 Good morning. Welcome to CMC markets on Friday the 18th of September and this quick look at the week ahead beginning the 21st of September Before we get started obviously do the usual housekeeping, disclaimers and what have you But I think one of the things that I have taken away from this week's price action in equity markets is that Despite the gains of last week. We really struggled to make any inroads Into further upside particularly for European markets. We've tried to go higher but Essentially we've lacked an awful lot of momentum and also with respect to US stocks. I think there is still quite a bit of concern about The lack of Political consensus within the US ahead of the US election on Any sort of new stimulus program and its concerns about the resilience of the US Economic recovery this week's retail sales data out of the US pointed to a bit of a slowdown Which I think is not altogether surprising given that The stimulus program of six hundred dollars a week Ended at the end of July so disposable income Is always going to be a little bit tighter? Heading into August and that's really been borne out in the consumer confidence numbers and more broadly I think in the retail sales numbers even though the the jobs market has continued to hold up fairly well Prevailing narrative for the past week or so I think there's been on the fact that the Bank of Japan the Federal Reserve and the Bank of England really didn't offer too much In the way of guidance about further stimulus so you could argue that the Bank of England in opening up the negative rates locker Did help to push the pound down to its lows of the week and Given the fact that Last in in last week's video. I said that the Bank of England Wouldn't be going down the negative rate route That really that comment hasn't really aged that well that being said just because they're looking to Work with the regulator to try and make negative rates work doesn't mean that they will be able to having said that Why put in all that effort to try and investigate an Outcome which might see them work if you're not seriously thinking about doing it Is that being said experience has taught us and I don't really want this to be a rent about negative rates But I just can't help myself It's not worked in Switzerland. It's not worked in Japan. It's not worked in Europe It's not worked in Sweden and in fact in Sweden with the ricks bank they pulled their rates back out of negative territory and pushed them back to 0% because of the damage it was doing to the Swedish financial system yet here we are These super brains of the Bank of England somehow think because it's failed everywhere else. That doesn't matter It doesn't matter. We're going to have a look at it. We're going to give it a try Because we can make it work when everyone else hasn't been able to anyway run over So I think with respect to that there are obviously They're obviously looking to try and keep the option on the table The reality is that it's going to be very very difficult for the Bank of England to push rates into negative territory Without significant damage and blowback in the UK financial system. So What does that mean for the pound? Well at the moment you can see the instance when The Bank of England talked about looking at negative rates You've got that big spike down there and the daily candle which went all the way down to 128 60 And then we closed Back towards the upside now some people will say that was because Ursula von der Leyen That of the European Commission said that she still saw the prospect that a trade deal was possible Let's be clear about this It's in neither party's interest to take the prospect of a trade deal off the table Europe is in trouble economically the UK is in trouble economically Politicians will not be forgiven if they don't work past their differences and try to come to some form of accommodation As we head in head towards year-end now they talk about an October deadline Ultimately the EU does what the EU always does they always work up to and beyond a deadline There will be some form of mechanism put in place to try and smooth over any speed bumps any potholes Um between the UK and the EU now how they do that? Hard to say but at the moment this area of support down at one around about 127 60 looks fairly solid for the time being so All of the political noise notwithstanding the price action is telling me That the pound is continuing to find support at higher levels from this daily chart here If we can now break back through 130 20 Then we could well see further gains back towards 132 now that could be as a result of a weaker dollar Certainly, I think there was widespread disappointment on the part of investors As to the federal reserve stance when it came to its own meeting earlier in the week But in reality, what else could the Fed have done we're six weeks away from the US presidential election They will not want to appear to be seen to be partisan And in that context, I think the least the Fed could have done was exactly what they did do Which is absolutely nothing while at the moment keeping the prospect of easy monetary policy out to 2023 2024 on the table You know if the markets want more than that they're going to have to wait the market You know investors have to stop behaving like spoiled toddlers every time central banks don't give them what they want eventually That stimulus will probably come the market's way. They're not going to be tightening policy anytime soon So it's unlikely That markets are going to collapse under the weight of their own valuations That being said that doesn't necessarily mean we can't fall further at the moment If we look for example at the NASDAQ we can see that it's close to a fairly key support level These series of lows through here around about 10 930 that low there that low there and that low there Is flirting a little bit with the 50 day moving average? Hasn't conclusively broken below it. It has it is below it at the moment But you have to look at it in the round You have to look at it in the context of the s and p 500 Which is still above this 50 day moving average and in classic Dow theory The averages need to confirm each other and the s and p 500 is still above this 50 day moving average and as such Also above a very key support level in 3300 so keep an eye on these lows here on the NASDAQ but also Keep an eye on the 50 day moving average and this trend line support From the lows here and the lows here that we saw earlier in september For any indications that we could stop be starting to break lower Also, have a look at these share prices of Companies like apple facebook and what have you and look where their 50 day moving averages are Relative to the price action and the price action is above all of them So there is a distinct correlation between the performance of these big tech stocks And obviously the underlying indices that they are in so