 Good morning and welcome to CMC markets on Friday the 29th of May and this quick look at the week ahead beginning the 1st of June and it's been a very another positive week it's a very positive week it's been another positive week for equity markets driven higher largely on the back of optimism and significant optimism on the relaxation of lockdowns from from various countries across Europe the UK economy is slowly starting to make plans for opening up from the 1st of June dentists reopening on the 8th of June and non-essential retail on the 15th of June obviously with the added caveat that it's obviously contingent on no increases in infections or death rates in the intervening time one of the things that's been notable about this week's price action for European and US equities in general has been the fact that while we've been going higher markets been fairly content to ignore the rising tension that's been gaining traction in Hong Kong the US-China relationship over that the various smoke signals that have been coming out of that region for most of this week suggesting a confrontation was was brewing I mean US markets turned tail sharply last night on reports that President Trump is going to be holding a press conference later today obviously today being Friday the 29th of May just before 10 a.m. UK time on the very subject of China giving you a little bit of background you can see straight away that the FTSE 100 has had a fairly decent week we're still in the overall uptrend we've made a marginal new high from the levels that we saw at the beginning of March what's interesting to note however when this particular chart is we haven't actually managed to fill this gap this gap is acting as resistance just to below 6400 if we look at that tire six between 6300 and 6400 there's a hundred point gap so that's likely to act as resistance going forward we've seen a bit of a pullback today over a little bit of apprehension as we come into the weekend and month then so there could be a little bit of portfolio adjustment going on ahead of the fact that it's going to be the first of June on Monday and as result we're seeing a little bit of weakness there but nonetheless we still very much remain in by the dip mode when it comes to equity markets in general if we look at the German decks we can see once again we've had fairly decent rise every single day this week we haven't as yet taken out the 200 day moving average but obviously this afternoon's press conference store today's press conference could well prompt a little bit of a sell-off particularly if President Trump is particularly strident when it comes to his tone around China to give you a little bit of a background the US House has passed a bill earlier this week authorizing sanctions against senior Chinese officials for human rights abuses against Muslim minorities now obviously China also passed legislation earlier this week passing the security bill with respect to its oversight of Hong Kong which approved that earlier this week so there's an awful lot of what I would call diplomatic chewing and frying tap dancing if you like between the US and China over this and there has been some talk the US State Department could actually withdraw the special dispensation that Hong Kong has when it comes to its trading relationship with the United States unlike China Hong Kong doesn't have any tariffs on any of its goods between it and the United States even though it is strictly speaking part of China it still benefits from the special dispensation and trading relationship that is that was safeguarded as a result of the 1997 agreement that basically agreed the two systems one country format that is currently in dispute shall we say between the US China and the rest of the world so watch this space I think is probably the best thing that we can do but in the absence of the noise from the news the price action looks fairly solid when it comes to where markets are going the S&P 500 has managed to push above the 200 day moving average regular viewers will know that I've been watching that particular level for quite some time we have currently broken above it we're trading around the 61.8 Fibonacci retracement level of the entire down move from the all-time highs that we saw earlier this year to the to the reaction lows that we saw in early March so we're at a very key inflection point when it comes to the S&P 500 the NASDAQ has retested the highs of earlier this year the all-time highs so at the moment markets are going to be very very reactive not only to the news out of China but also as relaxation of the lockdowns get rolled out they will be reactive to any rise in the infection rate or the death rate that could cause these lockdowns to be tightened back up again but overall it's a fairly positive tone it's a fairly positive week it's a fairly positive month despite the fact that we're trading a little bit lower today I mean the fact that we've got a 6100 marker on the 50-100 is very good news when you consider where we were a month ago so looking ahead to next week we've got a plethora of important announcements we've got the US employment report for for May and all the while we've seen these the rebound in equity markets over the course of the past few weeks the economic data has been pretty much as bad as we thought that it would be weekly jobless claims in the US has continued to come in the million level or two million level in fact and now total jobless claims over the course of the past six to seven weeks total 40 million people so the one silver line that we took from this week's jobless claims numbers was the fact that the continuing claims declined from 25 million to 21 million so maybe the reopening of the US economy is starting to see some rehiring of some workers that were out of work in the early part of the lockdowns but it's very difficult to extrapolate that from just one number we want to see that played out over the course of several weeks but certainly in terms of the weekly jobless claims they continue to come