 Hello and welcome to CMC Markets on Friday the 11th of October and this quick look at the week ahead beginning the 14th of October and it's been a positive couple of days for Global equity markets. There's positive vibes around US China trade talks as Well as Brexit talks and this has seen the pound and global stock markets rise strongly over the last 24 hours There's rising optimism that we may see a breakthrough in either US China trade talks or Brexit talks Certainly the reaction of the pound Has been particularly notable in the past 24 hours. We've seen some very strong gains in the value of sterling on optimism that The talks between Irish tea Shockley of the red car and UK Prime Minister Boris Johnson may well clear the way To a pathway to a deal But I would urge a little bit of caution on some of these headlines Certainly the overarching narrative of the past few days has been One of caution and the fact that Michel Barnier felt compelled to say only a few a couple of days ago that The two sides remained as far apart as ever Would appear to suggest that the truth is somewhere in between and ultimately while there may be a path to a deal These talks could also be a road to nowhere so At the moment the the pound is on the rise and I think that's largely on the basis that we will get some form of Extension in the event that we don't get some form of deal But certainly I think the markets are pricing out the prospect that we won't get a no-deal Brexit at the end of October The big question is really how do we get through the next few days and the next couple of weeks? Certainly in the next few days it's going to be very much dominated by Brexit as well as UK data we've got the European Council meeting coming up on the 18th of October and The Prime Minister will have to ask the EU for an extension to the Brexit deadline in the event He is unable to agree a new Brexit deal So the government has until the 19th of October to ask for an extension in the event a deal Cannot be agreed and I think it's hard to see How a deal can be signed sealed and delivered in the time allotted Let's not forget that I think this optimism needs to be tempered by the fact that any deal Would not only have to be approved by the EU But by MPs here in the UK as well an MPs track record on agreeing on anything in recent months hasn't been particularly great so I Think you have to you really do have to look at it in the round What may be acceptable to the EU may not be acceptable to the UK politicians and Vice versa I mean terms of US-China trade and there were some new tariffs due to kick in on the 15th of October I think we could conclude that anything like progress could see those tariffs that are due to increase deferred With President Trump's meeting later today with Chinese Vice President Lee here How well that goes over the course of the next Couple of days could well be instrumental as to whether or not we open the new week starting the 14th of October Higher or lower after the big gains that we've seen so far this week Certainly, it's also big. It's also a big week for China data coming up. We've got third quarter GDP We've got September industrial production and September retail sales on the 18th of October So with all the talk of the China US trade the Chinese economy has consistently shown signs that it's been slowing throughout the year We've seen industrial production in particular has been very feeble Come and coming in at 4.4 percent in August, which was a 25 year low while retail sales also slowed sharply So this is unlikely to improve significantly in the September numbers and Q3 GDP is expected to slow from the 6.2 percent That we saw in the second quarter in terms of UK data on Tuesday We have wages data Wage growth here in the UK has continued to confound expectations It rose to just shy of 4% in the three months to July helping cushion the effects of an economy That contracted slightly in the second quarter of this year now Q3 is looking slightly better and certainly growth-wise if this week's Rolling Q3 GDP numbers are any guide we got a we got an improvement to 0.3 percent With the services sector making up most of that gain manufacturing construction have continued to remain fairly weak And at some point the lack of a business investment will start to take some of the optimism out of the numbers that we've seen with respect to the Q3 expansion which we could well see Over the course of the next few weeks so far also that the loss of retail jobs this year hasn't seen unemployment levels rise That I don't think can continue forever. So I have to keep an eye out for that as well We've also got the latest CPI data out on the Wednesday the 16th of October And these numbers have consistently remained in and around the Bank of England's 2% target in August We saw a very surprise fall from 2.1 percent to 1.7 percent So that really I think gave a really really decent boost to overall real earnings and certainly the best number that we've seen since 2016 So certainly certainly keep keep an eye on that but I think in terms of what we're expecting over the course of the next few days While the data is important The actual broader geopolitical and macro story is likely to be just as important as Well, so let's look at some of the key levels on the charts certainly we can look at the pound against the dollar and The next key resistance really I think comes in or in and around the highs that we saw in September Which is around about 125 80 now at the moment as I speak we're heading back towards that level there But even if we do move above there, we've got a big big barrier At around about 2670 which is a 50% retracement of the entire down move from the March highs to the lows that we saw In August, so there's a big barrier between 1 2670 and the 200 day moving average So even if we do get further gains over the course of the next few days These gains will probably be tempered by a significant amount of technical resistance But certainly I think in terms of the price action things are looking more positive Even if you even if you do have an awful lot of concerns about the broader narrative Around whether or not we actually get a deal Certainly in terms of euro sterling. We're actually testing a very key support level on that level here around about the 87 70 area Which was also the lows that we saw in September and that's also 61.8 for the natural retracement level of the entire Move from the lows that we saw in March this year to the peaks that we saw in August So I think