 Good morning and welcome to CMC Markets on Friday the 6th of December and this quick look at the week ahead beginning the 9th of December and What's likely to be a very important week? not only for central banks with the Federal Reserve rate meeting and the European Central Bank rate meeting but we've also got the small matter of the UK general election and The last few days have taught us anything. It's never to take anything for granted and yet that's what markets appear to be doing certainly in the context of the sterling breakout to the upside that we've seen this week Coming as it has against a backdrop of renewed uncertainty and ambiguity about US China trade and It's against that backdrop that we're seeing a little bit of weakness in equity markets because we started the week I think by and large on a fairly positive no on an expectation That we could see some movement on trade between the US and China in the next couple of weeks before those new round of tariffs Are supposed to kick in on the 15th of December But President Trump through all of that up in the air an impromptu press conference at the NATO summit When he suggested that he's quite happy to wait Until after the next presidential election November 2020 to arrive at a US China trade deal So on the one hand you've got a US president who appears fairly relaxed about Leaving the prospect of a US China trade deal For at least another 12 months and on the other hand You've also got a US president who's saying that trade talks are progressing very very well So against that sort of ambiguity I think it's very very difficult to sort of draw any conclusions as to what's likely to happen Over the next few days and that's what's prompted a little bit of what I would call risk off this week in Global equity markets and we can see that quite clearly in the way that the S&P 500 has behaved over the course of the past few days seeing some very sharp down moves From the highs that we saw at the end of November But on the back of that we've also seen looks what looks like a decent rebound on Wednesday Thursday, and obviously this is today Friday now We do have US payrolls that are due to come out later today Obviously, I don't have sight of those numbers as I record this video and Certainly some of the economic data that we've seen coming out of the US has again a bit like a bit like discussions over trade It's been fairly ambiguous We saw a week November ADP employment report on Wednesday Which has served which has served I think to muddy the waters a little bit when it comes to the health of the US economy We saw a very weak manufacturing ISM number all the key components on that particular report was soft But on the other hand in terms of services, which is a much greater Proportion percentage of the US economy Despite the fact the headline number was a little bit on the soft side All of the other internals the new orders increased to 57.1 the employment component rose to 55.5 And prices paid rose to 58.5. So all of those came out much better than expected And against that backdrop, I think it's very very difficult To make a prediction as to what the October jobs the November jobs report rather is likely to look like but generally Despite the fact that the ADP report was fairly weak It wasn't the weakest number this year. That was all the way back in March When we also had a fairly weak payrolls report November generally tends to be a fairly strong month for US jobs usually because of temporary hiring In and around and in the lead-up to Thanksgiving. So I think Anything in and around 165-185 For November payrolls. It's likely to be fairly decent It's certainly not going to be a game changer when it comes to the Federal Reserve rate meeting Coming up on the 11th of December and as long as wage growth holds up in and around that 3% level and the unemployment rate Remains steady. There's little to no chance that we will see a Fed rate cut At the upcoming Federal Reserve meeting that doesn't necessarily mean the payrolls report won't weaken the dollar But I certainly don't think it'll be a game changer in terms of when the next interest rate reduction will come But that is still likely to come in the early part of next year if in fact It comes at all. So looking looking at equity markets We've seen a little bit of a pullback, but certainly nothing to suggest That the top for US markets is in quite yet We can also see that borne out in the way that the DAX is looking at the moment We've seen a little bit of a pull lower We struggle to get back above 13,100 and 80 13,200 so for me that remains a key resistance level and only move back But we really do need to break below the 50-day moving average on not only the Germany 30 We also need to break below that on the S&P 500. If we look at the UK 100 It's a similar sort of story. We've seen a break down below 7,220 And as such that is likely to be resistance on any move back higher We can see the way this dotted line here This this little dashed line here has acted as a little bit of a turnaround level a bit of a pivot in terms of Support and resistance over the course of the past few months So I think it was support in and around here in November It's now likely to act as resistance only move back higher now that we've broken below this little bit of Consolidation pattern that we saw here, but overall we're still been in we're still within the range that we've been in for the last Three to four months. So again, no real game changer here when it comes to equity markets So as I say looking ahead to the week Coming up as I said previously, we've got the Federal Reserve rate meeting coming up on the 11th of December And as I said, you know when the Fed cut rates in October third time in a row It was widely expected that we would see another one this month Obviously given the data and now looks unlikely that will happen for a number of reasons US data is not showing any significant signs of Significant weakness certainly not in the context of services which makes up around about 70 to 80 percent of the US economy Yes, manufacturing is weak, but it is a very very small part. So even of itself weak Manufacturing data is certainly not a game changer When the central bank has already cut rates three times this year in any case and various Fed policy makers have already come out And said the central bank doesn't need to cut further and with some going as far as to say that the October one may well Have been premature So that's where we are here. I think in terms of The US dollar we might see a little bit of weakness and we've certainly seen a little bit of weakness Over the course of the past few days and that's caused the euro to move higher But watching the euro this week has been pretty much akin to watching paint dry it's been very very subdued in terms of the overall trading and One point in the past week or so lowest lowest overall range in euro dollar for years now We do have the European Central Bank rate meeting now not expecting any changes there But I think it's still going to be a very significant meeting because this will be Christine Lagarde's first meeting as European Central Bank president and While expectations are low that the governing council will adopt anything new with respect to current policy I think markets will be looking for clues as a style of press conference the type of ECB president that Madame Lagarde will be it was notable with Mario Draghi that he was able to fend off and come up with a whole host of innovative responses to a wide range