At the moment, we're still very much in by the dip mode for us stock markets despite concerns about current valuations if we look at the DAX Similar sort of story look at the price action. It's a very very tight There's an awful there's not an awful lot of range there and the one time we did try and break lower It was very very short lived and we actually closed more or less where we open so at the moment There's an awful lot of uncertainty. There's not much momentum in either direction And as a result that means that we're still very much in the uptrend that we've been in for the past few weeks It's a similar sort of story But see 100 is in this downward channel Um, it's towards the top end of the downward channel, but nonetheless We're still at the upper end of this recent range that we've been in over the course of the past two or three months So i'm anticipating further range trading Going forward For the major indices now in terms of what we're looking at later this week There's not much To really get the old creative and excited juices flowing. Obviously this week. We had central banks bank of japan Bank of england um, and the federal reserve we also saw Some fairly resilient uk economic data retail sales rose for the fourth month in succession Yeah, the jobs numbers Um, the unemployment numbers did go to a four-year higher 4.1 on the ilo measure The actual real measure is probably higher than that And jobless claims numbers have continued to rise Which with the expiry of the furlough in october could see a significant Rise even further assuming of course that the chance for the exchequer doesn't bring out any mitigating um policies to try and offset the impact of a sharp rise in the jobs numbers So the key things i'm keeping an eye out for the coming week ahead are French and german flash PMIs uk flash PMIs manufacturing and services Um, there's a german ifo business climate survey These are all in 23rd the PMIs and the 24th the ifo We've also got weekly jobless claims On the 24th of september as well. So in terms of macro Pretty light in terms of earnings numbers We've got kingfisher Cineworld and nike. There's a couple of key companies that i'm Keeping a close eye on So the overall macro picture Let's look At euro dollar because we've got some flash PMIs coming out Later in the week from france and germany and obviously some of the concerns about Um stock market valuations and risk off that we've seen this week Have been as a result of talk of new localized and targeted lockdowns As well as curfews quarantines that they appear to be coming more commonplace Not only here in the uk But also in france and spain where infection rates are really starting to get worryingly high World hold the world health the world health Organization is also warned about the alarming rise in coronavirus cases across europe as we head into the autumn, but This was always going to happen. This was always going to happen. We're testing more A lot more than we were in march and april So when you see all these spectacular Sensationalist headlines about you know the infection rates higher than it was you know in in In march and april well, of course it is because we're testing more the r-rate is still lower The r-rate was an awful lot higher in march april and may When the pandemic was at its height. We just weren't testing anywhere near as much because we didn't have the capacity now that we're testing more Obviously that capacity is being stretched to the limit by increased capacity As is the the lab results in terms of trying to get those results back quickly So it's not just the uk government That's struggling with this and you know, there's plenty of reasons to criticize the uk government. I mean Governments themselves in glory anywhere not just the uk the u.s. Administration, france, germany Running out of capacity some people are going for tests don't need to go for tests which is obviously overburdening the system The big Number the important numbers to keep an eye out for not so much the infection rates hospital admissions And deaths now hospital admissions are going up in marseille and france That is a concern and obviously that's why you're getting these localized talk of new localized and targeted lockdowns Over the course of the next few weeks a month and that is likely To continue to weigh On certain sectors namely travel stocks Leisure stocks, that's why you're starting to see them come under further pressure Over the course of the net over the course of the last few days That's why ryan air has cut capacity again in october And and could well continue to do so as we head into the winter months. So there will be more Stimulus measures from governments as we head into the autumn as virus infection rates go up. What does that mean for pmi's? It means that pmi's particularly services are going to come back under pressure After the big rebounds that we've seen in the summer We've got france and germany. There's already evidence there that pmi's are starting to taper off in france We saw services slow down from 57.3 in july to 51.5 in august Given the direction of travel that we've seen in the case of infection rates over the course of the past three or four weeks That it could well actually see a dip into contraction territory In september So I think it's important to understand that as we come to the end of q3 q4 is going to be much more challenging when it comes for when it comes to The resilience of the recovery that we've seen in the wake of the absolute lockdowns that we saw in march and april And that's going to be true just as it is for manufacturing as it is the services uk flash pmi's have been slightly more resilient in august services activity for the uk Had a five-year higher 58.8 Now with e-touch to help out in august that obviously helped In terms of the september numbers we could see a little bit of a slowdown From that if we come into if we come anywhere near the loads of mid fifties I think we'll be doing well there given the fact that there's The uk recovery has been slightly lagging behind the rest of europe because we released our lockdown measures slightly later so They're they are they are you know these pmi's are likely to be key bellwothers of what's to come Further down the pipe in terms of the effect on the euro 50 day moving average again is acting as a decent support level We did break below this neckline very very briefly before coming back above it, but it's becoming quite apparent This 119 level is proving to be a little bit of a barrier And again my head and shoulders Scenario is still very much valid But we do need to consolidate a move below 190 below below this neckline here the 50 day moving average To target and move back to 116 if we look at the euro index This is a particularly interesting chart We draw a trend line from the lows in february We're on the cusp of breaking a potential support for euro, which