to see a rise of around about 6.3% again as a result of economic restrictions being eased and the potential rebound in economic activity. Gold prices still fairly resilient, still found a little bit of a base around about 16, around about the 1680, 1690 area with solid resistance around about 1760. Don't expect to see big declines in that in a range. Certainly again, looking to buy the dips on gold prices Brent crew prices topped out a little bit starting to roll over potentially could head back to $32, $33 a barrel, but overall not really expecting a great deal of weakness there, either. Now on the earnings front, it's also a can we continue to see earnings reports coming out. One of the big outperformers in recent months has been online retailer boohoo boohoo.com saw a real roll over in the wake of the economic shutdowns in March and April but since then we've rebounded really really strongly and headed back to make new all time highs, which is not bad for a retailer given the fact that the you know consumer spending has been very very muted. Certainly had a spectacular collapse. But recent recent results have shown that is been able to shrug off the slowdowns in economic, you know, the slowdowns in the economic activity. So what are we, what are we expecting? Well, I think you've got to ask yourself is an awful lot of the good news already priced in. Now, earlier this earlier in May, there was a broker note that suggested that maybe boohoo's cash flow probably wasn't as positive as it could be. There's a short selling note that went out on it now I'm not going to go into details about it but what we've basically seen is that there was a claim that that boohoo was overstating some of the revenues that it was getting from PLT. It's PLT brand pretty little thing. They've since gone out and basically purchased the remaining 34% of that state that it didn't already own for initial 269.8 million pounds. So that came against the claim that it would cost boohoo over a billion pounds to buy out that state. So whether that was a response to the short selling note or not, I think what it does is shot that particular Fox. So I think revenues are expected to see decent increases across all their brands. You've seen decent revenue increases across Nasty Goal, PLT, as well as boohoo, and these numbers are likely to paint a slightly weaker picture. But nonetheless, we could well see a little bit of profit taking given the extent of the rebound since we've seen the March lows. We've also got the four year numbers for House Builder Barclay Group, the company withdrew its guidance. But they did say that profits were still likely to come in around £475 million for the year ended the 30th of April. They've also said that they will pay their dividend, which is due on the 30th of September. The return to work on construction means that the likely hit to their revenues is probably not expected to be anywhere near as big as was initially estimated when they put out their COVID update. And as such, as long as the cash buffer, the £1 billion net cash buffer hasn't been eaten into significantly, then the final dividend or the dividend due on the 30th of September may not come under threat. But that could well come under review. There's 140.1 million dividend due on the 30th of September. So keep an eye on that. They could well consider holding that which could undermine the rally that we've seen so far, even though we have seen a bit of a sell-off in the last couple of days. We've also got potentially the latest quarterly update from Carnival Cruise Lines, given the fact that they actually haven't done any business or haven't seen any revenues over the course of the past quarter. I'm not sure how helpful that particular update will be. So that's it for this week. If you want to basically read slightly more detail on the week ahead, that can be found on the website in the news and analysis section. And that particular report will go live or around about just after 4pm on Friday evening. Otherwise, thank you very much for listening. Until next week, this is Michael Houston talking to you from CMC Markets. Thank you.