down on a weekly basis yes they are still a very very high but they're not going they're not increasing on a week-to-week basis that they do they're coming down from the peak that we saw on the first week or be at a much at a much slower rate so I say going back to what I was saying before the key items that I've got my eye on this week are the US employment report which is due out on the Friday the 5th of June and while we'll be paying close attention to that now obviously last month's April payrolls report confirmed what most of us already knew that we'd see a record number of Americans lose their job in April when the final number was released we came in slightly below expectations at 20.5 million but nonetheless when the ADP number is also added which is due out on the Wednesday it's spelt as a sorry tale of economic misery for a huge number of people so Friday's payrolls report is expected to be a multi-million number it won't be anywhere near the April number but each job loss will still be felt equally as painfully with another 8 million jobs expected to be lost while the ADP payrolls report is expected to shed another 9.5 million jobs on top of the 20 million that we saw in April so that would take the total number of jobs lost over the last two months to over 50 million jobs over a quarter or merely a quarter of the American workforce so that's going to push the unemployment rate up from 14.7% close to that 20% level that we've been talking about over the course of the past few weeks so it's not expected to be a pretty picture when it comes to the payrolls report we've also got PMIs coming out next week you know in that context I think we can safely say that while the manufacturing PMIs haven't been anywhere near as bad as the services PMIs we would expect to see an improvement in the services PMIs now they're coming out on the 3rd of June and the 4th of June the reason I think the possibility that European PMIs could be coming out a day later and the same day as the European Central Bank meeting that's also a very very key key economic macroeconomic indicators I'll be keeping an eye out for later this week is because it's a French and German Bank holiday on Monday so there could be a delay in those services PMIs coming out on the Thursday so what can we expect from the services PMIs well after the horror show of the recent record lows that we saw in April we I think we can expect to see an improvement certainly the flash PMI numbers that we saw from France and Germany in the UK did see improvements from the record lows in April 29.4 31.4 and 27.8 were a significant improvement from the teen numbers the low teen numbers that we saw in the April numbers we're also expected to see an improvement from the record lows of 7.1 Spain and 10.8 for Italy irrespective of you know where the numbers come in they still point to an awful contraction in the second quarter so you know it's really you take what comfort you can from the fact that the numbers are still pretty awful the UCB rate meeting now there's been an awful lot of optimism and we can see that reflected in euro dollar over the course of the past four days this week we've seen a very very decent rebound in euro dollar on the basis of this EU Commission and you can see that on the weekly charts so it really does bear it out quite nicely on the back of this EU Commission proposal to issue 500 billion euros in grants and 250 billion euros in loans to the most badly affected countries in Europe by the global pandemic pandemic let's not forget that Italy Spain and Greece are going to be the worst affected simply because of their debt dynamics but also because of the fact they rely so heavily on tourism for their economic growth and when you look at the travel restrictions and everything else it's going to be very very difficult for those countries to show any type of economic growth this year and I think that's why there is an awful lot of uncertainty and nervousness about the haste that these countries are taking in terms of reopening their economies to tourists so soon after they've locked down or so soon after they started to ease their lockdowns given the horrible death rates that we've seen in both Italy and Spain so you know there is some optimism about this proposal I think there's too much optimism about this proposal because ultimately the money is not going to be agreed anytime soon and what they really do need is the money right now but given the fact that an awful lot of countries in Europe or three or four countries in Europe are opposed to the idea of grants without any types of conditions attached to them this is set to be a fairly intense fight between the frugal four as they're known Austria the Netherlands Sweden and Denmark with respect to signing off on billions of euros of loans without or grants without any conditions attached to them whatsoever and it's unlikely that any agreement is going to come anytime soon given the fact the next EU summit is on the 18th and 19th of June and no one could argue that these countries don't actually need to help now as opposed to some time next year so the UCB rate meeting why is that important well it's important for a number of reasons the main reason being that the recent German constitutional court decision which compelled the ECB to justify its rationale around its 2015 asset purchase program will have prompted some nervousness I think amongst ECB officials about being too overly aggressive with their current pandemic emergency purchase program which while wasn't ruled on by the constitutional court could well find itself under the spotlight given the fact that it has much looser criteria in implementation than the one that the German constitutional court ruled against so for me the ECB has a mountain to climb if it wants to convince markets it can do much more than it already has done without signalling that they could face further challenges if they go further in extending the PEP program which is due to expire in October now to my mind they have no choice