could herald in a significant Um period of euro weakness if we break below this 1030 area here This could be a sideways consolidation Or it could just be a simple break of an upward trend line. Nonetheless This is likely to be a key support area for the euro a break of which Could signal in about of euro weakness going forward So keeping an eye on that and that could also play into the euro sterling play That's seen a significant sell-off in that over the course of the past few days um Try to break through 92 70 80 has come all the way back here finding support in 90 80 So that's the next key support level on euro sterling as long as we as long as we remain below 91 70 80 Then we could well see further losses there back to around about 89 and a half I you know, I find it I think it's very easy For people to be bearish about sterling It's very much a contrarian position to be slightly bullish simply because I think there's an awful lot of negative narrative around the pound um, and as such The pound is very susceptible to short squeezes as we've seen this week If we can break above 130 20 in cable Then we could see a move back to 132 And certainly given the very sharp reaction of those lows there. It suggests there is some um, there is some residual short positions still out there Um, we've also got german ifo business climate. It's due out on the 24th German government has pledged to continue its fiscal plans to support the german labor market until the end of 21 2021 which should in the face of it be supportive but If you're worried about a slowdown in the economy localised lockdowns and what have you Then it's highly likely that you're not going to be particularly incentivised to Invest in your business as you head into the winter months So that's certainly something to keep an eye out for going forward. So I would certainly expect um Certainly expect the dollar To continue to remain a little bit on the south side Now that could benefit the euro certainly in terms of the rebounds that we've seen in the dollar at the moment They're very hard one But at the moment the euro hasn't been particularly strong either so You've got a little bit of conflicting signals when it comes to Dollar strength or weakness and euro strength or weakness And that's why I think it's important to look at the dollar the dollar index and the euro index Try and give a steer on the next move on that particular currency pair And that's one of the beauties of these new index products. They do give you a much broader Outline of what's put you know What what the next likely move in a particular currency might be certainly on a more trade-weighted basis Jobless claims again It's a tricky one this one because They're they're still solidly below a million But the declines that we're seeing are tending to be an awful lot more nuance a lot more muted. We've seen 860,000 and the latest jobless claims numbers. It's only down around about 30 000 from the previous week So it does appear that the jobless claims increases are starting to level off At a very very at this very very high rate And ultimately that's not sustainable It essentially means that they're probably they're probably gonna plateau in and around this sort of level And if you want an economic recovery in the u.s You need to see these numbers come down an awful lot faster And that doesn't appear to be happening and it's not likely to happen Unless we get some movement on some form of fiscal stimulus um from u.s politicians, but And unfortunately, I don't really see much evidence of a datont On that particular measure in terms of the earnings numbers. We've got cine world one of the One of the sectors that's been Worst affected by the corona virus shutdowns cinemas have reopened albeit You have to wear a mask Which is not my idea of fun and you go into the cinema Now there has been some speculation that cine world could be subject to a takeover bid from a big hollywood studio Um, certainly with the shares of record lives. It is a bargain, but it's a bargain for a reason It's carrying an awful lot of debt so um, you know, there could be some truth in that given recent changes to um us us regulation when it comes to the release of With the release of movies, but I don't hold out much hope there's too much risk involved and I think The uh The the the numbers that the first half numbers that are due out Um this week are not likely to paint a particularly pretty picture Even though cinemas have started to reopen on a fairly albeit on a fairly limited basis We've also got nike's latest numbers Certainly the loss that they posted in q4 hasn't held their share price back digital sales again have been a big driver of um A lot of companies outperformance in the retail space If we look at the if we look at the um the last set of numbers Um digital sales saw a rise of 75 in q4 So I think that is the direction of travel That is likely to continue to help drive these sorts of gains this week. We've seen big gains um in or decent numbers I should say from the likes of h&m next and um Inditex who own who owns are all as a result of Decent performance on the part of their online businesses. They prove themselves to be able to adapt To the changing retail um The changing face of retail when it comes to Physical stores and online and it's been the same story for king fisher who were reporting their first-off numbers as well I mean king fishers had its fair share of problems owns b&q and screwfix um at its last set of numbers um ceo teary garnier reported a 66 four in four-year profits, but king fisher Stores were allowed to stay open in april And this is seen online sales surge so I think that will continue to be the case and king fisher is one of those companies that's that is actually employing new staff It's employed an extra 4 000 staff to deal with the extra workload from the boom in the online business So I think while its costs may have gone up So will its revenues and that's reflected in the rebound that we've seen in the share price So there is good news out there in the retail sector You just have to know where to look for it look behind the negative headlines There are pockets of good news out there. Tesco's is hiring An awful lot of new people as is amazon King fisher as well. So for all the for all the noise about job losses There is there are other entries on the other side of the ledger um, unfortunately the job losses at the moment Are outweighing the number of new jobs being created That being said, um, I think that's pretty much it for this week um Thank you. Uh, thank you all very much for listening that we just sign off with quickly putting up the disclaimer again now before we Before we sign off the end of another week and Hopefully look forward to a slightly more um interesting Trading week as we come to the end when we head towards the end of The third quarter of which obviously september is there the last month