 Good morning and welcome to CMC Markets on Friday the 8th of February in this quick look at the week beginning the 11th of February And it's been a bit of a mixed bag of a week for global equity markets We've seen some disappointing we've seen a disappointing performance from European markets in general No, the FTSE 100 has been an exception to that While the US markets have found it difficult to move beyond some very important technical resistance levels And I think there's a number of factors at play I think behind the fact that we do appear to be running out of steam for the rally that we've seen so far Since the beginning of this year There's been a number of factors that have weighed on risk appetite over the course of the past two to three days some significant downgrades of growth forecasts by central banks as well as other economic Institutions since the Federal Reserve downgraded its outlook for the US economy and became an awful lot more cautious on The trajectory of its rate path We've seen central bank after central bank revised down its growth forecast. We had the Bank of England We've had the Reserve Bank of Australia Downgrade their growth forecasts for 2019. We've seen the European Union Downgrade will actually take a take a scalpel to the growth forecasts for the European Union Particularly Germany and Italy which have dropped to the bottom of the league when it comes to Expectations for growth and the Bank of England cut its growth forecasts for the UK economy from 1.7 to 1.2 percent Over concerns about and Brexit risk So against that backdrop and the fact that President Trump and Xi now aren't and China's president Xi are now not scheduled to meet before the March the first deadline we've seen a whole host of profit-taking on Equity markets in general and with respect to the DAX those of you who've been regular listeners to these videos will know that I've been Looking at the 11,000 level on the DAX as an a significant support level For the breakout that we saw at the beginning of this year and now we're now back retesting it as well as the 50-day moving average so I think that's going to be a very key support level going forward and I think it's likely to continue to do so Over the course of the next few days if we do Fail to stay above this 11,000 level then I think there's a decent chance We could well head back towards 10,800. We're not there yet We're currently just about holding above it and I'll be keeping a close eye on that FTSE 100 has formed performed slightly better over the course of the past couple of weeks Unlike European markets, which are weighed down by lower load growth expectations We've seen some decent gains over the course of the past few days We're starting to give some of them back, but we're struggling to get through this 7,180 level 7,200 level that I identified just over a week ago as a key resistance level for The FTSE it's a similar story for the S&P 500 We failed to get above the 200 day moving average and again here a key technical resistance level on Both the FTSE 100 and the S&P are likely to be key arbiters of where we go to next at the moment We've dropped back towards 26,80 level on the S&P 500 And that's likely to be a key support level going forward if we break back below that on the daily chart Then we could well see a little bit of a drift back down towards the 2600 level So those are the key levels that I'm keeping an eye out for on the DAX the FTSE 100 and the S&P And now we're going to be looking ahead to next week the progress of China US trade talks because ultimately I think while While while it's become apparent that President Xi and Trump won't be meeting before the 1st of March deadline Which is when tariffs are due to car due to go higher The fact that they're not meeting doesn't necessarily mean that tariffs will automatically increase by the extra 15% That they are expected to do on March the 1st We could get another extension talks are ongoing Treasury Secretary Stephen Mnuchin is scheduled to go to Beijing in the coming few days to talk to Chinese officials And try and get a much closer Agreement on next steps in the China US trade talks It's also a big week for the UK economy in the wake of the Bank of England's decision to keep rates unchanged And ultimately I think while Mark Carney the Bank of England governor was a little bit Downbeat in terms of his growth expectations I also think that it's worth looking at the fact that the growth the GDP downgrade from the Bank of England Whether or not you believe they're accurate or not Was still well above the levels that the German economy is expected to grow this year There is a significant concern at the moment amongst European Central Bank or European officials in fact that the ECB Doesn't have the monetary tools to deal with a new prolonged slowdown in the European economy now we've heard from ECB officials and Mario Draghi in particular in recent weeks that The slowdown that we've seen over the course of the past few weeks and months is Supposed to be temporary in fact present ECB President Mario Draghi's