 Good morning. Welcome to CMC markets on Friday, the 4th of December joining me Michael Houston to preview look ahead To the week ahead beginning the 7th of December coming off the back of yet another fairly positive week for global equity markets, we've seen the Nikkei 225 once again push closer to 29 30 year highs the highest levels to 1991 we've seen US markets continue to push higher to new record highs and While European markets have lagged a little bit We have seen the FTSE 100 start to play a little bit of catch up on Its losses so far this year. Don't get me wrong. Let's see 100 is still significantly down From the levels that we saw at the beginning of the year around about 15% But it does appear to be playing catch up and a large part of that I think is down to the fact that we've got some optimism rising optimism that Despite all the political two-ing and fro-ing between the European Union and the UK We will get some form of Brexit bill Despite French threats to veto anything that they're not happy with We've also got the vaccine rollout The fines of vaccine rollout which was given the go ahead by the UK government this week Which was perceived and received in a very positive light because it suggests that there is so finally a Timeline for an end to these restrictions that have been really acting as a stranglehold on global economic activity Doesn't resolve the immediate problem However, the immediate problem of further restrictions being rolled out across Europe Extended into next year in France and Germany Certainly the restrictions that England is now under are much more onerous than the ones that came that were in place pre-November the 5th When the initial lockdown came in place But ultimately what we have seen in recent PMI numbers is that the UK PMI is in construction and manufacturing Have been fairly resilient and even the services ones which are you would have expected to have been Disappointing when anywhere near as disappointing of those coming out of France Italy in Spain So there is grounds for optimism furthermore the latest Chinese economic data that we've been seeing Coming out of the Middle Kingdom has actually been fairly positive There is no sign of a second wave there and as such there is an awful lot more optimism about the Chinese and the Asian economic recovery Certainly in terms of being ahead of the game with respect to where Europe currently is so Markets are focusing on that. They're also focusing on the prospect of a new or a Revived if you like US stimulus deal. Certainly. I think the recent Jumping weekly jobless claims that we saw throughout November I think has prompted a little bit of food for thought on the part of US policy makers that they need to get some form of stimulus deal in place to replace the one that rolls off at the end of this year In the absence of any new deal and this is important And I think this is concentrating minds on Capitol Hill in the absence of any new deal 12 million Americans will lose their unemployment benefits as of the end of this year as of the 31st of December So they need to get some form of replacement in place agreed By the 10th or 11th of December by the end of this by the end of next week by the end of the upcoming week As does the EU summit which is also due on the 10th of 10th of December There needs to be some form of EU UK trade deal Outline in place in time for that summit on Thursday So we've got a couple of deadlines coming up in the course of the next week or so which are likely to be key In terms of maintaining this move higher as we head towards the Christmas break And yes, I've said it said the C word Christmas because we're heading into Christmas now And we're likely to see volatility increase and liquidity dry up And the reason for that is because an awful lot of investors will start to retreat to the sidelines particularly with markets approaching Record highs in the US and multi-month highs here in the UK and Europe money will start to come off the table people will retreat to the sidelines And volatility could well increase on the back of significantly increased headline risk So we do need to be aware of that. We're well aware We're well attuned to headline risk brexit. We've had it for the last three years three to four years So that will be nothing new the difference will be That a drying up the liquidity will exacerbate any moves not only in equity markets But in currency markets as well where we've seen a significant decline in the value of the dollar We've broken below those previous Um previous loads that I highlighted in my video last week And that suggests we're going to see further dollar weakness going forward Which which neatly segues me into one of the key one of the key macro Items that I'm looking out for in the upcoming week. It's the ECB rate meeting Yes, we do have other rate meetings coming up in December notably the Fed and the Bank of England But they are the week after next The primary focus now Is on the ECB and the reason for that is the rise in the euro through the 120 level You can already see on my screen how that we've moved above 120 when our trading 120 170 the likelihood is we're probably going to trade Higher than that if we look at