 Good morning. Welcome to CMC Markets on Friday the 27th of November and this quick look at the week ahead beginning the 30th of November for we get started. A couple of risk warnings for compliance purposes. As I take you through the events of this week and look ahead to what is likely to be another fairly decent week on the macro level though a little bit light shall we say in terms of earnings announcements and I think what we're seeing and what we have seen over the past week or so is some increasing evidence that an awful lot of people are winding down as we head into December and towards the Christmas break and I think it's not really surprising given the fact that November looks as if it's going to be a very very decent month for equity markets in general. However the past week or so the outlook for stocks as well as the global economy has brightened considerably as the prospect of a number of vaccine candidates along with what looks like it's going to be a relatively seamless transition of power in the US has prompted a bout of optimism an increased bout of optimism I might add that a pathway to recovery is opening up. You can really see that I think born out in the early part of this week when on the Monday and the Tuesday we saw decent gains in the S&P 500. An awful lot of those gains were predicated on the fact that while President Trump isn't going to go quietly he is he is basically setting in train the events for a fairly seamless transition of power to a new Biden administration however obviously that still presupposes that the new US administration will be able to roll out some form of fiscal stimulus in the new year. Now despite this brighter outlook in terms of geopolitical events the path to recovery continues to look fairly long and arduous and what do I say that well despite the fact that France, Germany and the United Kingdom are coming out of or are supposed to be coming out of their month-long lockdowns that really doesn't appear to be the case when you actually look at some of the new restrictions that are being rolled out in the lead up to Christmas. You know if we take if we take France as an example French President Emmanuel Macron has announced a modest relaxation the France's lockdown however there's huge disappointment at bars and restaurants who were told they would have to remain closed until the 20th of January so that's a huge blow to France's services sector. So I think while I think there is some justification here in the United Kingdom that services bars and restaurants have been put into tier two and tier three restrictions from the 2nd of December things could also be an awful lot worse given the fact that France's bars and restaurants aren't even allowed to reopen. So I suppose it really depends on whether or not the glass is half full or half empty. We've had a new budget from Chancellor of the Exchequer Rishi Sunak. Precious little in the way of new measures to help businesses and particularly hospitality businesses get through to March and the potential for a rollout of a vaccine candidate. Certainly we've seen an awful lot of what I would call tweaks and changes promises and what have you with respect to infrastructure to build new roads new cycle lanes invest in 5G invest in broadband. You know it's all it's all it's all sort of looking in the right direction and certainly I think the fact that the UK is set to borrow 394 billion pounds this year has raised a few eyebrows and I think prompted some nervousness about the fact that the Chancellor didn't outline any measures to try and recoup some of that money back but ultimately there really isn't any rush to do that. 30 year guilt yields are around about 0.85 0.86% 10 year guilt yields of 0.3%. I think while we're still in the middle of the emergency talking about raising taxes and cutting spending is is a little bit premature when we haven't even hit a recovery stride yet. Time to talk about recouping some of that will be I think a year from now assuming that we get a seamless path to recovery. So what does that mean for stock markets and asset prices in general? Well we're on course for a fairly quiet end of the week volatility has subsided quite substantially in the past three days we can see that in the form of the S&P here today given the fact that the US is off on its on a Thanksgiving break in US trading for Friday is only like is only a half day anyway so we can expect volumes to decline quite substantially as we run into closer play today. Asia markets have been much more positive the Nikkei 225 has continued to make new fresh 29 year highs and certainly I think the momentum on the Nikkei is certainly an awful lot more positive than it is for other markets more broadly if we look at the Nikkei 225 we can still see that since we broke out above this 24,300 level it's been pretty much one way apart from a little bit of a pullback there and we look as if we're probably going to end the year up in up above 27,000 on the basis of current momentum despite the fact that the oscillator continues to remain very overbought you know we have to go back to 1991 to find out when the Nikkei was last at these sorts of levels and let's not forget the all-time highs in the Nikkei are at 40,000 so we still remain some way short of those 1989 peaks so certainly an awful lot potential for an awful lot more upside in the Nikkei 225 the S&P 500 has thus far managed to hold above 3,600 that for me I think is likely to be a fairly key support level on any pullback if we drill down into that we can probably see that much clearer on the basis of this particular four hour chart here if we go all the way back to the middle of November we could see that 3,600 was a decent pivot on this candle here and here to a lesser extent in and around these sorts of levels here but certainly in terms of a round number I think while we're above 3,600 the line of least resistance for US markets remains towards the upside on any dips lower the DAX is proving to be slightly more problematic it is very much underperforming though not to the same extent as the FTSE 100 but nonetheless it continues to remain stuck very much below these previous peaks of 13,460 and if we select year to date there's a nice little year to date button that I've selected up there that is a very easy thing to do you can basically just select the month