 Good morning, welcome to CMC Markets on Friday, the 11th of September and this quick look ahead at the week beginning the 14th of September. And what has been, I think, a fairly choppy week after the declines of last week, we've seen a little bit of a mixed bag for European and US equity markets. It looks likely that US equity markets will finish the week lower, however, European markets have been slightly more stable in that they look as if they could well end up the week finishing in positive territory. So while I go through the various disclaimers before I get started, going to be looking ahead at what's likely to be a fairly packed week in terms of central banks, we've just come off the back of the European central bank where there was an awful lot of focus on the recent rise in the euro, whether or not it was exacerbating the deflationary shock within the euro area and there certainly is evidence to suggest that is certainly turning out to be the case. That being said, the rise in the euro has been largely as a result of a weakness in the dollar and ultimately there isn't really much the European central bank can do about that because in a straight fight between the Federal Reserve, ECB, the Bank of Japan or anybody or any other central bank, there's really only going to be one winner. So ultimately whatever the ECB says about their concerns about a high euro and Christine Lagarde basically said that there was no need to overreact to a rise in the euro. The fact of the matter is that it will make a high euro will make it much more difficult for the ECB to meet its inflation target in not only the short term but the long term as well. Not that any central bank has hit its inflation target in the last 20 years, which brings us neatly on to this week's Federal Reserve rate meeting which is shown on the 16th of September. We've also got central bank meetings from the Bank of England on the 17th and the Bank of Japan on the 17th in the wake of the announcement of the departure of Japanese Prime Minister Shinzo Abe. Will his departure change the Bank of Japan's approach with respect to monetary policy? Unlikely. We all know that ultimately the only thing that central banks can do at this point in time is essentially keep the pedal to the metal when it comes to keeping monetary policy fairly accommodative. And certainly Christine Lagarde of the European Central Bank pretty much intimated that was what the ECB is certainly going to do going forward. So let's say we're recapping the current week's trading. Let's start with the FTSE 100 before we get on to the details of the week ahead. And as we can see from this daily chart, this daily candle chart here, what I've done is I've put the price action into a corridor, a channel of price action. As we can see, we're getting slightly lower lows and lower highs as well. That is a worry if you think that the volatility that we've seen particularly out of the US market in the past week or so is symbolic or symptomatic for that matter of a potential short-term peak. Certainly I think reports that an awful lot of the rise that we saw in US tech stocks over the course of the past few weeks has been as a result of complex option transactions on the part of SoftBank, then I think there is a little bit of a cause for concern given the divergence between the cohort of US stocks, these particular tech stocks which are trading well above their long-term earnings averages and the rest of the market, is there a possibility that we could see a period of consolidation for US tech stocks ahead of the upcoming US election? Because I think with the polls the way they are, I think there is a concern particularly for US tech and pharmaceutical stocks that a Biden win could herald or presage a significant change in attitude towards taxation policies towards these particular sectors simply because I think there is a consensus opinion amongst Democrat circles that they don't pay enough tax. So as we head towards the US election I think we could find that some of the upside could be limited when it comes to the US tech sector and the US pharma sector as we get closer to that 3rd of November voting date. Obviously fiscal stimulus is also a big part of the overall equation when it comes to the US economy. It's looking increasingly unlikely that we will see a fiscal stimulus bill, another fiscal stimulus bill this side. The US election simply because the weekly jobless claims numbers don't really incentivize US politicians to up the urgency when it comes to passing a new bill. When you've got weekly jobless claims coming in around about 884,000 a week well down from the levels that we saw a month ago, the urgency really just isn't there and I think that breeds a sense of complacency. Now I think there will be some US data out next week which could give an indication as to whether or not the US consumer is starting to retrench and that is going to be US retail sales for August which are due out on the 16th of September and it's a big week also for retail sales not only is it a big week for central banks it's also a big week for retail sales not only in the US but in China and the UK. So I think this week's economic data, macroeconomic data will give us a good indication as to whether or not the recovery that we've been seeing since the lockdowns earlier this year is starting to run out of steam. Certainly with respect to the UK economy there isn't any evidence of that at the moment. The GDP numbers that we saw last week were still fairly robust for July. Certainly the manufacturing production, industrial production data were also fairly solid. A bit of a concern about services data, a little bit of a slowdown there. So maybe we could see that start to manifest itself in the overall retail sales numbers of the UK economy and we've also got the latest UK jobless claims and unemployment data out on the 15th of September. So let's start with just having a quick look at the various charts in front of me so we've got a fairly decent corridor or channel of