 Good morning and welcome to CMC Markets on Friday the 2nd of August and this look at the week ahead beginning The 5th of August and it's been quite a week for global equity markets coming off the back of less than expected Dovish announcement from the Federal Reserve on Wednesday we've also had an escalation in China US trade by President Trump which was an extremely unexpected development if truth be told Given the fact that China and the US have only just sat back down to discuss their future trade relationship and this escalation by the president to implement 10% tariffs on the remaining 300 billion dollars of Chinese goods from September the 1st I think has really put the cat amongst the pigeons So to speak what it's done is it's prompted a sharp down move in equity markets Undermining, I think some of the expectation that the Fed could well ease monetary policy again in September That was always likely to be a little bit of an each-way bet in the aftermath of the press conference that we saw on Wednesday the 25 basis point rate cut was the least that was expected, but because of a slightly muddled message From Jerome Powell. I think there was a belief that maybe the Fed didn't want to pre-commit to a September rate cut And I think that more than anything prompted some of the volatility that we've seen since Wednesday and And the fact that the the president who still wants a weaker dollar and he still wants the Fed to cut an awful lot more May well have calculated That a further escalation in trade tensions might give him the rate cut that he so desires But the big question is at what cost? Because less well just over 12 months away from getting re-elected I think the last thing that the global economy and the US economy needs now is further potential for trade disruption that being said we are where we are and US markets have dropped sharply the FTSE 100 has rolled right over back below the lows that we saw in July and looks to be heading back towards this key trend line From the lows in December, which currently comes in round about 7300 area, so that's a very very big level there coming in around about these sorts of lows in June So going forward the potential for further declines is very much there. We're seeing Bond yields continue to fall the German 10 year bond is now close to minus 0.5% and The continued weakness in manufacturing data that we've seen over the course of the past few days Has prompted speculation that the ECB may well be compelled to Introduce further easing measures when it meets next month in September, of course whether that will be enough to Help support The economy in the euro area remains very much to be seen But certainly Mr. Trump's intervention over the course of the past 12 hours has really caught markets unawares and Has prompted a very very sharp sell-off in particular in the German DAX. We can see that very clearly here A big big fall below 12,000 if that is sustained then we could well see further gains back down Towards the lows that we saw at the beginning of June around about 11,700 The S&P 500 has also seen some very big falls over the course of the last Couple of days, but again, it's only broad as close to the 50-day moving average Which has in the past proved to be a very pivotal level when it comes to Switching around of market sentiment, but when you look at the S&P in the context of other global markets It is still lagging very much behind. It's still within touching distance of all-time highs so I think that could well be a key leader as We head into next week and that's before we even talk about the US payrolls report Which is due out later today and is expected to show that the US economy The labour market in particular is still in fairly rude health The big question is irrespective of how good or bad the payrolls numbers are will it be enough to help sponsor a rebound in US markets a good number would vindicate the Fed's Cautious stance with respect to its a policy announcement on Wednesday While a lousy number would cast doubt on it The big problem here is even with a good number the escalation by President Trump has muddied the waters With respect to the normal reaction function of the market So there's no guarantee a good number could be treated as a positive signal by the markets If investors perceive that it might push the Fed away from cutting rates sooner rather than later Bond markets appear to think That we are going to get lower rates going forward the US 10-year Treasury is pushed down towards 1.8% It's lowest levels since 2016 so it's clear quite clear what bond markets are thinking the big question is what effect it has on equity markets Anyway, let's have a look at the week ahead because the week ahead while it's likely to be dominated by interventions on Trade also has a number of fairly key announcements coming out notwithstanding the fact on the 5th of August Which is the Monday? We have global services PMI's and those are going to be important in the context of how weak Manufacturing is thus far. We've seen little evidence that the slowdown in manufacturing is weighing on the services side of the European and US economy the big concern is if that weakness in manufacturing Starts to trickle down into the services numbers. So I will be paying very close attention for any signs That the weakness that we've seen in manufacturing is starting to trickle down into Services and that could well change the medium term direction Particularly if there is evidence of a slowdown in services, even though They are still expected to continue to outperform We've also got second-quarter GDP from the UK on the 9th of August It's doubtful as to whether or not those numbers are going to be particularly instructive. We