the CMC dollar index, we've broken lower And that suggests to me that there's potentially further downside. The reason there's potentially further downside is the equity markets tend Appear to be the only game in town. There's only really positive news out there. So I think there is potential As we look forward to next week's ECB meeting that we could actually see an open We could see a 12 month extension To the bond buying program that's currently in place right now Now the ECB as a reminder extended the size or expanded the size of its pandemic emergency program pep From 750 billion euros to 1.35 trillion euros and they extended it into the middle of next year 2021 june 2021 they could well extend that By six or 12 months um When they meet next week, there is limited appetite for further cuts into negative territory We're already well into negative territory on the part of the ECB and the The evidence is mixed in terms of how valuable Further cuts into negative territory will be notwithstanding the deleterious effect It has on european banks balance sheets. So let's look at the euro dollar We've broken above 120 On the basis of this analysis Whatever the ECB does next week. It's not going to stop euro moving towards 125. Why do I say that? Because this 120 70 area was a significant barrier. We've gone through that We've broken through this triangular consolidation here The the minimum price objective for that is 122 30 Behind that we've got the previous peaks from february 2018 of 124 The likelihood is we're going to revisit those there's nothing the ECB can do To stop it it is going to happen. So what does that mean for the dollar going forward? Well, essentially it just means further dollar losses um The federal reserve will always out swing Out punch out whatever you want to say The ECB or any other central bank for that matter. You can't avoid it It is what it is And certainly the fed certainly got more room to ease monetary policy than the ECB does So that suggests that we could well see further dollar downside if we're going to see further dollar downside We should see further equity market upside Which is why i'm more constructive on equity markets and I was say for example Two or three weeks ago. We've seen a significant change in tone and in sentiment and whatever you think are the fundamentals The fundamentals in the short term is still pretty poor. We still have to get through the winter months We still have to get through the increased infection rates. We still have to get through the rising um The rising death rates and the rising hospitalizations But there is evidence starting to become The starting to manifest itself That is we head into the spring the outlook could well look an awful lot better As the vaccine gets rolled out not only here in the uk where it's starting Potentially starting next week But when it gets signed off by the EU at the end of this month and potentially the us Even before that and that's before you even consider the oxford and AstraZeneca vaccine Which is undergoing further trials to better understand its efficacy so um for next week at the moment The outlook looks fairly positive for further euro dollar gains as it does for further equity market gains. We've broken above 6500 in the FTSE 100 We still got some way to go before we go back to the levels that we saw at the beginning of the year But nonetheless This significant breakthrough 6500 if sustained Could see us go all the way back To 6600 of potentially 7 000 over the course of the next few days and weeks It's a very positive development German DAX on the other hand is continuing to struggle Below these peaks here now. Why is the DAX struggling? You may ask me and the thing about that is is that it has managed to retrace most of its losses for this year So there's an element of the FTSE 100 playing catch up To the rebound that we've already seen in the DAX So that is still capped in and around 13,460 Finding a fairly decent area of support around about 13,200 Doesn't change the fact that we're very much in a by the dip mentality When it comes to the DAX But ultimately the data that we're seeing out of Europe Is slightly worse than the data we're seeing out of the UK If you look at the PMIs that we've seen over the course of the past month or so Germany's PMIs on the manufacturing side have been fairly positive services have been weak France, Italy and Spain again very weak and the fact of the matter is The european union the EU still haven't signed off Their EU recovery fund because of potential vetoes from Poland and Hungary So that's delaying a fiscal response on the part of the european union And I think that is to a certain extent Holding back any further gains In broader european equity markets because of the The reaction function of the european union it's been constrained Because they're going to have to they're having to get agreement from 26 27 other people Hence why the UK was able to steal a march On the european union in approving the sign off and roll out of the Pfizer vaccine All they needed was a sign off from their own medical regulator Rather than another 27 And that was something that was outlined by the german economy minister jens spahn Where he