 Good morning. Welcome to CMC markets on Friday the 3rd of September than this quick look at the week ahead beginning the 6th of September and it's been another lacklustre week for European stocks. However, we still finished the month of August higher for the 8th month in a row with the FTSE 250 once again setting new record highs This week's main focus I think has primarily been on the Friday of the the August jobs report, which is due out later this afternoon and Which has seen expectations adjusted lower to some weaker than expected US economic data over the course of the past Couple of weeks. I mean this week this week alone. We've seen ADP come in at around about 320 odd thousand three hundred and twenty five thousand for the second month in a row I needn't remind you that The July jobs report ADP report was similarly weak and yet non-farm payrolls came in around about nine hundred and Forty thousand so Sometimes a weak ADP report doesn't necessarily translate into a weak non-farms report nonetheless Expectations about this August report have been tempered somewhat. We're looking at around about 725 750,000 For that particular number But either way, I think that even if we get a miss on the July jobs report I Don't think we need to be overly concerned That US hiring trends aren't likely to pick up in The weeks and months ahead ultimately a poor report won't change the likelihood of a tapering of asset purchases It will affect the pace it will affect the timing and it will affect the scope of one potentially pushing a taper into next year Certainly the US dollar has come under pressure over the course of the past week or so we can certainly see it in These numbers here obviously the Jackson Hole speech by pow Last week I Think really shifted the focus much more to the labor market and inflation Expectations thinking looking at the em at the em The inflation numbers they are still Quite hot, but they are starting to show signs of moderating Slightly the ISM manufacturing prices paid report fell back again for the Second month in succession. However, we do have US PPI Coming out next week in the coming week and they still appear to be on an upward path So there are there are supply chains supply chain concerns. There does appear to be starting We do start to appear to be seeing Upward pressure in wages in specific sectors And I think the upcoming PPI numbers will be an added indicator As to whether these price pressures that we've been seeing over the course of the past three to four months are showing signs Abating or have further to go now Expectations for August PPI For a final demand to rise by eight point three percent up from the seven point eight percent In July with core prices rising six point six percent up from six point two Now you would think That that would be dollar positive, but actually it's been the it's been the actual reverse And I think there still is an expectation on the part of central bankers and markets in general. I think that slightly so slower pace of US economic growth in the third quarter Will push out the prospect of a Fed tapering to Potentially the beginning of 2020 to That's not to say that we won't see increased sounds From the various Hawks on the FOMC About bringing forward a taper to say for example October I think much of that will depend on the data certainly the debate is ongoing and Certainly Robert Kaplan of the Dallas Fed Showed no signs that he had resiled from his expectation that a taper would start sooner rather than later He'd previously indicated that he might be persuaded to change his mind on the timing of a taper if the data continued to deteriorate or showed signs of deteriorating further. He's not at that stage yet So that I think really Doesn't really call into question when the federal tape which has caused into question the timing of it And that's why the dollars slipped back The Fed meeting on the 22nd of September will be I think very very key in the overall Expectations of when a taper could come But certainly I think in terms of what we've seen over the past couple of weeks the US dollar does appear to be On the cusp of a test of these lows Down here, which is basically where the 50 week moving averages on the dollar index does appear that we could well see further short-term dollar weakness, but overall I can't get too bearish on the dollar even if you take the view that EU inflation is now starting to pick up quite significantly earlier this week. We saw a UCPI hit 3% That was well above expectations and certainly I think makes it for a very interesting meeting next week of the European Central Bank But anyone who seems to think that somehow it means that the ECB will be looking to tighten monetary policy anytime soon Well, I've got a surprise for you. They won't be yeah, they might be additional debate about extending the PEP program But the foot, you know the ECB is likely to remain on hold Well into the middle of this decade I can't I can't see a scenario at the moment Which will cause the ECB to raise rates or push rates up from the currently negative levels So I think if we look back at the ECB rate meeting for this week What we've seen over the course of the past few days as for the euro strength The big test I think for me with respect to the euro is going to be these peaks here Are around about 1,1910 and even higher around about 1,1975 We've got a little bit of resistance coming through this channel line But I drew in through here from these peaks all the way back in January when we were up around about 1,2280 The middle of that channel It's pretty much where we are at the moment Our weak payrolls report Could push the euro to the top of that channel And this 1,1910 area. I would be very surprised if The payrolls report was so weak That it would push the euro up towards 1,20 but stranger things have happened But overall I still remain very much of the opinion That Euro dollar still remains very much sell the rally And certainly I think if you look at the series of peaks through here There's going to be quite a bit of a barrier to euro gains Going through between 1,19 and 1,1950 So So that's Euro dollar Obviously, I think we also have to be cognizant of the fact That we have a German election at the end of this month. It's 26 September I'll be writing about that later this month But certainly I think while there may be a sharper debate amongst ECB policy makers over a PEP extension With the more hawkish members starting to make more noise about the potential for an extension from March 2022 to September 2022 I think for the time being While the hawks may make the most noise They still remain very much in the minority on the governing council And while Christine Lagarde may not be able to get unanimity on any