 Hello and welcome to CMC Markets on Friday the 6th of July and this quick preview of the week beginning at the 9th of July Before we get on to that I think it's important that we look back at the events of the last few days And I think if anyone was in any doubt whether or not President Trump was serious when he promised 50 billion dollars worth of tariffs on Chinese goods. They have their answer They kicked in at midnight tonight and there's an initial 34 billion worth of tariffs on goods ranging from electric vehicles To industrial lays and other components and machinery Used by us manufacturers now as i'm recording this video China hasn't as yet retaliated in kind That being said They are likely to do so on us Farm exports like soybeans Um As well as obviously crude oil and a whole host of other us goods to a similar amount around about 34 billion dollars now President Trump did ratchet up the rhetoric in a speech earlier today in Montana And um, he suggested that if china did retaliate with respect to the tariffs that have been implemented today that The us has in abeyance the prospect of another 200 billion dollars worth of tariffs on chinese imports And as well as um another 300 billion on top of that totaling 500 billion dollars of tariffs on chinese goods i'm not really sure whether or not actually um us does that amount of business with china but Hey, ho We'll have to see how that plays out But ultimately equity markets appear to be Shrugging off the fact that the shots the opening shots have now Been fired and i think really now the big question is What happens next and at the moment i think there is an expectation that maybe we'll get a tit for tat response from china and The the the dialogue could well continue for quite some time yet I think what's also helped equity markets This week is some reports Out of germany that president trump had made an offer To german car executives always the german ambassador or the us ambassador germany had made Unafford to german car executives that the us would suspend the threats Of charges on autos if the block also removed equivalent charges on us cars Now while that seems a very nice solution to a very prickly problem Things are never that simple And ultimately i think if tariffs are dropped between german automakers and us car makers they would have to be dropped not only for The rest of the european union But also japanese car makers south korean car makers under the terms of wto rules. So There are a significant number of hurdles to overcome before that even becomes a possibility And furthermore, it's not likely that Smaller eu countries would appreciate a sectoral carve out for the for the auto industry Which is more likely to benefit germany and france than the rest of them. So While the offer has been made I think it's unlikely That any progress will be made on that particularly quickly that being said We've seen a decent rebound in equity markets this week and we are approaching some key resistance levels And let's let's start by looking at the german DAX. We've seen a decent rebound Just off the 12,200 level and we're heading back to resistance and the previous lows through here Of around about 12,550 now the oscillator is starting to turn Slightly more positive. We can see that here And I think if we break above this key resistance level at 12,550 Then we could see further gains towards the upside And actually when you look at an awful lot of the economic data that we've seen this week by and large It has been fairly positive looking at the services PMIs. They've actually come in slightly better than expected And I think that has also helped boost the euro. We've had some decent german factory goods orders We've also seen a decent german industrial production number for may So I think the concerns about a slowdown at the beginning of this year I think they're starting to come off the boil a little bit and I think there is rising Confidence that perhaps we could see a nice little uptick into the summer and in to q3 I think there's also an expectation that the ECB Or certainly the ECB is Promoting an expectation that they will raise rates or be it very modestly In q3 and I think there is a perception that maybe that is helping underpin the euro to a certain extent But I would argue better economic data will do that Not whether or not the ECB guides that it's going to raise rates from minus 0.4 percent to minus 0.3 I mean ultimately that's still very very small when you consider the the fact that the u.s Federal Reserve is likely to be raising rates at a much faster rate over the same period of time In that context the FOMC minutes did suggest that there is rising concern amongst some policymakers That the um that they might have to tighten policy may be a little bit faster There is I think there is limited tolerance For higher inflation and there is a concern that the u.s economy Might be starting to run a little hot as a result of those tax cuts at the beginning of this year That being said the dollar is coming under a little bit of pressure and the euro is starting to press towards the upside Now let's move on to the footsie 100 again There's a nice little resistance line here coming in from the highs that we saw in the middle of may Just above current levels at the moment and in line with the 50 day moving average So keep an eye on that daily chart again here We've got the oscillator that is now starting to turn slightly positive heading towards the 50% level At the moment momentum continues to look fairly positive even though I think we're just about marginally positive on the week as a result of the fact that I think the footsie has been hurt Hit particularly hard because of significant declines in commodity prices And that is a bit of a worry if you're getting a bit of a rebound in the global economy The last thing you want to be seeing is a little bit of weakness in commodity prices And that is what we have been seeing over the course of the past few days with big declines in copper and platinum so So the fed minutes this week articulated some concern about The u.s economy running too hot We also had comments this week from mark Carney governor of the bank of england who suggested that ultimately if I think the data Continues to improve the way that it has been And august the second rate rise is very much on the table now. I know what you're going to say We've been here before and we certainly have and I certainly won't Believe it until I actually see them pull the trigger on a rate rise That being said we have seen a nice rebound in the cable over the course of the past few days um, I talked about it Last week when I suggested that this bullish reversal here could signal further sterling gains The oscillator is turning higher But I think if we really want to see a move higher in the cable Then I think we also need to see the uk data that we've got out in the next week or so come in fairly positive And we've got industrial production manufacturing trade and we've also got the first monthly gdp number Um, which should give us a good indication as to how the uk economy is doing on a month to month basis And this will be the first time this number has been released by the office for national statistics And should give us a decent indication as to how the uk economy is doing We've also got um, donald trump visiting the uk next week, which should be a fairly interesting state of affairs Certainly, I think it will prompt an awful lot of wailing and gnashing of teeth from some parts of um, the the uh, the uk population, um when he uh, when he visits london But ultimately, I think what we'll be looking for there, I think is Um, any sort of indications that the u.s. Is going to be particularly sympathetic Towards a trade deal when the when the uk finally Leaves the eu And that is I think that is sort of serving to cap the upside in the pound against the dollar because it's still an awful lot of uncertainty as to what the uk's actual brexit position is when it comes to um Formulating a white paper to give to the eu as to what the uk's position is with respect to trade deal And the irish border We also have china trade data Next week and i'll be paying particular attention to the export data Which for the last couple of months has posted numbers in excess of 12 percent. Will that continue to hold up? In the in the shadow of continued concerns about trade wars We've got chinese cpi and we've also got a bank of canada rate decision Will the bank of canada raise interest rates despite concerns about nafta? um Negotiations which are likely to stretch into the end of this year. I think with the fed hiking Last month. I think the possibility is we could see the bank of canada Hike rates by 25 basis points because simply speaking the the canadian economy does appear to be doing fairly well Okay, so um, that's pretty much it for today and this week. Thanks very much for listening Michael hueson talking to you from cmc markets