or the indicator column and then select the star option there you select it and then it drops into your upper menu here so you then whenever you need it just select it and it will calculate the year to date move for you and as you can see from the year to date on the DAX we pretty much pulled back all the year to date losses on the German market so far this year we also had news out earlier this week that the Germany 30 in September 2021 will become the Germany 40 though the criteria for entering it are likely to be toughened up quite considerably in the wake of the wirecard scandal so it'll be very interesting to see how many of the DAX is current current 30 incumbents actually make it into the DAX 40 in September 2021 nonetheless at the moment we're currently holding above 13,200 and I think as long as we stay above that level we might have another crack at those previous peaks that we saw all the way back in September. FTSE 100 it's underperforming this week it's starting to roll over a little bit after the really decent gains that we've seen so far this week the big level on the FTSE 100 for me remains this 6,500 level here that is significant in the context of this line here if I just extend it to the left like so we can see that it acted as a little bit of a support level all the way back in January 2019 so anywhere near six and a half thousand six thousand six hundred is going to be a tough nut to crack but certainly we're in an awful lot much better shape than we were a month ago when we look at the beginning in November we were down around five thousand five hundred and now we're around six thousand three hundred so we put on eight hundred points in the space of a month so I don't think we can be too unhappy even though we are still significantly lower from where we started the year I think one of the things that is obviously affecting the FTSE more than an awful lot of the other indices is the fact that it has it's very heavily weighted towards UK banks they've they've they've rebounded quite strongly but it also has an awful lot of travel and leisure stocks in it companies like Whitbread who own Premier Inn the International Hotels Group which obviously owns Holiday Inn and then you've got British Shareways as well airline stocks Easy Jet and what have you which are weighing on the index and obviously retail as well in the in the you know next Sainsbury's Tescos and what have you so it is very much a it's very much an index that is geared to the UK economy and I think is why it's underperforming obviously this is also the fact that EU UK trade talks are continuing to be frustratingly slow though time is running out for a deal to take to take shape I think the I think the last date I think for any sort of agreement is December the 10th and we're starting to brush up very very close to that but certainly EU UK trade talks are continuing and I maintain that some form of deal will take place I think there is a risk of an accidental no deal because either side overplays their hand but I think it's you know it will be high either side to start playing Russian roulette at this late stage the fact is that we're still going to see probably significant disruption the beginning of January simply because these talks have lasted so long and any deal that they rushed through is going to have to be very very well it's going to be very very much so rushed through certainly the performance of the pound suggests that the market's surprising in some form of deal and I think the confirmation of that could see a little bit of a pop in the pound but I don't expect it to go surging massively higher Euro area has its own particular problems with Germany also imposing further restrictions throughout December and that is also causing tensions in Europe or by itself because Angela Merkel is calling for the closure of all Alpine ski resorts in an attempt to try and bear down on the rising coronavirus cases that are actually currently seeing a resurgence across the Euro area so now that's sort of a brief praisey of what we're looking at this week quickly go back to the footsie 100 I think if we break below 62 80 I think there is a risk that we could push to the downside if we look at the four hour chart here we can see that there is a little bit of support in and around this 6,300 area 6,250 I think as long as we can hold above these levels here then there is potential for further gains otherwise we could go for a little bit of a roll over but overall I'm still fairly optimistic about the prospects for equity markets more broadly at the moment the trend is higher though I am a bit concerned about the fact that we are starting to lose a little bit of a momentum on the footsie index looking at the cable more broadly we've seen a decent move higher in the pound over the course of the past few days and that's bringing us very very close to a very very key resistance level from the peaks all the way back in 2007 that line there is really really important in terms of future sterling gains and at the moment this 134 area is currently capping cable gains but this peak here in 2007 through the peaks in 2014 if we now zoom in we can see that we're pushing right up against it and it also coincides with these peaks through here so we're at a very very key inflection point a decision point for the pound if we're able to really push push through these peaks here then we could see a fairly decent move higher up towards the 140 level as we head into 2021 and certainly I think that is my bias over the course of the next 12 months period I'm you know I'm very much of the opinion that the pound has the potential for more upside than downside and how it behaves over the course of the next few weeks days and weeks is going to be important look at these series of highs all the way through here we're at a big big level in terms of cable on a weekly chart and how it behaves over the course of the next month or so could be very important in terms of the overall next move higher in the cable rate so if you're tiny short cable at these sorts of levels you need to be a little bit careful yes we could drift back down to around about 132-133 and certainly at the moment that is the safety play short cable with a stop loss above these previous highs but if we do break 135 then we could really see a significant move towards 140 that