decision She should still be able to get some form of majority when it comes to This week's decision on monetary policy So that's the euro dollar ahead of the ECB rate meeting. We have a quick look at euro sterling We have continued to squeeze higher. This is a four hour chart Which is why it looks slightly different to previous ones now. We can see very much The the euro is in an uptrend at the moment It's basically gaining on the back of the short squeeze that we've seen not only in euro dollar Euro sterling more broadly the slightly hotter than expected inflation numbers But ultimately for the same reason I struggled to see upside in euro dollar I struggled to see much upside in euro sterling either Simply because I think the Bank of England Is going to be much More hawkish over the course of the next few months data permitting The appointment of Hugh pill as chief economist to replace Andrew Haldane Is likely to be a stop to the more hawkish members of Or to a more hawkish outlook If you like even though he will be reporting to Ben Broadbent who is who's one of the more dovish members But certainly if you look at some of the previous commentary From mr. Pill. He has been very critical Of too loose Monetary policy, so it'll be very interesting to see whether or not his pre-bank of england skepticism lasts And continues when he joins the mpc I think an awful lot of people will be looking To see whether or not he's toned that criticism down When he takes up his post and starts commenting on matters of monetary policy going forward So in that context, we've got The latest uk industrial production and manufacturing production data On the 10th of september. We've also got monthly gdp numbers for july And the july gdp numbers are likely to point to A continuation of the economic expansion that we saw in june albeit at a slightly weaker level If we look at cable cable has lagged a little bit Over the course of the past few Weeks in terms of the rebound that we've seen in euro dollar again. This is another four hour chart But we are very much In an uptrend so I think even though on a longer term basis We've come down from the highs that we saw all the way back in the first of june We do appear to be starting to correct back up towards 139 and 140 Monthly gdp in june saw a gain of one percent Certainly there is and that was up from a 0.6 percent gain in may For july, we're expected to see that moderate down from 1 percent to 0.8 But ultimately While gdp growth is likely to slow on a three-month basis. It still remains at a very healthy 3.8 to 4 percent despite weakness in industrial production and manufacturing production and I think one of the One of the more head-scratching elements of recent data When it comes to the uk economy has been The resilience of manufacturing and construction pmis Relative to the ons industrial production and manufacturing dust data Which to all intents and purposes has been rubbish. It's been really really poor Um But you have to basically look at it in the context of what the pmi data covers pmis don't cover the auto sector And the auto sector has been struggling with production issues chip shortages Worker shortages and what have you in july uk car production slumped to its worst level since 1956 Which suggests that this week's august manufacturing production numbers will be similarly Disappointing Various uk automakers have already announced production slowdowns due to shortages of important parts So I think while we might not see The significant weakness in manufacturing industrial production we saw In july it's likely to remain lackluster When the august numbers are released so You know these these supply chain shortages these worker shortages are starting to affect economic output It doesn't necessarily mean It's not for want of a lack of demand It's for want of a lack of supply in terms of key components and key parts So i'm not overly concerned about that because at some point These supply chain shortages will basically the wrinkles will come out And suddenly you'll get a surge in production and that supply demand imbalance will correct itself So So those are those are the key those are the key items for The coming week and and as such I really don't expect that to Act as too significant a drag on the pound going forward the economic figures the outlook still looks fairly positive um wage growth Still looks fairly decent and is starting to pick up and there is a worker shortage so unemployment Even with furlough running off Shouldn't and I say shouldn't in inverted commas Jump up too significantly from the the current levels that we have At the moment though businesses might have to spend a bit more money in terms of retraining Employees and what have you but they should be doing that anyway um In terms of wider economic data coming up over the course of the past Over course of the next week or so we've got the latest china trade numbers now the chinese economy. I think is the one item that might cause a little bit of might cause some rations In financial markets and the stock markets in general because there is growing evidence there Where the economy is slowing down quite sharply Part of it is self-inflicted in terms of a crackdown um on key sectors of the economy And another part of it is obviously covid related disruption Um We've got china trade for august. We've seen over the course of the past few weeks various disruptions at china's ports Um in the last month or so that's likely to disrupt how much economic activity took place in august We've seen lockdowns We've seen chinese exporters having to discontent with supply chain bottlenecks higher costs components shortages factory shutdowns regional shutdowns Um, and we've also got the fact that us demand Is also slowing in the form of falling consumer confidence Um, which would suggest that this week's china trade numbers could introduce Another downside surprise I'll certainly be very very surprised um, if we see A increase on the very impressive numbers that we saw in july Um, recent data from germany also showed that exports to china fell to a one year low So certainly in terms of trade we're seeing slowdowns both from germany and from the us into china So that has got to be reflected or should be reflected In the china trade numbers going forward So, you know that really then beggars the question whether or not the people's bank of china will step in to try and support the economy Now there's no evidence at the moment that They will be overly aggressive In doing that they'll probably just do enough to keep the ship afloat So to speak so that is a risk going forward And that's why we are still seeing the footsie 100 continuing the struggle anywhere near 7200 the one I think the one silver lining