 Good morning and welcome to CMC Markets on Friday the 26th of July and this quick look at the week ahead beginning the 29th of July and over the past few weeks I think there's been an implicit assumption that central banks were likely to ease monetary policy quite significantly over the course of the next few weeks and months and certainly initially in the wake of yesterday's European Central Bank rate meeting that appeared to be the central basis which investors were taking with respect to the next move from the European Central Bank, but as Mr. Draghi continued with his press conference, it soon became apparent that there were significant splits on the governing council as to the types of measures that would be needed to try and improve liquidity conditions within the euro area There certainly wasn't unanimity, certainly I think in the context of the tone of Mr. Draghi's comments there does appear to be some pushback about the possibility of easing interest rates significantly over the course of the next few months because of the potential damage further negative rates could do to European banks balance sheets and let's not forget that there has been some concern that the negative rate environment is making it that much more difficult for European banks to really generate a significant level of profit to pull themselves out of the slump that they've pretty much been in for the last four or five years Earlier this week we had Sergio Almotti from UBS outline concerns he had about the damage it was doing to UBS's ability to generate profits and we've also had the CFO from Deutsche Bank articulating a fairly similar argument So there does appear to be divisions on the governing council and I don't think it's too hard to see where those divisions are manifesting themselves with the appointment of Christine Lagarde as head of the European Central Bank I think that has freed up Jens Weidmann of the Bundesbank and potentially also the Dutch Central Bank at Klausknot that they are uncomfortable with significantly further negative rates without some form of mitigating factor to try and offset some of the damage to European banks profit potential so if we look at Euro dollar we can see that the effects of yesterday's Rather mixed messages that we got from the ECB had on the currency markets We also saw it in the bond markets German 10-year yields hit their lowest levels ever minus 0.42% before Heading back higher towards around about minus 0.35 Euro dollar is finding very decent support around about 111 had a very nice little bear trap Wasn't able to break below 111 and we can see that 111 level is a very significant support level going all the way back to June 2017 we did hit two-year lows, but we weren't able to significantly push below it So we can see there's definitely potential that if we do break below 111 We could see significant further Euro losses and further dollar gains And I think in that context That's probably why the ECB was a little bit conflicted when it came to pre committing significantly to significant further amounts of stimulus From their September meeting when this week we have the latest federal reserve Rate decision and that is one of many things that I'm going to be looking at over the course of the next few days With respect to what's going to drive these markets going forward because if we look at the way Markets have been performing They've been performing pretty much on the basis that we're going to get further easing from the federal reserve At their Wednesday meeting on the 31st of July The only question being whether it will be a 25 basis point rate cut or a 50 basis point rate cut personally I don't think they need to do anything at all But I think the bar now has been set and it will be a major surprise if they weren't to act at all So if we look at the FTSE 100 We can see that we've made Significant peaks earlier this month around about 7,600 we have drifted a little bit lower But certainly in the context of where we've come from we still remain very much In the uptrend that we've been in pretty much since the beginning of this year Similar sort of story for the German Dax albeit on a slightly more choppy basis But nonetheless despite the fact that we've had some significant down moves over the course of the past few days Um, we haven't as yet broken below the 50 day moving average or this trend line here So while there is potential for a little bit of a sell-off I'm not expecting to see any significant declines Unless we break out break below the key trend lines that I've outlined here It's also a similar sort of story on the s&p 500 Again here holding solidly above that 29 60 29 70 level We've also made new all-time highs again on the s&p 500 and us markets continue to remain Fairly resilient not too surprising when you consider that the us economy Continues to be the outperformer When it comes to the economies around the world we saw that this week When the imf upgraded their forecasts for the us economy while also downgrading their outlook for the global economy so Let's talk about The fed because I think the fed what the fed does As well as what the fed says will be a key arbiter for equity markets going forward And I think really the big debate isn't really about whether the fed will cut next week I think that they will whether or not they need to is an is a moot point The big question for me is the type of guidance That they give in the wake of any potential Monetary easing this week now recent data from the us economy Does appear to suggest we've started to see a slowdown From the strong numbers in q4 and q1 and we've got q2 gdp numbers out Later today they are likely to be significant significantly weaker From the 3.1 percent that we saw in q1 anything Anything anything near to 2 percent I think will mean that we'll get a 25 basis point rate cut, but we could well get a significant We could get some dissenters to that decision and I think that will be key Will we get a dissent to any rate any fed rate move? And if so who those who will who who will those dissenters? be One also has to bear in mind. There is a political dimension to this trump has been banging on About the federal reserve cutting rates for the past year or so So I think there will be some political pressure for the fed to at least do something I think the likelihood is they will do the bed minimum anything other than a 25 basis point cut Would be a major surprise 50 basis point can't see it I just can't see it. It's not going to happen We've also got later this week us payrolls second of august And there is a school of thought that would probably suggest this latest july payrolls number doesn't really matter that much I disagree it will either justify the fed's decision to cut rates by 25 basis points or it won't Saw some fairly strong numbers in june 224,000 new jobs were added I will be hosting a webinar on the july payrolls report One o'clock on friday the second of august. Please tune in for that. You'll be able to sign up for that by Going to the website and going to the events section But for me Wages still look fairly decent weekly jobless claims lowest levels for Three three months coming in at 206,000 a week payrolls report would vindicate the fed But again with wages at