is that is you know that is the danger trade at the moment what could cause that it's hard to say but I think it's predominantly likely to be more a case of dollar weakness than sterling strength that being said if we look at euro sterling and this particular chart here those of you who are regular listeners and watchers of my videos will know that I've been bearish euro sterling for quite some time at the moment the 8860 level is still a very key support level but again I think it's interesting to note that if we do get a break below 8860 and we get a break above 135 in cable then you could see an awful lot of short sterling positions starting to get scrambled upwards so or covered if you like you could see an awful lot of short sterling positions get covered quite sharply because there's some very key resistance levels for sterling coming up over the course of the next month or so and particularly in December when volatility tends to thin or liquidity tends to thin out a bit you could see some very significant moves in the pound over the course of the next four to five weeks so those are the key levels I'm looking for in terms of sterling 8860 euro sterling 135 cable okay so let's move on to euro dollar euro dollar appears to be pushing higher not to the same extent to the pound but again we are finding a little bit of traction above 118 and a half 119 the ECB is unhappy about the fact that euro dollar is trading a little bit higher if you look at the way the euro's performed over the course of the past 12 months with inflation at zero percent the last thing the ECB wants is a strong euro but that's precisely what they're going to get if they if the dollar continues to weaken and I think that is the big story at the moment for quite some time now I've been of the opinion that the potential for a dollar rebound is has been fairly you know as it has been fairly fairly high I'm starting to revise my view on that a little bit I haven't completely flipped on it but there is a school of thought and the price action is leading me gradually in that direction but maybe the dollar has got a little bit more downside left in it at the moment 120, 190 and a half 120 is still a decent barrier for euro dollar but if the US if a new US administration really wants to weaken the dollar through benign neglect then there's really not much else anyone can do about it and I think that is going to be a significant factor in the direction of the dollar over the course of the next few months more broadly our CMC dollar index we weren't able to sustain a move higher this bullish reversal here didn't play out as I suspected it was going to and we have drifted back down towards these lows here so I'm now going to remove that didn't work wasn't confirmed not a particularly successful trade there and we have actually made a marginal new low so certainly in terms of the CMC dollar index momentum is fading and downside risk is growing even if the normal US dollar index is still showing euro is still showing the US dollar above it's September lows this is basically indicated by this euro dollar price up here around about 120 so dollar weakness does appear to be starting to become more of a thing and I think that is a concern certainly looking at it against the Chinese currency we have seen further gains for the Remninbi there's certainly potential for more dollar downside there my target for the Remninbi is still 6.5 and that would suggest to me that the fact that we haven't reached that yet means that we probably will and as such unless we can get back above this level here which is 663 then we could well see further dollar weakness against the Chinese currency towards 6.5 which in turn will drag the CMC dollar index down as well because it has a much higher Chinese Remninbi waiting than the ordinary dollar index does which doesn't have a China waiting at all so I've talked enough I think about some of the key levels that we've seen so far this week we've obviously seen a bit of a sell-off in gold so I'll quickly cover that for you 200 day moving average ladies and gentlemen keep an eye on that we've seen a bit of a sell-off we've seen a break below 1835-1840 the next key support level lies on the 200 day moving average so if we break below 1800 and the 200 day moving average then we could well see further losses in the gold price towards 1763 which will be a 50 retracement of this entire up move from the March lows to the highs that we saw in August so at the moment the direction for gold does appear to be down towards 1763 but we would only that would only be confirmed on a break below the 200 day moving average so I'm keeping an eye on that for the moment but certainly the lack of any bounce would appear to suggest we're probably going to see further gold weakness against the US dollar particularly if equity markets continue to push higher so looking ahead the key I think the key benchmark for next week the key the key event for next week is going to be non-farm payrolls which is due on the 4th of December I think one of the most encouraging things that we've seen with respect to non-farm payrolls in the US labor market has been the improvement in the unemployment rate we've come down from 14.7 percent in April to 6.9 percent in October now this trend is expected to continue in the November numbers with a further decline to 6.7 percent now weekly jobless claims had until two weeks ago been on a downward track they have now started to edge back up again and that is a worry what we saw I think with respect to the weekly jobless claims was that we hit a low of around about 709,000 711,000 two weeks ago we've since jumped back up to 778 and I think there is a risk that with all the Thanksgiving shutdowns the lack of fiscal stimulus that we've probably seen the low point in jobless claims and we're probably going to start edging back up above 800,000 a week now if we start to do that then obviously the cause for Democrats and Republicans to put together a limited stimulus plan will continue to grow as we head towards Christmas at the moment there really isn't any pressure on US politicians to sort their lives out when it comes to a stimulus plan but I think if we get a fairly weak payrolls report next week and the estimate for next week has come down from 600,000 jobs in November to 500 from the 638 that we saw in