that we've got is that the the lows are getting higher Which gives me um, some comfort That we could well Continue to push higher But it is glacial and in some respects it's like watching paint dry But nonetheless, um, sometimes you have to be patient to Before you actually hit the target that you're looking to see so that the footsie 100 I'm still looking fairly bullish The dachs is pretty much dull or as you can see from this chart here We're not really seeing too much In the way Of excitement there been trading in a fairly tight range. There's a decent top at around 16 000 But still finding fairly decent support in and around the 50 day moving average, hopefully When september starts in earnest We'll start to see a little bit more a little bit more volatility, but at the moment Markets are fairly quiet when it comes to the dachs and we've also got the fact that The dachs or shortly in the next two or three weeks And grow from 30 stocks to 40 stocks Um, and the entry criteria for the dachs will change Um, so that could well impact Um trading in a germany's benchmark index over the course of the next two to three weeks As well as the fact that we have the small matter of a german election where it's unlikely to deliver a clear outcome if I cast your mind back to 2017 it took The various parties In the german parliament over six months before they were able to form a government from The delivery of the the election result Are around about on the last sunday in september The new german government was finally sworn in on the 14th of march the following year 14th of march 2018 So given the current state of the polls We can look forward to seeing Six months potentially of german political gridlock On the s and p 500 again Trend is your friend. Just follow the price action. We're continuing to push higher This continues to be the key line in the sand in terms of dip buying for the s and p And I think really the same applies to say for example The nasdaq 100 which has once again made new record highs here and we can lob in the new line All the way through here for want of a better line, which also happens to coincide With the 50 day moving average Just get rid of that um Looking at the cmsc sterling index Not really seem too much to get excited about there. Let me just get rid of that because we don't need it anymore Might draw in a new line with this So a slightly different channel just slightly redrawn it Rebounded off the lows here Big question is whether or not we'll start to see a return back to these peaks We saw back at the beginning of august um Other items to keep an eye out for in the upcoming weeks is there's two in particular that i've got my eye on First and foremost we have gamestop The old main stock the meme stock however you want to call it um I think the big question here is really do the fundamentals matter for a stock The seen huge amounts of volatility since the middle of january and for that um Short interest has reduced markedly um Since the beginning of the year Away from the noise that's dominated discourse. I think the re I think the key thing around gamestop is Whether or not new management can turn the business around and I think the jury still remains out on that um All the free publicity helped boost its q1 numbers by 25 to 1.28 billion dollars in revenues and cuts losses to 45 cents a share But company still faces a long road back Companies bought itself more time. It sold an extra 5 million shares in june Raised another 1.1 billion dollars in the process on top of the 550 million it raised in april Now it needs to start making money Even though Even if it doesn't That probably won't stop the shares from going higher again um After all, I think down is the new up these days where means Memes stops are concerned um Having said that losses are expected to come in at 56 cents a share also worth keeping an eye out for Despite the fact that Really the share price We're not we're probably not going to see much share price action in terms of morrisons Latest numbers given the fact that it's basically Uh, you know in amongst a bidding war um, but It'll certainly give us an opportunity to Look under the bonnet Of the actual business itself um You know these uk's fourth largest supermarket squeezed between the likes of Tesco's and sainsbury's and the young up starts of ld and little now It does appear after an impressive q1 To be Increasing evidence that we're getting a little bit of a slowdown in q2 and it's not surprising. You know, we've seen We've seen the uk economy reopen. We've seen more and more people out and about and while We could well have seen a pickup as a result of euro 2020 The summer of sport and what have you um, there is there is the likelihood that q2 is likely to be See a significant slowdown to the impressive numbers that we saw in q1 In q1 total sales rose by 5.3 percent with online sales showing an increase of 113 percent while fuel sales were back to levels last seen pre-pandemic so I think If we look at q2 according to cantar In the 12 weeks to august like the like sales for morrisons were down 6.2 percent On 2020 levels. No, obviously, you know, these this is a different set of comparatives, but nonetheless Sales are still higher than they were pre-pandemic And morrisons market share has unchanged at 10.1 percent. So I don't really expect these first half numbers to really Shift the share price one way or the other but I think they could certainly pose the question For the two bidders as to whether or not what they're looking to pay for morrisons Is actually worth it if the q2 numbers actually disappoint. So Certainly something to keep an eye out for also releasing their latest numbers Is dunnell group four-year numbers? for 2021 They've they've been they've been an impressive performer As a result of the pandemic and also q2 numbers from Ted Baker So just quickly run through Brent crude This is the daily chart here looking to test the top of this channel here this line's gone So we can now remove it And now actually look at potential for further gains. I've said this before and I'll say it again Crude oil prices are looking fairly well supported But at the moment I'm still not convinced of the case for them to go much above current levels Despite some of the wilder predictions out there gold similar sort of story pretty toppy in and around here around about 1,835 1,840 A weak payrolls number could well Push gold higher A strong payrolls number could push it lower It really is that binary Okay, so That's it for this week Hopefully We'll get a bit more color In the aftermath of this afternoon's payrolls report But in the meantime have a great weekend everybody and See you all again same time same place next week. Thanks very much for listening