they have to send a signal that they remain to do whatever it takes to try and support the eurozone economy while the politicians bicker about the recovery fund because the recovery fund is unlikely to be available this year it's probably going to be available sometime early next year if there is an agreement so the ECB has to act as a bridge and the market has to believe that they can act as a bridge so this recovery fund is going to be front and center but it's going to be well down the line so my expectation is that they will likely try and extend the the PEPP beyond the October expiry and look to extend it towards the end of the year so what does that mean for euro-dollar well we've certainly seen the euro-dollar has been pretty much in a range for most of the last three to six months I don't expect that to change it's a big barrier up and around these levels here the marks of 26 and 27th march highs around about 111 50 but even if we are able to move much above here I still don't really see that much in the way of upside particularly if the macro outlook dissipates and the markets get spooked as a result of the US and China starting to get more aggressive with each other that's likely to prompt the dollar to go up and push the euro lower so I still think it's very much a range trade as far as euro-dollar is concerned if we look at sterling dollar the cable we continue to remain in a fairly decent uptrend here from the lows that we saw in March albeit the rebounds are starting to get a little bit tentative in and around here we haven't seen much of a rebound off this line we've just about respected it we really need to move back through 124 to retest the highs here but also the 200 day moving average which is likely to be a fairly key level when it comes to further gains for the pound against the dollar so again here with respect to the pound very much within a range and likely to remain within that range notwithstanding the fact that as we head into June pressure will be brought to bear to either agree on a Brexit extension deadline or try and push the deadline or push the push the timetable for agreeing to an extension beyond July because that's the date that's written into the withdrawal agreement that if the UK wants an extension they have to apply for one by July but at the moment the pound still looks to my mind it's finding it difficult to go up with any degree of confidence but dips still remain fairly well supported and for me the really big level I think on the pound is this red line here on this chart here it's 1985-120 that for me is the real line in the sand you know as long as we are able to close on a monthly basis above 120 then I'm still very much of the opinion and it's very counter-intuitive there's more upside than downside so that's really I think the way I'm looking at the pound against the dollar as we look ahead and certainly in terms of the improvement on the economic side of things we're likely to see a pickup in the data as we head into June and July and the fact that the unemployment rate thus far hasn't gone up too significantly largely as a result of the government's furlough scheme which does now look as if it's going to be extended into October though how that is funded could actually prompt a little bit of weakness particularly now that we're seeing evidence of significant job losses starting to trickle down into the overall data with companies like EasyJet, international Consolidated Airlines who own British Airways, Rolls Royce all announcing large-scale layoffs so that is something that's likely to start to filter into the figures over the course of the next three months and could act as a little bit of a headwind but the UK won't be unique in that. We've also got the RBA and the RBA is due to make a rate decision this week not really expecting too many surprises from the RBA the Aussie is finding upside a little bit difficult at the moment a little bit of resistance around the 200-day moving average with all this stuff about China there could be some headwinds there running into resistance so for me I think I'd be very reluctant to get overly long of Aussie at these sorts of levels maybe look to start to fade some of this Aussie strength that we've been seeing over the course of the past few days and weeks look for a little bit of a correction lower I think Philip Lowe has made it quite clear the governor of the RBA that he would probably reach the lower bound when it comes to interest rates so really the key question will be is the RBA prepared to do any more QE than some than the numbers that we've than the amount of QE that we've already started to see it do over the course of the past couple of months the government's already announced a three to five-year jobs program called JobMaker that I think that has helped push the Aussie up this week but at the moment it's finding it very very difficult to get through the 200-day moving average and these highs here around about the 6670 the 6680 level so keep a close high on that particular level for resistance in terms of company earnings we're going to call this the remote revolution company earnings week because there's there's three companies I'm reporting this week all of which could actually find that the working from home has actually helped them in no small manner we've got Halfords which has seen some decent gains over the course of the past few days broken above its 200-day moving average we've got their four-year numbers and while Halfords generally tends to be known for the fact that it has an automotive and auto parts and servicing business it also sells bicycles and the Halfords was classed as an essential business by the UK government so it actually remained open and at the beginning of May Halfords said its four-year results will be boosted by increased sales during the lockdown which could push profits up to around about 55 million pounds despite this the company did pull the divvy which I think is entirely sensible saving it 24 million to help shore up its balance sheet and