 Good morning and welcome to CMC Markets on Thursday the 7th of May and this quick look at the week ahead beginning the 11th of May and it's been a little bit of a choppy week for European and US stock markets. We got off to a little bit of a negative start in the aftermath of a big decline on Friday in the absence of European markets and European markets caught on to that with a bit of a negative vibe on Monday. Since then it's been a little bit of a roller-coaster ride and to all intents and purposes we really haven't gone anywhere. I think it's been very very difficult for investors to sort of deduce any sort of direction for markets in general simply because they're being pulled on the one hand of our optimism, the slow easing of lockdowns, or prompt an upturn and ignite a fairly quickish recovery in economic activity, if not an improvement in the data and then on the flip side of that you've got continued rise in really poor economic data. Now I'm recording this video on a Thursday simply because Friday the 8th of May while it is non-farm payrolls day is a UK bank holiday because the Monday bank holiday has been moved to Friday the 8th of May to commemorate the 75th anniversary of V-Day which is victory in Europe from 1945. So the UK is celebrating their bank holiday on a Friday not on a Monday, which of course means that I will have to do the non-farm payrolls webinar on the Friday during what is supposedly a day off, but you know then's the breaks as they say. Nonetheless, what we have now is a quick look at the stock markets this week and by and large it's been a pretty fragmented type of week. What we've seen is since the big decline in the middle of last week we've seen a pretty what I would call choppy series of sessions since Monday. We obviously had a big decline on at the end of last week on the Thursday, which was followed by an even bigger decline on Friday. Since Monday we've seen a slow move higher, but we haven't really moved anywhere significant in the context of where we were about a week ago. Certainly looking at the weekly charts we can see that even though we look as if we're going to finish positive on the FTSE 100 that will be slightly skewed by the fact that we had an extra trading day last week, which the Europeans didn't have. So in the context of where we go to next it's going to be a fairly bumpy ride because obviously we don't have site of US payrolls. We had the ADP report earlier this week, which came in at 20 million job losses for April. The likelihood is we'll get a similar disappoint thing number, not an unexpected number, but a horrific number on Friday. The unemployment rate in the US is likely to move well above the 15% level and yet we have this cognitive dissonance on the part of equity market investors and particularly US investors. The presuppose is that while you're going to see 30 to 40 million new unemployed people in the US economy, somehow we're going to get a v-shaped recovery. Certainly the Bank of England's assessment this morning of a recovery in the UK economy is similarly optimistic, talking about a 15% decline this year followed by a 14% decline this year, my mistake, followed by a 15% rebound in 2021. Now that is predicated on a series of what I would argue is heroic assumptions. It's based on the fact that you're not going to get a significant amount of unemployment that's likely to remain a little bit stickier than most, given the fact that some of the jobs that we saw two or three months ago are not likely to come back. And I'm thinking very much in particular around the travel sector airlines, aerospace, that sort of thing, because obviously it's unlikely that people are going to want to travel anywhere near as much over the course of the next two weeks. There'll still be travel. It just won't be to the same extent. And obviously, aerospace simply because an awful lot of airlines won't want to spend out on new fleets, new aircraft and could well cancel any of their existing orders, which could well affect Boeing, Rolls-Royce and Airbus. So there is going to be significant knock on effects, not only in the travel sector, but also in the supply chains for the aerospace sector, which in turn will obviously cause a trickle down effect into the more vulnerable areas of the UK economy. So looking at the S&P 500 at the moment, we still remain below the 200 day moving average, as we do on a whole host of other equity market indices. And while we're below those levels and I can't reiterate this enough, I still think the downside is the more vulnerable side until such times as we get a rebound through and above the 200 day moving average, then stock markets very much remain in consolidation and sell the rally mode in the longer term. In the shorter term, we are still finding a fairly decent base here in the DAX in and around this 10,200 area. And I think the name of the game at the moment is pretty much range trading. We know the data is going to be horrible. This morning's latest China trade numbers for April showed that even though China is now out of its lockdown and it looks like it's got a handle on the virus, in April there was very little evidence of a recovery in economic activity, domestically, imports slid by 14.2 percent. That was much more than expected. And it suggested that while the economy is reopening, consumers remain very, very cautious about going out and spending money. And I think that's really I think that's equity market investors are really underestimating that. China's