said that they were prepared to wait for EU-wide approval other member countries approvals before signing it off Which to my mind seems mad when you've got a public health emergency you do what's best for your population And not what's politically ideological what is ideologically pure But this is where we are so potentially more people could die Because the EU decides to delay the ratification of the vaccine rollout Um, so that's the dax I'm looking at the s and p 500 Still continues to go from strength to strength 3,700 3,800 now remains the next lightly target for that in terms of this breakout here We could potentially even go as high as 4,000 over the course of the next three months That's certainly my target in terms of the next three months for the s and p a break higher Towards that 4,000 level going forward So that's the footsie 100. That's the s and p 500. That is the dax About the outlook for sterling this outlook for sterling looks slightly more mixed We have got some economic data out next week. UK industrial and manufacturing production for october Um, that's still lightly to look fairly positive over the course of the next Few months simply because there's there's been an awful lot of what I would call catch up after the really sharp downturn that we saw In the april numbers Recent PMI numbers have been fairly positive These industrial production numbers are due out on the 10th of december. They're likely to be fairly Still fairly positive q3 was an especially positive quarter q4 is probably likely to be less so Because of the the november shutdowns, but let's not forget the november shutdowns only really have affected the services sector They haven't really affected manufacturing industrial production or construction Those have continued to tick along quite nicely. Nonetheless cable still looks very much by the dip There still appears to be a perception that we will get some form of skinny deal between now Um, and the end of the month With the likelihood of it could be agreed within the next few days It could well be that by the time that you hear this video, there could be something already agreed Which means that this video is slightly dated nonetheless The the uptrend still remains intact And I think while we're above the series of lows through here of 27th of november around about 130 to 80 Then the line of least resistance for is for a continued move Towards the upside so very much still by the dip mode on the back of a weaker dollar I think the bigger concern Is with respect to euro sterling there the picture is slightly more mixed We've seen a break above This trend line here gap tire We haven't been able to break above Series of peaks through here around about 90 70 So I think that's the next key resistance there. It could just be another false break In euro sterling, but we need to break back below 90 I think that's really the key level for me if we zoom right in here ladies and gentlemen You look at these series of three peaks here in these daily candles Bit of a barrier there bit of a support there So for me, we need to get back below 90 to retarget the 88 60 lows That I was talking about in my video last week. So we've broken higher We haven't really broken through 90 70 until we do there is a risk that this could be a false break And we could head back towards these lows over the course of the next few days Time will tell But certainly the euro sterling break higher Doesn't look particularly conclusive at this moment in time If we unless we break above 90 70, then of course, I'll need to revisit my analysis on that basis So so so what else so what else have we got so what are we what else have we got to look forward to over the course The next few days. We also got china trade Now china trade numbers the chinese economy has continued to look Fairly positive. They're not they're not suffering from a second wave The most recent china trade numbers for october continued the Chain of improvement that we saw in september when imports surged their best levels this year They did slow a little in october to 4.7 percent Which is a little bit disappointing But ultimately, I think what the most recent retail sales numbers have shown us with respect to the chinese economy is the chinese consumer Is starting to become more confident In the economic outlook the lack of a second wave The fact that they've managed to keep coronavirus cases fairly low as we head into the winter Suggests that the chinese economy is likely to continue to improve Through november It's also let's not also forget that the first part of november was golden week In china and then we also had singles day as well so domestic consumption should continue to improve Throughout november and the chinese trade numbers should reflect that when they come out on monday So on thursday, we've got an ecp rate meeting along with an eu summit So hopefully there will be an eu summit which will sign off a bare bones some form of eu uk trade deal Always assuming that france doesn't veto it at the moment They're making an awful lot of noise about vetoing it, but If they do veto a trade deal Then french fishermen Will lose their right to fish in uk waters as of the first of january because ultimately