it suspended its guidance for 2021 it will have benefited from the business rate suspension and I think it will have benefited from increased bicycle sales as well as accessory sales so the big question is is that price is is that all that good news priced in and if it's not can the share price go higher from the lows that we've seen in March but also more importantly now that we're above the 200-day moving average is the line of least resistance for Halfords to be by the dip for a move higher certainly if we look at this here it does seem solid support in and around 150 so you could conceivably argue that while it's above 150 then the line of least the the risk reward the risk reward trade here is to to buy the dip with a stop loss below the 200-day moving average zoom of video communications well since its IPO it's been pretty much one-way traffic for zoom and you know that's a that's a fairly good thing it's one of the things that we've heard in all these the zoom video conference calls the Downing Street press conferences and what have you the company priced at $36 a share when it IPO'd just over a year ago now look at it it's $163 an awful lot I think of the positivity is already priced in the company is profitable it was profitable when it IPO'd it was one of those very rare beasts but let's not forget the revenues are still well short of a billion dollars last year revenues rose to 622 million and that pushed the market cap to an eye-wateringly high 44.3 billion right 44 billion when it was around about $180 so it's not even a billion dollar revenue company yet yet the market is a price you know he's giving it a valuation of over 40 billion dollars so this year revenues are expected to rise to around about 917 million if it can get it over that billion dollar mark then that might be enough to keep the upward momentum going let's face it valuations are out the window right now so i'm not sure that it really matters but the fact of the matter is if it's able to grow revenues exponentially the big question will be whether it can sustain those revenues once the economies start to reopen because once economies start to reopen you may find people don't need to anywhere near as much so and it will also prompt other companies to up their gain as well slack technologies has been a similar sort of outperformer as well again trading well above its $26 IPO but it's been a tough struggle it sold off very aggressively in march it's clawed its way back Q4 update certainly moved towards working remotely we've seen a bit of a renaissance but again like zoom it's going to have to meet those expectations and despite all the optimism over the Q1 numbers we are expecting we're still not expecting to see a profit for slack unlike zoom where we are so a loss of six cents a share i think we can safely say the future for slack looks an awful lot more promising than it did a few months ago the big question is can we make further gains from the post IPO optimism that saw it go up to $44 a share so those are the three key companies that i'm keeping an eye out for this week we do have a couple of other items tiffany it's got first quarter numbers lvmh bought them as you may remember at the end of last year but also workspace group which has had a pretty tough time of it recently and was a favorite for small and medium-sized and startup businesses because of the fact that it was able to provide fairly cheap office space which had super fast connectivity on short-term leases their share price has taken a bit of a beating and they're they're they're publishing their four year numbers on the third of tune so that's really i think quick preview of the week ahead let's just have a quick finish up by looking at Brent crude seen a nice little move higher in Brent crude over the course of the past few days what's significant i think is that we've managed to move above this horizontal line here on the cash chart and have thus far managed to hold above it now the big question is can we sustain the move higher that we've seen over the course of the past week or so above $32 a barrel if if we're looking at the slow stochastic i would suggest momentum is starting to fade a little bit but until such times we trade below this level here then i think there could be a further squeeze higher particularly if there are no setbacks to the economic reopening of the various economies because if the if the economic reopenings happen on the timeline that governments have laid out then demand should pick up supply should drop and prices should edge back towards $40 a barrel at the moment we remain in a bit of a no man's land when it comes to you know will the economic reopenings happen on schedule or will there be setbacks and i think that's why crude oil prices are in a little bit of a no man's land at the moment looking at gold prices still very much by the dip if we look at this chart that i've that we looked at last week we've fallen back a little bit but what we haven't done is we haven't fallen below this trend line here so i think why are above this trend line here for gold then we still remain very much in an uptrend for gold prices and my gold price target for the end of the year amazing tax still there $1800 an ounce the trend is very much towards the upside yes we have fallen back over the course of the past few days but significantly we haven't taken out this lower trend line here and until such times as we do i think it's very much a case of buy the dip for gold while we're above $1690 an ounce okay so that's pretty much it for this week ladies and gentlemen i hope everyone is enjoying the warm weather i certainly am hay fever notwithstanding it's always a little bit tricky when you when you suffer from hay fever in the same way that i do particularly when you don't have the of the luxury of an air conditioned office to work out of because you're working from home but we try and make the best of it anyway thank you very much for listening ladies and gentlemen and speak to you all same time same place next week