price action taking place here. We could we'll see the FTSE 100 rally back to the top end of this but overall we still appear to be in the range that we've been in for the past few weeks or be on a slow downward decline but we are now back up to 6000 level having spent a few days below it. Looking at the DAX there's a much clearer picture emerging of a fairly decent uptrend still intact, still above the 200 day moving average and still above and we are still making higher lows and higher highs. We put in a new monthly high, month on month high earlier this month. So certainly the momentum still appears to be with the DAX. Moving on to US stocks, again despite the recent volatility on the S&P 500 and the NASDAQ, the direction of travel still remains fairly clear. What's significant about this ladies and gentlemen is the fact that we are still above the 50 day moving average on the S&P 500 it's acted as a fairly nice area of support over the course of the past four to five months. So I think despite the falls that we've seen in recent days while we're above the 50 day moving average and the lows here of around about 3,300 then we really may I think we still remain very much in by the dip mode whatever your views are on the underlying fundamentals it's a similar story on the NASDAQ here as well. Again 50 day moving average it's just about held on the daily chart and if we are going to get a breakdown in any of these markets then what we really need to see is a break below the 50 day moving average in both the S&P and the NASDAQ to confirm the move lower. At the moment we're not seeing that and even if we do we could well see a pullback to around about the 10,200 area which also coincides with this series of lows through here which I've drawn in with respect to the red horizontal lines on this NASDAQ daily chart. So looking ahead big question I think with respect to the outlook for the US dollar is whether or not we are going to see a stop or a slowdown in the recent dollar weakness that we've been seeing over the course of the past few weeks which has prompted the euro dollar to go up to the 120 level before retreating. Certainly if we look at this dollar index here we did break lower but at the moment judging by this chart here we do appear to be making a little bit of a recovery you may have noticed I put a bullish reversal in there that any event did not work because we didn't get a confirmation of the break to the upside through these highs here for a thousand and at the moment I think there is significant concern that while we're unable to break through this 1000 level on the dollar index the CMC dollar index which is slightly different from the US dollar index because it has a much bigger waiting for the Chinese currency and a much lower waiting for the euro it's still fairly reflective of a US dollar that is still in a downtrend. So let's quickly look at euro dollar because I think euro dollar is important in the context of the overall dollar story and the fact of the matter is the fact that the ECB governing council remains split on the strength of the euro means to say that there is the risk of further euro upside back towards 120 we've seen that in this daily chart here I've drawn a line through here now this looks like it could be a complex potential head and shoulders forming with a head at 120 we saw here we've got a series of left shoulders here now we can argue whether or not that is a double left shoulder if we look at this candle here this is very significant because I think even though we pushed up above 119 on Thursday post ECB we were not able to hold on to those gains having said that today on the Friday we are now looking to retest those ties in the absence of any commentary from the Fed this week and I think this is why the Fed meeting is so important in the absence of any concern on the on the part of the Fed about a week a dollar then I think the likelihood is we could we'll see the dollar week in further and euro dollar head back to that 120 level while the governing council is split on the prospect of the euro's current strength I think the line of least resistance while we are above this neckline and this is the key caveat that I have to this particular commentary while we're above this neckline here then the euro could well go back for a retest of 120 break below this neckline here and then all bets are off and we could be going back from 120 to 118 for a 200 point move lower back towards the 116 level this is potentially a head and shoulders but it's only a head and shoulders once we break below the neckline and that neckline break is confirmed by a close below it so what are we expecting from the Fed this week well not much I think Jerome Pearl pretty much laid out his thoughts on average inflation targeting at Jackson Hull his comments that the Fed was now looking to implement this policy was quite significant and I think what we will be looking for is more detail from Fed policy makers as to how they will implement this new policy what is significant is that they confirm that the Fed is now less concerned about its inflation mandate and it's more concerned about its employment mandate which means that they're quite prepared to let inflation move well above its two percent target threshold though being able to do that is fundamentally different from it actually happening at the moment inflation is pretty subdued pretty much around the world and as Fed officials have said in the past and what Mr Powell has said in the past the Fed is a hostage to events whether it be a second wave or a political gridlock over a new stimulus package now some Fed policy makers have said they want to be more aggressive about policy action certainly Lell Brainard has been vocal with respect to that as has Atlanta Fed President Raphael Bostic nonetheless I think the Fed needs to be a little bit careful being too aggressive in case they get accused of being politically partisan ahead of the November election so in terms of euro dollar keep an eye on this neckline