recent comments to the European Parliament I've suggested that they believe that any slowdown would be temporary and it's been a consistent refrain from the ECB for Over a year now and yet here. We are still seeing gradual declines in economic activity With the prospect that the three biggest European economies of Germany France and Italy are all in or heading towards a technical recession and that's really weighing on euro dollar and In the process actually helping support the US dollar the US dollar as has continued to gain this week quite substantially And it's not for any reasons as to that the market thinks that the Fed is going to raise rates It's not US 10 year yields Have continued to decline in fact if you look at US 10 year yields on a line chart as shown Here we're down around about 2.64 percent and then any subsequent rally in US 10 year yields has been Much shallower than the previous one. So the direction of travel for US yields is lower Unfortunately, the biggest problem is that while US yields are heading lower. So are German yields. So are UK yields and so are Japanese yields Italian yields are going the opposite way but for obviously completely different reasons as concerns about their ability to actually fund any fiscal program and run into and run foul of EU fiscal rules, so that's a slightly different story But German Bund yields are heading lower the differentials between German and US rates are moving in the dollar's favor And that is why euro dollar is declining against the dollar and ultimately We could well see a retest of these 112 80 lows and these 112 These 112 20 lows that we saw in December the direction of travel for euro dollar does appear to be towards The lower end of the range and if you look at every single subsequent rally from these lows here They have been getting shallower. So if we do break this support level around about 112 80 We could well head lower the pound on the other hand. It's been slightly more Supported that being said that is likely to remain quite volatile Decent support again in the pound against the dollar around about 128 10128 20 Which is the lows that we've seen here. We could we'll see a drift back down here But again, it's a big week for the pound coming up. We've got Another war is scheduled to get another UK parliamentary vote on A prospective plan B and we've got a host of UK data coming out now While we're expecting to see another meaningful vote on any changes to the withdrawal agreement I don't think we're going to get one simply because at this moment in time There haven't been any changes to the withdrawal agreement the UK still wants the Irish backstop removed and While there hasn't been any shift in positions There has been agreement to meet later in the month for further talks now We could see further attempts by Parliament to take steps to try and prevent a no-deal scenario from happening With the revival of the Cooper amendment which could force the Prime Minister to seek an article 50 Extension and that is something that is continuing to look ever more likely simply because we are running out of parliamentary time to pass the Necessary legislation for even a no-deal scenario So I think both sides will want to try and get some form of article 50 extension in place over the course of The next few weeks. We've also got UK fourth-quarter GDP numbers out on the 11th of February And they're likely to show a little bit of a weakness from the numbers in Q3 Probably something in the region of naught point two or naught point three percent Certainly Q1 is looking a lot weaker than the Q4 numbers and we'll get a first indication of them And we've also got UK inflation data out on the 13th of February now in December's numbers They came in at 2.1 Which was a 22-month low and that was largely driven by a fall in airfares and a decline in fuel costs I don't expect those numbers to Significantly increase though and rail fares increase do come into the numbers in January There does tend to be a little bit of a boost at the beginning of the year, but they're not expected to be significantly weaker They might be slightly stronger We've also got a whole host of US numbers retail sales for January a due out on the 15th We've also got you flash GDP numbers on the 14th of February Let's hopefully we don't get a Valentine's Day massacre on the equity markets in the wake of Any data that comes out on that particular day and it's also a very big week for earnings We've got Royal Bank of Scotland's latest four-year results We've got some More results from the retail sector in the form of Dunnell group and we've got further important numbers out of the US Deer and Co first quarter numbers CME group and Coca-Cola So quite a busy week lined up the main things to keep an eye out for is for progress in US China trade talks UK and EU GDP numbers as well as any parliamentary activity With respect to parliamentarians attempts to force and no deal On to the UK government. So that is it for this week. Thank you very much for listening This is Michael Houston talking to you from CMC markets