know they're going to be weak We've seen some very weak construction and manufacturing numbers in April and May We did see a little bit of a pickup in retail in June But I think at the best case scenario the likelihood is that they're probably going to come in flat at best And the pound is just above some very very key support levels from 2016 and 2017 the big big level that I'm targeting on cable is 1985 that coincides with the lows that we saw at the beginning of January Obviously, we also have the flash crash lows of October 2016 and that low there really depends on the bank or FX provider that you are currently trading with at the time various various People have it at one eighteen fifty one nineteen one nineteen fifty some a little bit lower But the big big level I think is around about one nineteen eighty one twenty the figure so certainly looking for evidence of a Potential base forming anywhere near that particular level if we break below that then I think really all bets are often You're looking at a potential for a move towards one ten And obviously the all-time lows back in 1985 which were around about 105 80, but we're a long way from that yet Also keeping an eye out for the Aussie dollar the Aussie dollars obviously weakened quite Considerably over the course of the past few days on the back of the fact that the dollar is stronger But also concerns about China the escalation in the US China trades back. That's broken below its tune lows quite significantly and Could well retest the flash crash lows that we saw at the beginning of January but a word of warning here Concerns about a slowdown in China are obviously weighing on the Aussie dollar given how closely the Australian economies fortunes are geared to the growth cycle there But let's not forget the RBA has already cut rates twice this year already once in June once in July now There is an expectation That perhaps we'll probably see another cut in August but I wouldn't bet the house on it We've already heard from RBA governor Philip Lowe that further easing was likely to have little effect Particularly if other central banks act in a similar fashion now that might Presuppose that the the RBA might decide to wait a bit We could so we could still see a rate cut, but that doesn't necessarily mean it's going to happen in august So the RBA rate meeting on the 6th of august They could spring a surprise Keep rates on hold and maybe delay a rate cut until a subsequent month in September or October And that could prompt a little bit of a short squeeze if they do surprise to the upside We've also got dollar canada payrolls or canadian canadian payrolls And we've seen the canadian dollar weakened quite significantly over the past few days Largely on the back of a stronger dollar, but also a weaker oil price We could we'll see a retest of that 133 area, which is the 200 day moving average But also coincides with these series of lows at the beginning of june between 130 250 and 133 So certainly keep an eye on that the canadian economy has seen a decent pickup In payrolls growth over the course of the past three months Unemployment has fallen to 5.4 percent A multi-year low wages have also started to pick up at the fastest rate since march 2018 And we've seen a recovery in consumer spending which augurs well in the context of the overall economy So I don't think the bank of canada is going to be in any rush to car interest rates even if the federal reserve does So that could actually limit the upside in the u.s Dollar against the canadian dollar in the short to medium term. So keep an eye on those key levels there also key other Other items to keep an eye out for hsbc's latest numbers for the first half I don't think we're going to get any Significant surprises here. The share price performance has been pretty unremarkable So I would expect this 640 680 range to remain intact irrespective of what numbers come out I think what will be particularly interesting is we have The latest second quarter numbers from lift and from uber Let's have a quick look at lift. We've seen a decent recovery In the wake of the sell-off that we saw post IPO and we've come back pretty much close to The IPO price range, but we've now started to roll over again. So we've seen a bit of a stabilization in lift shares But I think the big question is will the company show any evidence that its losses Are stabilizing and I think for the recent share price rally to be sustained There needs to be evidence that the company has stopped hemorrhaging cash so Have a quick, you know pay close attention to user numbers, but also pay close attention to The hemorrhaging of cash and it's really a similar story for uber as well In terms of its share price movement again We saw a significant sell-off in the aftermath of the IPO Since then we've slowly clawed that back, but once again we started to roll over So the business has continued to grow last year. It saw it reach 91 million users It generated 9.2 billion dollars from its taxi business Look at its food business uber eats that is also a fast-growing Part of the business it saw 149 rise in revenues Last year to 1.5 billion dollars, but that small bearing comparison to its taxi business But again here similar sort of story hemorrhaging cash Losses at three billion dollars last year and the company also laid off 400 people last month so I think there are concerns that the company will ever get close to making any sort of return For its shareholders expectations for uber are for a loss of two dollars 33 cents per share So that's it for the upcoming week. Keep an eye out on the various Numbers that I've highlighted in this video and thanks very much for listening. Michael Houston talking to you from CMC markets