on this daily chart here but at the moment while above this neckline the prospects of a retest of 120 remain quite significant if we now move to the Bank of England there that that meeting is due on the 17th of September the day after the Fed and again here we've seen a big big decline in cable we've broken down on the back of the uncertainty about EU-UK trade talk relations and the insistence of the UK government of implementing its internal markets bill that certainly I think caused an awful lot of bad feeling on the part of the European Union accusing the UK of acting in bad faith which in turn has prompted counter accusations that the EU doesn't really want to trade deal they just want to punish the UK because they've because of the because of various foot dragging when it comes to trying to negotiate the trade deal nonetheless the main debate I think at the moment is whether or not the UK economy needs more stimulus judging by recent data that really isn't a debate because the UK economy thus far doesn't appear to be showing any signs of slowing down there has been a lot of chatter in recent months about the likelihood of whether the Bank of England will go down the negative rate routes to be quite honest that is becoming rather boring it's a little bit predictable and it's not going to happen you know the Bank of England may be not ruling the possibility out but the fact of the matter is if you implement negative rates with the size of the UK financial sector as it is you're probably going to do more harm than good so I really think that it would be nice if UK central bank officials could be slightly more creative when it comes to their forward guidance and actually paint a picture of competence because at the moment some of the stuff that's coming out from central bank officials as you know would be probably more at home in a circus that being said not really expecting any changes from the Bank of England no changes to monetary policy we've got retail sales and jobless claims it's becoming increasingly apparent the ILO measure is not fit for purpose which means we're going to be paying particular attention to the jobless claims numbers now last month the claimant count for July rose 94,000 the headline claimant count rose to 7.5 more importantly the latest data showed that another 220,000 jobs were lost in the three months to June so we're likely going to see further job losses announced in the three months to July and that could bring that could bring the total number of jobs lost since March up to around eight to 900,000 closer much closer to the million mark so certainly I think that has that is inviting debate about the extension of the furlough scheme given the fact that restrictions are now starting to be tightened again and that in turn I think will raise concerns about the UK economy slowing down into the fourth quarter so certainly in terms of retail sales we're also expecting to see an improvement in retail sales for the month of August big levels on cable we can see that I've drawn it in we've got the 200 day moving average coming in just below 127.60 which happens to be just about today's lows Friday's lows so 127.40, 127.50 that's going to be a key support level going forward obviously Brexit negotiations notwithstanding trade talks are due to restart again in the coming week of the 14th of September let's hope they are more constructive than they have been this week and we've also seen the sterling rate index CMC sterling rate index fall back close to the support level from June so be keeping an eye on that level there as well as a key resistance level on euro sterling which we're starting to push quite a bit higher on euro sterling and back to the levels that we last saw in March so we're going through a significant period of sterling weakness I think the big question is whether or not that weakness is sustained as we go into September okay let's move on to the Bank of Japan not really expecting any much of a change there Japanese economy still looks very very weak the Bank of Japan's latest policy a one trillion dollar loan program straight out of the federal reserve playbook is the latest attempt by the central bank to help struggling firms at the moment Japan is looking a lot weaker in terms of its own recovery than it is elsewhere across the globe we've also got Chinese retail sales for August on the 15th of September and here again Chinese consumer hasn't really been the same as it was since the February and March lockdown year ago Chinese retail sales growth was in the region of seven or eight percent per month we haven't even got close to that in the months since the relaxation of the lockdown in july retail sales declined 1.1 percent they've declined every single month since the reopening of the Chinese economy so in terms of retail sales and industrial production industrial production has managed to recover quite well in the aftermath of the Chinese lockdown retail sales another measure entirely given the fact that 50 of the Chinese economy is now consumer-orientated that is worrying and I think speaks to a concern that we could well have seen the peak of the rebound here in Europe and the UK and we could see a little bit of a slowdown as we head into the winter simply because with social distancing measures in place we're unlikely to get back to the same levels of economic activity that we were seeing prior to the lockdowns which means it's going to be a long slow hard graft of a road back to normality if even if even if in fact we're able to get back to normality so just um just finished up looking looking at the DAX there yep again watch the watch the key supports on the daily charts on the DAX at the moment in terms of what equity markets doing at the moment we're still very much in buy the dip mode despite all the recent volatility and I think that's really what you have to hold on to sometimes it's important to try and push the noise to one side and actually look at the overall price action and the price action at the moment is