 Hello and welcome to CMC Marcus on Friday the 7th of December and this quick look ahead of the week beginning the 10th of December. Before we move on to that let's have a quick look back at the events of the last few days and we got off to a fairly optimistic start on Monday on the back of the G20 at the weekend. The agreement to delay the implementation of further tariffs for 90 days between the US and China I think did give some optimism that ultimately both parties would step back from the brink but events appear to have overtaken that agreement over the course of the past week or so we've seen huge amounts of volatility. There still appear to be significant concerns about the overall growth path of the global economy. There's also an awful lot of concerns about a potential inversion in the US yield curve and I think that is prompting concerns about a potential recession maybe 12 to 18 months down the line. So against that backdrop we've seen bond markets particularly the yield curve and the middle part of the yield curve start to invert a little and I think that is spooking investors against a backdrop of another Fed rate rise which we're due to get later this month and I think it's calling into question as to whether or not the Fed will be able to continue to raise rates as we head into 2019 and certainly I have my own views on that I think it's highly unlikely given recent events given what the yield curve is doing that the Fed will be able to continue to hike rates into 2019 and actually there is a chance that we could actually find that the Federal Reserve starts to resile from its commitment to raise rates and actually could lay the groundwork for a potential rate cut in the back end of 2019. Now we're not there yet but certainly I think markets are starting to price out the possibility of further rate hikes as we head into 2019. It's a little bit too early to write that possibility off completely but certainly given the direction of yields the low levels of inflation the decline in the oil prices I think it's quite likely that expectations of future Fed rate rises will get dialed back quite significantly and if we are to get further declines in equity markets then we could get talk of a potential rate cut as we head into 2019. Now a number of important things have happened this week notwithstanding the fact that we've broken a number of key supports on European equity markets namely we've broken that 11,000 area on the DAX so from a technical point of view that is very significant indeed and if we're not to see further declines we really need to see a move back above that 11,000 level a consolidation and a move back above that 11,000 level to stabilize and push higher. We've also seen a similar break lower in the FTSE 100 again a break of those lows around about 68, 60, 68, 70. Again what we need to see for that to stabilize is a recovery back above that support level that we've got around about 68, 60, 68, 70 I can't see that happening sadly I think this consolidation here this sideways consolidation could well see an equivalent move from the distance between these highs around about 70, 180 so we could see potentially another 300 point down move from 68, 66 towards 6,500 for that not to occur we need to get back above 68, 70, 6,900 okay so looking ahead it's going to be a big week for central banks got the ECB rate meeting on Thursday I think that's the one of the two big items that are coming up for this week and given some of the direction of travel for European economic data the ECB has a massive problem it's been dialing up expectations that we could see a rate hike in the back end of 2019 given what we've seen in the US given what we've seen over the past week or so that is becoming increasingly a less credible piece of forward guidance and that gives Mario Draghi a significant tightrope to walk and certainly I think in terms of what happens with respect to Euro dollar what it doesn't do I think has changed the overall range that we're in at the moment if you're going to start pricing in a potentially weaker dollar if the Fed is dialing back expectations of further rate hikes then ultimately I think you also have to dial back expectations of ECB monetary policy when they end their asset purchase program at the end of this month Europe's three largest economies are showing signs of distress weak manufacturing data not only in Germany and France but in Italy as well it's a you know a monetary policy in Europe still remains a fairly accommodative and President Macron has his own problems with riots on the streets of Paris so I think looking forward it's going to be very unlikely that the ECB will not at least pull back from its guidance that it could see tighter monetary policy by the end of 2019 so I'll be paying particular attention to the tone of Mario Draghi's press conference as we head into the Christmas period we also have or we should have assuming that Theresa May Prime Minister Theresa May doesn't postpone it the meaningful vote on her Brexit deal and it's becoming increasingly likely that this deal will not pass the House of Commons this is pretty much already priced in so I think even if it gets voted down assuming that it happens if the Brexit deal is rejected I can't see that much in the way of downside for the pound if anything if the deal gets through which doesn't look particularly likely at this point in time then we could see the pound rally we have seen obviously further developments with respect to the European Court of Justice's Advocate General's opinion and it is just an opinion it's not a ruling that the UK can unilaterally revoke Article 50 thus reversing Brexit now there will be a final I think there will be a ruling on that on Monday and that's Monday the 10th of December if the ECJ rules that that opinion is valid subject to certain caveats it will certainly give a significant boost to the remain side of the campaign and there they're I think their ability to try and reverse the outcome of the 2016 Brexit vote now markets will certainly like that ruling and we could well see the pound rally on the back of it from a politics point of view it's going to make the politics in the UK which are already poisonous even more so because you'll get speculation about another referendum potentially a general election which I think is unlikely but if we do get talk of a general election expect the pound to drop quite sharply on the back of that but overall I think the most likely outcome is more fudge more prevarication because at the moment there is no majority for any type of consensus apart from rejecting the deal in the cow in the House of Commons at this point in time what we've also done is we haven't broken this key level around about 126 50 so that for me is the line in the sand for the sterling declines if we move below 126 50 we could go quite a bit low but while we're above that expect the pound to remain a very choppy indeed we do have actually some economic data next week and that is UK wages and unemployment it almost seems incidental to all the politics but it's there nonetheless wages expecting them to remain fairly steady at 3.2% that's positive that's positive is still a tight labor market we've got the unemployment data out that's likely to remain around about 4.1% we also have US retail sales on the 14th of December which should give us consumer shopping habits for the Thanksgiving period of Black Friday and Cyber Monday US economy still looking fairly strong so I think all this talk of recession and what have you is I think a little bit premature shall we say and we also have the latest in Chinese industrial production data and retail sales data for November and the retail sales data will be particularly important given the fact that it will cover the period of singles day of November the 11th so I'm expecting some fairly positive numbers there but I think it's less about the numbers now but and more about some of the technical breakouts and one thing that I have seen and will pay pay close attention to is these trend lines on the S&P 500 and the Dow despite all the volatility despite the declines these trend lines have held and while they do so I think the outlook for US markets still remains broadly positive so that's pretty much it for this this week I've gone on for I think a little bit too long but ultimately hopefully I've covered all of the ground that I need to cover if you have any comments on the video or any comments on CMC markets please by all means leave a Google review more than happy to invite feedback otherwise thanks very much for listening this is Michael Houston talking to you from CMC markets