that's when All the existing treaties lapse So in essence, they will be a set they will be shooting themselves in the foot if they were to do that We've also got a bank of canada rate meeting coming up on The ninth of december now depending on today's payrolls report canada payrolls reports That could well Be significant It's it's unlikely that the bank of canada will cut rates further and act any more than they already Then they are already doing with respect to them their current asset purchase program We also obviously have us payrolls data Which as of yet I don't know the numbers for because i'm recording this pre pre payrolls But ultimately i think they're of less importance than the current us stimulus talks, which are currently taking place In washington right now the mood music does appear to be slightly more positive there There does need to be some form of new deal And as a result irrespective of how these payrolls report how today's payrolls report comes out I think the main focus will be On the stimulus talks and less on the actual payrolls numbers, which by and large have been fairly positive On where the unemployment rate is expected to fall further from 6.9 to 6.8 So certainly in terms of euro sterling sterling in the dollar expecting further dollar downside Further sterling in euro upside in the short to medium term gold prices continue to Recover from the lows that we saw earlier this week. We need to get back through 1845 1850 In the short to medium term to reinstate The move back higher certainly this this this candle pattern here looks constructive For a move back through 1845 back towards this trend line here back towards 1900 That certainly looks like a morning star candlestick formation Which generally is positive and would be positive on a break back above This 1845 1848 level here, which was resistance on Which was support on the move lower and is now acting as resistance on any rebound Brent crude prices are heading back up and could well retest the 50 65 area Which is a 61.8 gubernature retracement level of this entire down move from this year's highs to this year's lows So going to be a bit of a barrier 50 50 and a half 50 65 dollars 50.65 dollars a barrel on Brent keep an eye on that for any pullback On Brent crude prices in terms of what i'm looking forward looking ahead to in terms of company news It's a big week for Rolls Royce. They've got their latest third quarter numbers coming out on Friday They've taken an absolute caning over the course of the past Few weeks few months But hopefully the worst is behind them. They've raised more money They've done a rights issue at 35 p of share share prices now around about 131 The reopening of The global economy Hopefully will auger better times for Rolls Royce But we need to take out this series of peaks through here at the moment. We're currently capped in and around This this sort of area around here around about 137 138 Obviously Ryanair buying 75 Boeing 737 max is is a statement of intent Michael O'Leary thinks that The outlook for air travel will be much more positive in 2021 than it has been this year to be fair It would be hard to be any worse But to buy 75 Boeing 737 max is I think that's optimism plus You know, that's optimism unlimited I'm not sure I'd want to get on a max even now um, nonetheless, it's a statement of intent and If that continues into 2021 Then hopefully Rolls Royce share price the worst is behind it We've also got air b&b's latest IPO That also the latest IPO the IPO for air b&b That's due to price on the ninth to start trading on the 10th I have done an article a little bit of a preview on that which you can find on the news and analysis section Of the cmc markets website. So certainly keep an eye on that pricing that on the 10th That's being priced at around about a valuation of 35 billion dollars between 40 and 55 dollars a share So keep an eye on that. We will be looking to Launch that as and when it starts pricing on the 10th of december and we've also got ocado latest q4 numbers and They've been one of one of the one of the big winners from the pandemic but There is some very key support coming in on the ocado share price at the moment You've got to think if there is going to be a reopening And less people shop online Ocado could actually start to see a little bit of a money drifting out of it Going forward. It's been a decent year for ocado if you select a year to date This is we've seen some really solid gains but since september It's been trending lower and if we take out this trend line here Which currently comes in just below two thousand two hundred We could we'll see a a retest of the 20 pound level going forward so That's what i'm keeping an eye out for In the upcoming week Um, this will be the this is going to be my penultimate video For this year. So I will probably finish up Next friday with my last Full year look at the week ahead um When i'll obviously be previewing the federal reserve And the bank of england. Um, but if you do have any questions on any of this Feel free to drop me a line Or contact me on twitter. You know where to find me. Otherwise, thank you very much for listening This is michael hueson talking to you from cmc markets