 Hello and welcome to CMC Markets on Friday the 21st of February in this quick look at the week ahead beginning the 24th of February and we've seen a fairly resilient performance from global equity markets this week, we've seen new record highs in both the US markets as well as the German DAX and the stocks 600 but nonetheless I think some of the early optimism that any fallout from the coronavirus was likely to be transitory is starting to be tempered back somewhat and that's not really surprising when you consider that as with any epidemic generally tends to spread over the course of time and certainly that's what we're seeing with respect to the coronavirus and new cases being reported in Japan and South Korea and I think that more than anything is the biggest concern that I think investors have going forward that and supply chain disruptions so that means that the latest economic data the upcoming economic data is going to be closely monitored over the course of the next few weeks for any signs of not only economic weakness but also I think any evidence that we're seeing significant disruptions and earnings downgrades from various companies as they get to report their latest numbers now we saw a canary in the coal mine well I think it's a canary in the coal mine earlier this week when Apple reported that first quarter revenue was likely to fall well short as a result of shutdowns and factory shutdowns in China and if a company like Apple is reporting that they could well fall short of earnings expectations and really you need to sit up and take notice and certainly I think the fact that gold prices have gone up significantly higher over the course of the past few days suggests that while equity markets are fairly resilient there is an awful lot of hedging of bets going on when it comes to asset and capital allocation so let's look at the let's look at the Germany 30 the DAX the trend for you at the trend for stock market still remains up it's still we still remain very much in by the dip mode we can see that from this trend line here the dip that we're seeing today has thus far been contained to around about 13,500 that is acted as support on previous occasions and while it does so and it also happens to coincide I think with this series of highs through here so I will be paying particular attention to this series of highs here and the lows through here to determine whether or not we start to head back towards this trend line over the course of the next few days my gut feeling is there is certainly potential for us to drift a little bit lower over the course of the next few days but within the confines of the current uptrend same really I think applies to the S&P 500 again we can see that here again looking at support in and around these series of highs through here simply because they acted as resistance in the past so they're likely to act as support in the future and we can see that borne out by virtue of the fact that I've drawn this horizontal line in here currently comes in around about 3,330 so look at that 3,330 level in the short to medium term maybe even 3,320 if we break below that then it's likely that we could retest the 50-day moving average as for the FTSE 100 the UK 100 again even though that it has underperformed its peers again here we still remain in the confines of the wider uptrend that we've been in since September and October of last year so despite all these concerns about coronavirus it's not time to hit the panic button quite yet at the moment it's likely to be any dip is likely to be used as an opportunity to get back in if we look at gold prices though there's no sign here whatsoever that we are going to be pulling back anytime soon if we look at this very long-term chart here these are the all-time highs from 2011 and I drawn a series of Fibonacci retracements from the lows that we saw all the way back in 2016 we've just broken above that 1585 1590 area that suggests to me that the next the next move higher in gold is likely to be towards 1800 there is nothing much in the way of resistance between 1600 and 1800 when it comes to the gold price against the US dollar what's also been notable over the course of the past few days is how strong the dollar has been so you've had strong dollar strong gold resilient stock markets and again the dollar is acting as a little bit of a haven in respect of capital flow and we can see that here in this dollar index chart here we've broken above these this series of highs through here I think the big level on the dollar index is likely to be 100 it's a nice round number I think if we break through that then we're likely to see further gains in the dollar index and while mr. Trump is unlikely to be a too big a fan of that there's not really much he can do about it given the fact that the Federal Reserve remains fairly relaxed about the health of the US economy as shown by those Fed minutes earlier this week and the factor of the matter is the US economy still appears to be doing fairly well and the data that we've got coming out this week is likely to reinforce that we've got the latest fourth quarter GDP numbers coming out on the 27th of February now in Q3 the US economy managed to grow slightly faster than Q2 coming in at 2.1% slow down in manufacturing at the end of Q4 along with a general motor strike could well have hit the economy in Q4 but with unemployment still at 50 year lows wage growth trending in and around 3% anything around 2% is still fairly decent so I think even if it comes in below 2.1% you know that is still pretty okay at a time when countries like France Italy and Germany are either contracting or stagnating we've also got US consumer confidence and I think that's going to be particularly important in the context of the US consumer because the US consumer is the bell whether it's the rock on which the US economy is built now we did see a little bit of softness at the end of last year but we did see a decent pick up in consumer confidence in December which moved just back above the 130 level for the first time since August now current spending patterns would appear to suggest that the US consumer remains fairly resilient we've also got personal spending out next week on Friday and personal income so that should also give us a good indication into how much the US consumer feels confident about spending their hard-earned tax dollars so I'll be paying paying attention to those numbers on the 28th of February personal spending personal income US consumer confidence on the 25th of February other economic data points that we've got out is German IFO that's due out on Monday is the recent recovery in German PMIs real or just an illusion certainly at the moment that doesn't appear to be any evidence in the German manufacturing PMIs at the coronavirus is having an effect on the German economy its flash PMI we saw a 13-month high for manufacturing PMI let's not forget that we could we'll see the effects of the coronavirus start to come out maybe in the March numbers in the next few weeks so I think it's too early to hang up the bunting when it comes to the coronavirus fallout on the German economy the German economy still remains so on on the weak side and