been out of lockdown nearly two months now. And yet there's still no significant evidence of a significant uptick in economic activity. Now, one part of that is obviously down to the fact that the rest of the global economy is in lockdown. So it's the export markets are pretty much closed apart from obviously medical medical exports and PPE and that sort of thing. So as we look ahead to next week, I still think the play is range trading in terms of equity markets. The FTSE 100, the German DAX, as we've seen here, as well as the S&P 500 direction is still going to be very, very difficult to determine in the short to medium term. But I'm still of the opinion that while central banks remain very much towards the easing side, we still need to see a significant improvement in economic activity. We need to move beyond the lockdowns. And move towards a rebound and a declining risk of a second outbreak. And unfortunately, I think we will get a second outbreak as we head into the winter season, even if we're able to defer it for two or three months. So as we look ahead to next week, the numbers that I'm keeping a particular eye out for are first quarter GDP for the UK, 13th of May. Little doubt, I think, that the economy will contract in Q1 if recent numbers from France, Spain and Italy are any guide. We've seen big contractions there, 5.8% in France, 5.2% in Spain and 5% in Italy. And even though full lockdown only happened towards the end of March, I think a combination of events, including the effects of February flooding, rising uncertainty seen in the lead up to the lockdown will have eaten in to UK economic output. I think the combined spillover of events saw retail sales in March pose a decline of 5.1%. So that gives you an indication of the sort of number we're looking at in respect of Q1 GDP, you know, and the fact that service sector activity hit 34.5 in March as well. So, you know, I think in terms of the economic outlook for the UK, the GDP number is likely to be a significant disappointment, which brings me on to German first quarter GDP, which is also due out next week, but it's due out on the Friday. It's due out on the Friday, the 15th of May. I have to think about that for a moment. Yes, Friday, the 15th of May. So that also is likely to see a significant contraction. And I think there is an expectation that first quarter GDP in the Eurozone was 3.8%, which seems a little bit optimistic when you consider three other biggest economies in Europe, both have both shown contractions of near and around 5%. So that would presuppose that Germany's first quarter GDP number is going to be much better than three point minus 3.8%. I think that's stretching it a bit. I think they could contract less than France, Spain and Italy, but to the tune of around about 2% 2% contraction to bring that headline EU number down. It's a stretch. It's not impossible, but the March lockdown is likely to have impacted Germany's export markets simply because China was in lockdown for February. Which means the German exports to China pretty much fell off a cliff. It was only really recovering modestly in March and combined with a slight economic activity in March and a 5.6% plunge in March retail sales and big declines in industrial production and manufacturing production and factory orders. I think it's highly likely we could well say a three and a half to 4% contraction in first quarter GDP, which would then mean that EU GDP is likely to come in north of 4%, minus 4%, minus 4%. So I think there's a significant underestimation in terms of German GDP expectations going forward for next Friday. So I think underestimating that a little bit. We've also got, you know, what if it will before I move on to China's industrial production retail sales. So what does that mean for Euro dollar? Because earlier this week we saw the German constitutional court lobber hand grenade into the EU Commission by basically saying that the European Central Bank acted outside of its boundaries when it implemented its quantitative easing program from 2014-2015 and that the ECB had three months to justify the legality of its asset purchase program. Obviously the ruling only related to the asset purchase program that started in 2015-2015. It doesn't apply to the current program, but if you extrapolate that forward, the old program had significant higher limitations on the types of European debt that the ECB could buy. For example, it could not buy Greek debt because Greek debt was classified as junk. As part of the new pandemic program, it can buy Greek debt. So it's got a much looser scope in terms of the assets that it can buy. So if the old asset purchase program is considered ultra-veries and outside of the ECB's remit, then it's quite highly likely we'll see a legal challenge to the existing pandemic asset purchase program. So watch this space. Whatever happens, I think it's very likely that the euro dollar will continue to remain under pressure. And this key level here, around about 107.20, is likely to be a key level going forward. Keep an eye on 107.60.70 area. I think it's still likely that we'll see a move down towards these lows that we saw in March. And similar sort of outlook when it comes to cable. Let's look at the cable chart here before we move on to other things that I'm looking at for the coming week. It's seen a little bit of sterling weakness this week, not altogether surprising, given that we've seen an awful lot more noise about trade talks, Brexit talks and what have you. And