if we're able to really Can sustain a move through these lows here around about around about 87 80 Then we could well see further gains for the pound against the euro and what's also quite notable is That the 50 day moving average Is now starting to cross below the 100 day moving average so from a technical point of view Momentum is really starting to shift in sterling's favor Against the euro. We did see a very nice rebound off these September lows here But we ran into resistance on the 50 day moving average the 50 day is now starting to roll over Momentum is starting to move against the euro and in the favor of the pound and that in turn could actually see further Sterling gains against the euro now how that comes about You know, maybe we could get an extension Maybe we could get certainly an awful lot more positivity about the prospect of some form of deal Who knows but certainly in terms of the price action The pound is looking much more positive Against the euro and as such we could well see further sterling gains Against the single currency Certainly looking in terms of equity markets. It's also Been a very encouraging move that we've seen Momentum on the on the slow stochastic start to turn positive We've rebounded off the 200 day moving average in the DAX and we are now testing this trend line resistance From the peaks that we saw in July drawn through the highs currently comes in around about I would argue 12,450 so I think more than anything I think if we get a move through these series of highs in September in the DAX then we could see a Fairly impulsive move to the upside for equity markets at the moment We we remain below this resistance level and as such we do have to be very cautious about further upside But if we get a sustained break through this series of highs through a year and this trend line Then we could see an impulsive move back to the highs that we saw earlier this year If we look at the S&P 500 at the moment, we've seen a nice little move higher here Back towards the peaks that we saw In July as well as August and September I think in terms if we are looking to make further gains here We really need to consolidate this move through 2960 And head back towards the 3000 level so I certainly think there's potential for us to move a little bit higher But I'm still very suspicious as to about whether or not further gains are in any way sustainable in the short to medium term Given the weak economic backdrop. Yes, the Federal Reserve has gone slightly more dovish in terms of injecting Extra liquidity in the short into the short-term repo market, but that's a long way from Signalling that they're likely to cut rates further or do further quantitative easing Crude oil prices have also been in the news in the past couple of days We have seen a little bit of a rebound largely on the back of geopolitical concerns about that that missile attack on the Iranian tanker in the Red Sea at the moment the Iranians are resiling from Claiming that it was Saudi Arabia that carried out An attack or the attack or whatever it is at the moment No one really knows what caused the fire and the explosion in this Iranian oil tanker But it does strike me as a little bit strange as to why the Saudis would carry out an attack Right off its coastline because it would be very very easy For them to be accused of such a thing if you're going to do something like that You don't carry it out on your own doorstep. So at the moment oil is starting to pull back from its highs of the day it's rebounded off this trend line support from the lows here and At the moment, I think while geopolitical risk is a concern and a break out of hostilities could push the market higher at the moment The fundamentals for crude oil prices look a little bit on the weak side In terms of the earnings picture. It's a fairly It should be a fairly decent week because it's the start of US earnings season We've also got the latest results from the London stock exchange in the wake of the abandonment of the HKX the Hong Kong exchange withdrew its 30 billion takeover bid for London's stock exchange So that will give us a good indication as to what the LSE strategy is with respect to its refinitive deal and How well it's been doing in terms of its Q3 numbers over the course of the last few weeks We've also got US banks earning season starts on the 15th JP Morgan in particular has seen Its share price pull off the highs that we saw earlier this year the last two quarters have seen record revenues for JP Morgan Profits came in at a record 9.7 billion in Q2 I Think it's unlikely that we'll be able to see them match those numbers given the fact that we have since then seen the US Economy slow down a touch and the US Federal Reserve has cut interest rates twice Flattening the yield curve quite sharply So I think that could hinder JP Morgan's end US banks in general Goldman Sachs city group and Wells Fargo To perform as well in the second half of the year as they did in the first So the record high for JP Morgan is up here around about 120 We could see a spike higher but there does appear to be a natural resistance between 118 and 120 for JP Morgan We've also got the latest numbers from Netflix and it's certainly been not good news The Netflix's share price over the course of the last three months When Netflix last reported in July the shares dropped sharply after management dropped Reported a sharp slowdown in user growth across the board in the US There was a loss of 126,000 subscribers and expected against an expected gain of 352 more worrying the international subscriber growth Slowed quite sharply as well. Now the management have guided that the Q3 numbers should see Seven million new subscribers. That is a really high bar They've said that the start of stranger things in your new series of the crown should see a little bit of a rebound But since then both Apple and Disney have announced new Streaming product packages and that could well signify a real test For Netflix's subscriber model So we'll have to see whether or not Netflix are able to meet that seven million subscriber target And whether or not we can get a retest back to $300 or whether or not we could get or whether we'll get another warning from Netflix as to whether or not They're going to able to meet their rather ambitious subscriber growth and revenue Targets so that's it for this week gone on slightly longer than I had anticipated for this weekly Market up by update, but none the less is Michael Houston talking to you from CMC markets