still fairly supportive of further further gains despite all of all of the negativity that's coming out with respect to the news flow so in terms of companies that I'm keeping an eye out for this week actually before I do that quickly go over US retail sales um July retail sales in the US painted a mixed picture showed a monthly gain of 1.2 which was slightly above expectations with the upward revision in June from 7.5 to 8.4 more than making up for that however consumer confidence has been a little bit weak and while the labor market has been fairly resilient you've got to take into account the fact that the expiry of the $600 a week unemployment top-up could well impact retail sales and spending patterns in August and I don't think that's something that I think has really been taken into account with respect to consumer spending as we head into the autumn so consumer confidence fell to 84.8 lowest level since mid-2014 expectations for US retail sales for a gain of 1.3 percent which is slightly more than the July number that doesn't seem right if you think that US consumers spending power has diminished because of the removal of the $600 week unemployment top-up at the end of July so that's that's during the 16th keep an eye on those numbers because they could well disappoint in the short term. In terms of companies I'm looking at this week one stands out and you may have noticed in my watch list I've got Apple and that's for a very very good reason. Obviously we've seen the we've seen the recent stock split the parabolic rise from the March lows to the highs that we've seen in early September and obviously this is where the stock split happened we've come down since then we now have a product we can look forward to a product event on Tuesday at Cupertino and I think this week's event will be closely scrutinized for obviously even details of new products the big question is which new products will be Apple looking to roll out ahead of Christmas now there's some speculation we could see upgrades to the iPad the Apple Watch iOS 14 the latest operating system as well as the new iPhone 12. Now we've been waiting for some time for Apple to outline its plans for a 5G model I think we could be waiting a little bit longer various various delays as a result coronavirus have pushed back Apple plans with respect to its 5G model and I think we may be may have to wait another month before we get any further details on that however that's what we'll be looking for details about an iPhone 12 details about a new iPad the success of the new iPhone SE I think could also prompt Apple to maybe focus on the lower end of the iPhone market when it comes to its new iPhone 12 given the current global slowdown let's face it when you've got Samsung bringing out a new phone which is one and a half grand are you really looking to compete with that given the fact that your iPhone 11s are already pricing in that sort of area anyway and your iPhone SE has actually done fairly well or could also be looking at some of their services so services revenues has paid off we've seen big increases there the Apple TV plus products though not a big fan of it's not really selling well will they see will we see some new significant investment in that given obviously the fact that Apple TV remains well behind rivals like Netflix, Amazon and even to a lesser extent Disney plus I think Apple needs to do an awful lot more to justify its current two trillion dollar valuation certainly while while the shares are now more affordable I think the big question is whether or not we might see further weakness back towards the hundred dollars a share mark and these sorts of areas here in the wake of next week's product launch particularly if they disappoint by not announcing a new 5G iPhone okay so what else have we got we've got we've got the latest numbers from next and we've got the latest numbers from Ocado group looking at Ocado record highs hasn't really stopped the share price from continuing to move higher even though the company has yet to make a profit I think there's certainly scope for a little bit of weakness but overall still fairly positive here still still fairly positive here let me get my words out certainly had a positive first half I think this week's Q3 sales update should give an indication as to how they how they foresee their latest tie-up with Marks and Spencers which actually started earlier this month also got next next first half numbers next have held up fairly well and actually the price action is broken above the 200-day moving average so the big question here is whether or not next can continue to make progress in the in the wake of the reopening of its various shops across the board Q2 sales showed a decline of minus 28% when next reported in July which was slightly better than expected investors I think will be looking for a better performance in the second half of the year and I think the big question will be whether or not next management will guide as to whether or not they'll see a significant improvement as we head into the Christmas period particularly in the online sector in this online next directory sales which is seen next take on extra staff to deal with the increased demand on that particular area of the business also have numbers out from FedEx and Adobe but overall the main I think the main focus for this upcoming week will be on the Fed meeting Bank of England obviously UK EU Brexit talks and obviously the US election and the political dynamics between the Democrats and the Republicans into whether or not they can actually get past their distrust of each other and actually put together a new stimulus package at the moment expectations are very low Ted Cruz the Republican Senator has indicated that it's unlikely that there will be an agreement between now and the election but as we know as in everything in politics a lot can change in a very short space of time so that's it for this week thank you very much for listening This is Michael Houston talking to you from CMC Markets