we've broken below that 124 area that I highlighted to you at the end of last week, which suggests that we could well look to retest the lows of the recent range all the way down here at 122. Looking at this two hour chart here can probably draw a nice set of lines through here, but there's also these two moving averages, which are likely to act as a little bit of a top around about 124.30 in the short to medium term. If we can get back if we can get back above 124.30, I think this range trade is probably likely to continue to play out. The way I see it at the moment is there's an awful lot of what I would call choppy range trading going on, particularly if we look at this chart on a slightly longer time frame. You can see from the highest back in April, decent selling interest in around 126.30 and here again above 126, but it's also decent buying interest anywhere near 122.30. I see no reason for us to break out of that range. Now, what I would say is that the time is slowly approaching that the UK will need to consider on the EU. We need to consider about the Brexit deadline, which comes at the end of this year, in which in some time in June, there may need to be discussions about an extension. But overall, the likelihood is that the Bank of England will do more quantitative easing before the end of the summer. The vote that we saw today saw two policymakers vote for an extra 100 billion pounds of QE. So it won't take much more economic weakness for the other seven members to also lean in that direction. So the current asset purchase program, £645 billion, that's likely to go up to £745 billion of government and potentially corporate bonds. As we look ahead to the summer. So that's Cable, that's the key levels on Cable. 124.30 on the upside. If we can get back above that, then I think it's likely that we could head back towards the highs that we saw towards the end of April, beginning of May. You're sterling still decent support around about 86, 70, 80. That is proving to be a very, very solid base in the short to medium term. But what it does tell you is the fact that if we do break below that, there's probably going to be quite a number of stop losses building up below that key downside support. We can sit on this chart here very, very clearly. This is the daily chart that we're looking at. If I change that time frame ever so slightly to a four hour chart, it's probably an awful lot more notable when it comes to looking at the series of lows that we've got in and around that 86, 70, 80 area. Here, you can see it very much more clearly on this chart that I've got in front of you here. So we've got these lows here, here and here and here and here. I think I've got a little bit carried away with my zoom function there. So I'll just wind it back out of touch so that it actually shows an awful lot clearer here. So here we go all the way along here, big, big support. And it's notable that the rebounds are getting ever so slightly weaker, which suggests that at some point we will break that level and head towards 86, 20 and 85, 80. So let's move on to Chinese industrial production. Retail sales for April. They're due out next Friday as well. Again, we talked about this, I think, a few minutes ago. The April numbers, April retail sales in particular is probably what I'm more focused on than industrial production simply because it's a good, it's a decent barometer of internal consumption, internal demand. In February and March, we saw declines of 20.5% and 15.8% in retail sales. So we should see an improvement in April. I think we should see a decline at well. Analyst estimates suggest we'll see a decline of 6%. Nonetheless, that's still pretty poor and shows that the Chinese consumer who now makes up more than 50% of the Chinese economy still remains very, very cautious in the aftermath of coronavirus and COVID-19. So economic activity is expected to improve. Industrial production is probably going to move back into positive territory as exports improve, as we've seen in the most recent trade numbers. But rising unemployment could well act as an additional break on a sharp rebound in economic activity. So those are the key macro items that I've got my eye on next week. Let's have a quick look at Brent Crude because we've seen a decent rebound there. Production cuts kicked in at the beginning of the month. But there's still no evidence at the moment that I can see that what we've seen is likely to give way to a significant improvement in demand. Yes, the easing of the lockdowns will help in working off the storage surplus. And certainly the performance on this weekly chart here from the 20 year lows does suggest that we are starting to carve out a little bit of a base. But the oil market is very, very fickle. And we've got the June expires going to be coming up to approach us over the course of the next few weeks. And that could introduce an awful lot of volatility. In the oil contract, the big level for me on Brent is this series of highs through here at about thirty two and a half, thirty three dollars a barrel is those highs through here. And obviously the 50 day moving average is acting as a little bit of a barrier on the daily charts in the short to medium term. So I'm keeping an eye on thirty dollars a barrel and thirty two dollars a barrel. I think if we can get back above there, then we could head back to 40. But at the moment, I'll be surprised if we do simply because this is such a huge resistance level through here. If I draw a horizontal line