we will start to get more color on that and over the course of the next few weeks and months we've also got flash CPI from the European Union for February on the 28th of February as well now we have seen a bit of a pick up in inflation in recent months not only in the EU but also in the US and the UK a large part of that maybe down to the fact that oil prices have been higher but also economic activity in some parts has been showing some signs of picking up but again given the contractions that we've seen in the Japanese economy the French economy in the Italian economy in the in fourth quarter in Q4 I think again it's too early to call time on any economic slowdown there's still an awful lot of tail risk out there when it comes to the coronavirus in terms of UK data pretty thin on the ground there's a couple of economic reports with respect to retail sales from the British retail consortium and what have you and what has surprised me I think over the course of the past few days is that we've seen some fairly decent economic data out of the UK retail sales flash PMI's wages and inflation and yet the pound has looked fairly weak it's been in a downtrend since those highs that those post-election highs of 135 it it is I think suffering a little bit from the effects of a stronger US dollar but nonetheless I think it's very much a by-the-dip currency of this I think at the moment we have got significant resistance around the 50 day and the trend line resistance from the highs in December but as long as we hold above the 200-day moving average it currently comes in around about 12690 and these series of lows through here that I'm reasonably confident that the pound has potentially more upside than downside and one of the things that I think sort of gives me confidence in that is that euro sterling looks very soft at the moment and I think if the coronavirus ripple out effects do affect any economy it will affect the German economy the big level for me I think on euro sterling and I highlighted this in a video earlier this week is between 82 80 and 83 the figure and this could be better shown I think on a weekly chart we can show that here then we've got a series of lows all the way through here since 2016 2017 83 now if we break below 82 80 on a concerted basis then we could well see further losses for the euro further gains for the pound at the moment we're getting a little bit of a short squeeze in euro sterling we could head all the way back to this series of resistance lines here where we have the 50-day moving average and and the these these two lines here but overall if we look at these series of highs through here we can draw a trend line through here I think as long as we hold below the 50-day moving average the line of least resistance is for euro sterling over the course of a longer period to go down we still very much remain in a sell the rally type mentality euro dollar again big big level coming up now that we've broken below 108 70 80 while we but while we remain below 108 70 80 euro dollar looks vulnerable too further losses towards 107 and the Emmanuel Macron gap as we like to go as it has been called which is this gap here that is likely to act to support between 107 30 and 107 80 but if we fill that gap and then move below it then really we're on course for the move for a move to 103 40 but at the moment 107 30 and 107 80 that's likely to be a strong area of support in the short term but in the longer term I still favor a lower euro and a stronger dollar in terms of companies reporting next week there's three I've got a particular eye on Metro Bank being one of them still remains a bank to be cautious about if we look at that chart doesn't look as if it's been to been doing too much does it over the course of the past few months but if we zoom it out then we can suddenly see how calamitous the fall in the share price has been now the existing management team or the old management team have been cleared out CEO Craig Donaldson he's left being replaced by a new CEO Dan Frumkin who most people have never heard of but he used to be CEO of the Bank of Butterfield a fairly small bank and I think the big test for Metro Bank here is not whether the worst is behind them I think that's pretty clear that it is it's whether the new management under the new CEO can turn around market perception perceptions of competence because ultimately the reason that this this bank is 90% down from its highs is because of management perceptions of management incompetence in running the business so the smart money suggests that they're going to struggle margins in UK banking are already very tight competition is fierce in terms of customer satisfaction the bank does very very well but ultimately they're going to have to continue they're going to have to start punching well above their weight to really turn perceptions of the bank around and move the share price back off these lows and back towards 300p another company that's been absolutely battered from pillar to post in recent weeks and months has been Aston Martin Lagonda it's been an absolute horror show for shareholders but it's not brand only IPO in 2018 management have overseen one profit warning after another but at least now that we've got a cash injection from Canadian billionaire Lawrence Stroll which has saved the business from collapse I think as long as we're able to hold above this series of lows here for Aston Martin then we could see a rebound in the share price and hopefully we'll move back to this 600 pence level that's acted as a bit of a barrier over the course of the past few months but again this coronavirus is not going to help Aston Martin that's where it sells an awful lot of its cars and obviously it also has the development of the DBX SUV which will help the company secure a steady cash flow stream in the coming years from that point of view what's happening in China and Asia is particularly unwelcome so it'll be interesting to see what management have to say about that going forward lastly but not least we also have Rolls Royce again not been a great year for Rolls Royce shares declining steadily for the past 12 months the the problems around its Trent 1000 engines are well documented it's helped push up its costs in November last year the company warned that the cost in terms of fixing the problems could well increase to 2.4 billion pounds by 2023 there are concerns about the cash flow given concerns about falling aircraft orders and again I think you know with air travel likely to decline over the course of the next 12 months I don't think airlines are going to be any hurry to start ordering new aircraft in which case engine orders could well suffer as a result of that so shareholders will be looking for good news on the bulk of the companies that the bulk of the companies problems are behind it and that management are focused on developing a new engine that addresses the upcoming challenges of reducing emissions other other companies to keep an eye out for London stock exchange for your earnings on 28 coca-cola and home depot to name but a few but otherwise that's it for this week thank you very much for listening it's Michael Cusin talking to you from CMC market