of Technical central banking issues and policy issues now Christine Lagarde won't have the background She won't have the expertise to deal with those sorts of questions. Her background is a lawyer She used to be a finance minister and yes, she was head of the IMF, but she's not an economist Mario Draghi was now when Mario Draghi depressed conference He usually had Luis de Gwendoz sitting next to him. He's not a central banker either He was Spain's ex economy minister So it's unlikely that he will have the expertise as well So in terms of technical questions, I think it will be an interesting dynamic as to who Madame Lagarde has sitting on her right Will it be chief economist Philip Lane? Who will fit who will deal with the complex central bank questions as and when they come up? So I think in terms of delivery it will be very interesting in terms of the type of central banker that Madame Lagarde wants to Wants wants to be and wants to lay out in terms of the European Central Bank Other things to keep an eye out for this week is the latest China trade numbers And they're going to be very important in the context of the uncertainty around China US trade now we have seen some recent improvements in PMI data To China and that would appear to suggest the Chinese economy is starting the show signs of picking up Recent stimulus does does appear to have helped increase domestic demand and obviously we did have singles day in November and obviously I think that will that will have probably boosted Chinese retail sales But in terms of trade, I think we're going to have to really scrutinize the export data for signs of improvement because judging by recent data from South Korea and Japan Any improvement is likely to come in trade data with respect to Europe and the US now expecting a rise of 0.8 Imports expected to clone 1.4 percent those numbers are expected to come out over the weekend around about Sunday or Monday But China has a habit of moving the dates for these particular data points But they are supposed to be coming out over the course of the next few days in terms of The ECB and the Federal Reserve going back to that a little bit because I didn't really talk about that when I was when I had The euro dollar chart on the screen. We can see from this chart here this horizontal red line There's a decent barrier in and around 111 20 And that for me. I think is going to be a very key resistance level. We're pushing up against it at the moment We are starting to gain a little bit of a foothold above it But there is also a wider resistance level at the 200 day moving average We did spend a little bit of island. We did see a little bit of an island of price action above the 200 day moving average in June But if you actually zoom this chart all the way out from the highs that we saw all the way back in February 2018 there is still a significant area of resistance in and above between 111 70 and 111 80 So overall Downside still remains intact while we're below These key levels here on this daily euro dollar chart Now another big story for this week Apart from US China trade has been the break higher in cable Certainly, I think in terms of the opinion polls There doesn't appear to be any evidence that labor is closing the gap on the conservatives, but opinion polls Have a habit of coming back to by two We've got only a few days to go until polling day on the 12th of December Financial markets appear to be pricing in the prospect that the conservatives will be able to win enough seats to gain a majority Of course this assumes That all the new voters who've signed up to vote for the very first time Vote along the same lines as recent opinion polls would suggest now as we know from the 2017 experience is this is not the slam dunk that I think pollsters assume That it might be Traditional party allegiances are breaking down all over the country It wouldn't take much for the opinion pollsters to end up with egg all over their faces and a rapid repricing of risk in The wake of any surprise Exit poll now the exit poll comes just a little bit after the polls close on Thursday after 10 p.m That will be the first indication that we'll get as to which direction voters have decided to break We should also be mindful of the Brexit referendum in 2016 Which financial markets got completely wrong? they thought remain would win and The rebound that we saw in the pound soon came crashing back down to earth So there's still all to play for but certainly in terms of the technicals The the outlook does look positive for cable We've got a golden cross a few days ago on the daily chart And that's where the 50-day moving averages crosses above the 200-day moving average We've broken above this sideways consolidation between 1 27 60 and 1 30 20 Which would appear to suggest that as long as we stay above this 130 area here Then we'll probably get a move to one thirty three eighty one thirty four over the course of the next few days In terms of euro sterling. It's also been a fairly decent and a positive Outcome for sterling. We've made new 30 month lows on euro sterling We've broken below the lowest levels this year and again on a technical basis The outlook does look positive for sterling with a with the potential for further sterling gains towards 83 50 and 83 over the course of The next few days, so it's going to be a very very big week for the pound It's going to be a big week for the US dollar in terms of the Federal Reserve And it's going to be a big week for the euro in terms of the ECB in terms of companies that are due to Report this week. I've got my eye on a couple Ted Baker Who's had a rough time of it in the past few days and that can be nowhere better borne out by this chart here they're reporting their latest numbers on the 11th of December and Only this week they overstated their inventory estimates by about 20 million pounds sending the shares to the lowest level since 2009 I mean the implosion of this brand has been nothing short of spectacular I think the big question is with all the M&A that's going on in the luxury goods sector With Ted Baker of these sorts of lows There could well be Some interest in terms of M&A because putting aside the problems of Ted Baker Most of it's down to bad governance. The actual products are fairly decent. So you might see a little bit of Speculation around either a takeover or there was some talk in the summer that Ray Kelvin might be looking to take it Private by way of a private equity placing and we've also got a Cardo Again a Cardo's done very very well over the course of the past 12 months We can see that here. It's probably one of the best performing technology stocks or retail stocks depending on how you want to categorize it over the course of the year to date In July management put the cost of the fires that Affected the business at around about 100 million pounds. They've just done a capital raising of 500 billion dollars in terms of a convertible bond So they're certainly investing an awful lot when it comes to boosting the business going forward But there's big big resistance in around 1400 and I think there's a decent possibility that we could be It could be as good as it gets when it comes to a Cardo when they report their latest Q4 numbers Also on the 12th of December. So the 12th of December is going to be a very very busy day not only for Macro news ECB General election but also in terms of corporate news as well. So that's it for this week Thank you very much for listening. It's Michael Houston talking to you from CMC markets