in that'll basically give you a better indication of the level that I'm looking at. There we go. So that's in there. And it's around about thirty three dollars a barrel straight across the top there. So let's keep an eye on that. Gold's pretty much busy doing nothing. Fairly well supported around about 16, 17, 16, 80 with decent resistance of the recent near the recent highs of around about 17, 40. In terms of earnings announcements, I think there's always interest in companies like Aston Martin been a real tale of what for Aston Martin since its IPO in 2018. Even I mean, I've been really surprised the amount of own goals that company has managed to score in the course of the last 18 months. One profit warning after another. It's only been saved from administration by the Canadian billionaire, Lawrence Stroll. It's got some significant interests in shareholders. Toto Wolf, head of Mercedes Formula One, is also a minority shareholder. It's just raised. It's just raised some new funds, diluting existing shareholders. It has a decent order book. It's got a decent order book of around about two and a half thousand cuts and the reopening of its manufacturing facilities will offer a welcome respite. But if it's looking to take on Ferrari, it's going to start have to start shifting some product. And that means that China needs to reopen quickly. All of its big markets need to open quickly. And it starts to need to start shifting quite a few of these DBX SUVs because that is being touted as the solution to its cash flow problem. So looking at these lows here, I think there's going to be a very key bellwether in terms of not only its Q1 numbers, which are likely to be awful, but its outlook. What? How can the chairman basically sell a future that's going to give shareholders some of their money back after what has been a horrific last few months? We've also got Ted Baker, again, another tail away. Therefore, your numbers from them, they are due to come out on the 15th of May. They may not. It's not immediately confirmed. But again, the biggest markets of Hong Kong and China, which have been hit quite badly. So I think more than anything, looking for a little bit of a decent rebound in those shares, given how far they fall. And you've got to ask the question, how much is the bad news is already in the price? It's managed to solve some of its debt problems by saying it's head office for 72 million pound, which allowed it to pay down some of its debts. But overall, that chart does not lie. It really needs a significant improvement through 200p to really suggest that it's that a base is in and we could well see further gains. It's trading more like a penny share at the moment, up seven percent today. What has been a success story in the U.K.'s construction sector, which has been a bit of a nightmare over the course of the past five years, has been about four BT. First quarter earnings during the fourteenth of May. And even though the construction sector has been one of the weak links in the U.K. economy, Belford BT certainly hasn't. We look at this chart here. We can see that it's seen a significant rebound off its lows. I don't particularly like that font. Let's do something about that, shall we go to settings, font and then change the small fonts to medium fonts. And then let's make the X bold so that we can actually see. The levels that we're talking about, there we go, that's better. It's a much better idea of, you know, where we are in terms of. The price action. So, yeah, going back to its last report, report in March profits rose eight percent, two hundred and twenty one million pounds, rise in the order book, focus on high margin. Now, the company did postpone the payment of the dividend in March just to bolster its balance sheet. But certainly, I think there is a chance the company may defer this update given the disruption to its business in Q1. But it does still remains in fairly decent shape given the problems faced by an awful lot of the sector. And that very weak construction PMI number that we saw earlier this week, which came in at eight, which was pretty awful. And again, I think we're likely to see a significant improvement in Q2 once all of these building sites start to go back to work. One other thing to keep an eye on is Marriott's latest results. They've had to raise an awful lot of money over the course of the past three to four weeks to try and ride out the hit to the hotel sector. They they bought Starwood a few Starwood a few years ago, so they're carrying an awful lot of debt. So they've managed to secure their survival for at least another nine months. And they're reporting their Q2 Q1 numbers on the 11th of 11th of May. So that's it. I think for this week's look at the week ahead, as I say, we don't have sight of the payrolls numbers, but I don't think it's going to be on the realms of possibility to suggest that the numbers are going to be pretty poor and that. Markets are probably going to take them in their stride unless the number, the headline number comes in anywhere near above or anywhere, anywhere significantly above twenty one or twenty two million. I think that's that's the benchmark number. And that is the expectation with the unemployment rate of it in around 15%. So as I say, that's it for this week. I have a good extended long weekend. If you're not tuning into the payrolls, if you are, I will be covering them live. In the meantime, thank you very much for listening. It's Michael Houston talking to you from CMC Markets.