 Hello and welcome to CMC Markets and this market update and here we are one week later after the historic Brexit vote and the surprise decision to vote leave and I think it's quite a good time to reassess where markets go from here because certainly the market reaction sterling not withstanding has been fairly contained yes we are broadly lower across the board apart from the FTSE 100 which has managed to recoup most if not actually all of its losses from a week ago and ultimately I think the big question now is given the really big decline that we've seen in the value of the pound where do we go from here the fact that we haven't seen a triggering of article 50 and probably won't be likely to over the course of the next couple of months the big question now is what happens with equity markets going forward I think the fact that article 50 hasn't been triggered quite yet has calmed things down somewhat as markets adjust to this new equilibrium of uncertainty because ultimately from what we've heard thus far from the political side of the debate and the runners and riders with respect to the Conservative Party leadership the likelihood is that there will be no new election there will be no new referendum and ultimately depending on who becomes prime minister and the odds-on favorite currently looks like it's going to be Theresa May the big question now is a where does that leave the outlook for global monetary policy going forward and certainly in the context of the Federal Reserve it's very unlikely now that we're going to see any rate rises before the end of the year and potentially markets are pricing out the prospect of any rate rises into 2017 as well notwithstanding that concerns about the global economy have not changed there's still significant concerns about China the fact of the matter is we've seen that the Chinese remnambi has been allowed to weaken further to levels that we last saw at the beginning of this year and there are still significantly elevated concerns about the banking sector in Europe and I think that's largely what I want to focus my attention on for this particular video today the banking sector in Europe particularly the banking sector in Italy which remains a soft underbelly of the European recovery and I think in that context even though we've heard an awful lot of what I would call aggressive rhetoric from European leaders about their negotiating stance with the UK ultimately there will be some form of agreement because any failure to agree will be mutually destructive to both sides particularly German exporters whose trade with the UK amounts to around about 42 billion euros a year in terms of the car industry alone so let's make a start in the context of the banking sector and let's pay particular attention to Deutsche Bank because Deutsche Bank remains a very significant concern from a charting point of view but also I think also from a German economy point of view because if we look at where Deutsche Bank's share price is right now it's US subsidiary failed another stress test this week in an announcement announced yesterday evening and going forward in the wake of this breakout of this pattern that we've talked about in previous videos the likelihood is we're going to see further share price losses in Deutsche Bank unless we can get back above first and foremost this 13 euros level here but potentially the 14 euros level up here the prognosis on a technical point of view does not look good certainly looking for a test of 11 euros and potentially a move to move below 10 euros towards 8 euros and 76 cents if we look at Deutsche Bank on a on a move further out the prognosis looks even worse and I think this is at this I think this is a particular share they really do need to keep an eye on not only Deutsche Bank but also the Italian market in general because Italian the Italian banks are in significant significant amounts of trouble Angela Merkel has blocked a bailout request by Matteo Renzi the Italian Prime Minister under EU bail-in rules they specifically specifically prohibit any cash payer funded bailouts and given the performance of Italian banks and I'm going to use one in particular this one here called Unicredit trading at all-time lows still looks very very weak it's still well below the previous lows that we saw all the way back in 2012 and looks to looks to me as if there's certainly potential for further losses there if Europe does not sort out this particular problem in Italy then we could face significant further erosion in risk appetite and ultimately that could weigh on European equity markets going forward moving on we've seen a significant move lower in the pound but specifically against the dollar now it's important not to just focus on the 31 year lows in the pound against the dollar you'll hear an awful lot of what I would call hysteria about the decline in the pound certainly in the context of the rally that we see that we saw in the lead-up to the vote we did see a significant drop-off on on the day after on the Friday and we can certainly see it here but we haven't broken below 131 130 I think that is going to be significant if we can get back above 136 50 then there's a significant chance we could well stabilized certainly the put certainly the strong dollar effects has now diminished quite a lot and that could in the short-term help underpin the pound on a trade-weighted basis it's still well above the lowest the lows that we saw in 2011 2012 so certainly in the context of the overall trade-weighted decline in the pound I don't think there's too much to worry about at the moment but I will certainly be looking very very closely at the 131 level over the course of the next few days and the 136 and a half level which was the previous lows that we saw at the height of the credit crisis in 2009 so that's it for this week thanks very much for listening this is Michael Houston talking to you from CMC markets