around about 3.2 3.3 percent I think the likelihood is that the 20 25 basis points is the bare minimum That we'll see And really then it's about the guidance as to when to expect the next rate cut And I think the fed could be actually more hawkish Perhaps than markets expect. We've also got the latest bank of england rate meeting As well and with the election or the appointment, I should say of borris johnson as UK prime minister the odds of or the noise around The prospect of a no deal brexit has increased I don't think the odds have changed. It still remains the default position But certainly the noise Around the risks of a no deal brexit has increased and that is reflected in the recent performance of the pound Which remains in a solid downtrend with a key support at 123 80 We really need to push back a 125 80 to stabilize the bank of england Not expected to make any changes if anything I think their guidance the inflation report is likely to point To the prospect of a rate cut in the near future and not a rate hike We've heard an awful lot of narrative. I think in recent times that Markets are underpricing the risk of a rate hike to be quite honest No one takes that seriously markets are already pricing in a 25 basis point rate cut before year end So I think an awful lot of the bad news to a certain extent is already priced in We've also got the latest global manufacturing PMIs. They're likely to reinforce The I think huge amounts of pessimism around that sector Last week the German or the German IFO Pointed to the German economy manufacturing sector being in freefall The numbers that we're going to get out later this week aren't expected to change that narrative. So Really is about central banks over the course of the next week or so We've also got the Bank of Japan again They are likely to remain fiscally loose on the company's front We've got a big earnings week for companies. We've got Lloyd's banking group. We've got Royal Bank of Scotland We've got Apple and we've got Beyond Meat And those are just the four that I'm going to cover. I could go into an awful lot more detail I'm not going to because I don't really want to bore you too much and I've already been talking for 10 minutes already Talking about BP. Well, obviously that's a play on the oil price been trading sideways For the last few months fairly decent support around about the 500p level It saw its profits more than double at the end of last year did BP to 9.7 billion pounds Oil prices have been slightly higher over the course of the last few weeks And the big question for me is BP's debt levels management need to start making progress on reducing The amount of debt to give themselves extra headroom in the event that we see a slowdown In demand for oil over the course of the next few months So key levels on the BP share price that we can see it's trading in a range I'm not really expecting that to change Lloyd's banking group very much a brexit play But we can see from this chart here From the move that we saw from the lows at the end of last year to the peaks that we've seen this year Is that there's an awful lot of brexit risk priced in In terms of this and that's on a very, very key support level around about 56 pence. What am I looking for? Well at the end of Q1 for Lloyd's It showed that despite concerns about brexit the bank actually had a fairly decent quarter Not that you'd know it from the performance of the share price. So Pre-tax profits rose to 1.6 billion pounds in Q1 Slightly below expectations of 1.88 billion pounds, but still well above the levels we saw in Q4 For Q2 the outlook is likely to have been more tricky given the weaker economic outlook for the UK economy seen in April and May Worth keeping an eye on provisions on further ppi The bank set aside 100 million pounds earlier this year with respect to that and weaker interest rate expectations Could see downward pressure on their interest margin, which was at 2.91 at the end of Q1 We've got those numbers are out on the 31st of july. We've got Barclays first half numbers on the 1st of august and we've also got rbs first half numbers on The second of august. Let's have a quick look at the rbs chart Seen a decent rebound over the course of the last Few weeks the announcement of the resignation of CEO Ross McEwan in q1 has slightly overshadowed the numbers in q1 He has since announced that he will be going to nab But overall profits have been fairly good for rbs But I think again as is in the case of Lloyd's. I think the housing market will be particularly challenging the overall economic outlook for april and may will also prove to have been challenging for rbs And while the bank is in a much better position than it was two years ago I think it remains rbs in particular remains much more constrained in terms of share price gains Simply because of the 62 stake that's owned by the uk government. So Certainly keep an eye on that. We've also got apple Just announced that it's buying out intel's chip making uh chip making division and um The iphone market smartphone market continues to be its main money spinner. However samsung posted a very weak number pointing to a significant slowdown in the barn Slowing chinese market a reluctance on the part of iphone users to upgrade all very expensive models Could see the company struggle to meet expectations Though the indian market could help pick up the slack now that apple has ceased selling its lower price models there So what are our expectations for q3 for apple? Well, they're set quite low We're expecting to see around about 53.4 billion in revenues there with profits set to come in around about $2 10 a share The the share price is quite near recent all-time highs Which would appear to suggest that the risk of a miss may well All be priced in but who knows one thing that could help drive an announcement is the recent product enhancements to the ipad And the mac which were announced at the end of q2. So we could see a pickup in demand there Also, keep an eye on the services number, which is likely to continue to show decent growth last but not least Beyond meat. Well, if this isn't an accident waiting to happen I don't know what is it's one of the best performing ipos this year Come came to market at $25 a share in early may And it continues to go from strength to strength Earlier this week it surpassed the market capitalization of Campbell soups Which has been in business since 1869 and has many more employees and much higher turnover than beyond meat Just to give you an indication beyond meat now has a valuation of $10.6 billion And total revenues for beyond meat are expected to come in at $250 million Million dollars not billion million So that gives you an indication That this could well Come down to earth with a crash the big question is when at the moment Markets seem to be still in love with beyond meat, but when you look at the valuation It is a little bit eye-watering. It's a little bit dizzy dizzying And you have to be nimble with respect to this one So that's it for this week gone in's gone on slightly longer than I thought I would have to but we've got a busy week Hopefully plenty of volatility and don't forget to tune in for the non-farm payrolls webinar on friday the second of august 1300 BST