October if that continues to come down then I would expect pressure to grow certainly the weakness of the dollar has been showcased quite nicely in the way Dolly Ennis traded we're still in that downward channel so I would again expect any rebounds in the dollar to find resistance up above the cloud resistance and this trend line from the highs against a backdrop of a weakening US labor market other things to keep an eye out for next week are the latest ADP payrolls report which is due out on the Wednesday the second we've also got the ISM manufacturing and non-manufacturing reports from the US economy which again keep a close eye on the employment components of those two reports particularly the services sector and it's going to be the services sector that again will take up most of my attention when it comes to the latest economic data that's due out next week on the 1st of December we've got the manufacturing PMIs which by and large have been fairly positive I think they have been an oasis of hope in the economic activity that we've seen throughout October and November certainly in France and Germany Germany in particular remained fairly strong at 57.9 so we're going to get the final manufacturing PMIs from the likes of Germany, France Spain and Italy as well as China China again looking fairly strong no you know no evidence of a second wave of coronavirus cases in China that the Chinese economy has continued to recover then on the third we have European services PMIs and this is where I think the weak points will continue to manifest themselves if we look at Italy and Spain in particular there's got to be significant concern about activities there as well as France which saw a flash PMI of 38 in its November numbers when it reported them last week that's likely to be confirmed at 38 the fact that bars and restaurants are likely to remain closed until January is likely to weigh on the December numbers as well which means that the outlook particularly in countries like Spain Italy France is likely to remain weak and yet the EU is still arguing about their own fiscal stimulus plan you really couldn't make it up it's absolutely mind-boggling how the European Union in the middle of an economic crisis continue to argue about the fact that they need to do some form of fiscal stimulus we've also got UK services PMI and again that's likely to be fairly soft though I was actually pleasantly surprised to only see a flash reading of 45.8 I was certainly expecting a weaker number than that that could well improve modestly in December about even so the tier two restrictions and the tier three restrictions are likely to mean that any rebound is likely to be modest at best and certainly not enough to pull the December numbers back into any sort of expansion when we come to report the December numbers in January we've also got a whole host of other UK data consumer credit mortgage approvals they've bounced back quite nicely over the course of the past few months particularly mortgage approvals which are back at levels last seen in 2007 as home buyers take advantage of the stamp duty stamp duty changes which are due to expire at the end of March in terms of earnings there's not really that much to talk about when it comes to UK numbers there's go ahead group they basically run the franchises for southeastern and south and southern and Thameslink railway their first quarter numbers not really expecting anything particularly spectacular there however we do have snowflakes third quarter numbers which are due out since first numbers since their IPO so there's an awful lot there's not an awful lot of price action there but certainly I think when you look at the IPO price of $120 a share and where it is now over $300 a share you still got to ask yourself whether or not the there's any further upside in the share price but at the end of the day what does it matter when you've got high-profile backers like salesforce and Warren Buffett's Berkshire Hathaway who basically invested $250 million each in the business and over $500 million in that particular business in a business where snowflakes nearest competitors are the likes of amazon and google so those numbers are due on the second of December and then we've got zooms and numbers on Monday and these numbers have taken it or their share price has taken a little bit of a dip over the course of the past few weeks mostly on the back of what I would call the reopening trade so you can sort of time it from when the vaccine news started to hit the wires and as a result these home working stocks these what I would call online stocks have taken a little bit of a knockback but when you consider how far the shares are up so far this year we're always due a little bit of a callback so their third quarter numbers are due out on the Monday and certainly there's no doubt the zoom has done very well but I think in terms of its infrastructure there are signs of growing pains there's been a couple of outages in recent weeks and months which suggests that the infrastructure has started in the creek and that would suggest that maybe they need to do an important lot a lot more investment in terms of supporting their architecture so I think the fact that they're also competing in the same sandboxes the likes of Webex, Logmeon and Skype maybe have prompted them to up their games but having said that profits are still expected to come in around about 75 cents a share however I do question whether or not a company that came on to the market with a valuation of nine billion dollars nine billion dollars is worth the market cap currently of 125 billion dollars but I suppose that's really another story anyway so that's it we've also got sales force latest numbers they stuck in a bid for slack technologies last week we could get some further news on that but other than that I think that's pretty much it for this week ladies and gentlemen I'd like to thank you very much for listening wish you all a pleasant weekend and I look forward to actually seeing some of you or hearing from some of you in our non-farm payrolls webinar on Friday the 4th of December which starts at 1.15 pm so if you're interested in that that then please sign up for that on the CMC Markets website so that's it for this week thank you very much for listening this is Michael Houston talking to you from CMC Markets