 Hello and welcome to CMC Markets on Friday the 5th of July and this quick look at the week ahead beginning the 8th of July and it's been another week of records for US equity markets with the S&P 500 flirting with that 3000 level. The Dow Jones has also made a new record high and European markets have also had by and large a fairly decent week with significant moves towards the upside and the reason for the moves higher this week have been the expectation that the deterioration in economic data that we've seen particularly out of Europe is likely to prompt further easing from the European Central Bank. We've seen that born out in the way that bond yields particularly in Germany have moved. The 10-year bond yield is now at minus 0.4% or is pretty much as good as which is the equivalent to the ECB's deposit rate and speculation that IMF Chief Christine Lagarde could replace Mario Draghi has reinforced those expectations of easier monetary policy from the ECB. So as we look ahead to the coming week I'm obviously doing this report slightly blind to the fact that I don't have visibility on the latest US payrolls report which is due out at 1.30 on Friday and that could actually be a significant arbiter of where we go to next with respect to not only the S&P 500 but also market perceptions of US interest rates where at the moment we're pretty much pricing in the likely prospect of a 25 basis point rate cut from the Federal Reserve when the Federal Reserve meets on the 30th and the 31st of July. Now I remain of the opinion that given the trajectory the current trajectory as we see it a US rate cut is not necessary if you're basing your analysis on the performance of the US domestic economy. Now that could well change in light of this afternoon's payrolls numbers I don't have visibility on them at the moment but the expectation is if we get a decent headline number anywhere and over and above 170,000 jobs and wages come in around about 3.2 or 3.3% then the argument for a rate cut becomes much less. There's no disputing that a rate cut is on its way the big question is as to the timing and it's the timing I think that's going to be the key indicator here with all the Fed to deem it necessary to cut interest rates at the end of this month. So this payrolls report will be the last payrolls report before that meeting and a number of Fed officials have gone on the record as saying that they're very much data dependent irrespective of what President Trump has been saying about the need for a rate cut. He's been tweeting that the US economy is the greatest ever and the S&Ps at record highs. That sort of begs the question why do you need a rate cut? So you have to basically put it in the context of that narrative and there's going to be a number of important economic announcements coming up over the course of the next few days none of which are likely to be as important as today's payrolls report. So looking at today's payrolls report a weak number will obviously just reinforce the expectation that we'll get a cut at the end of this month. A slightly more positive number will I think throw those expectations into doubt because at the moment the market is priced for a cut so anything that pushes back against that narrative could actually see a sell-off in bond markets and prompt yields to go up because the market is so one-priced, one-way priced in terms of a rate cut. So a poor number may not move the dial much. A good number could move it quite a bit. As we look ahead we've got a whole host of economic announcements out of China. The latest China trade data is due out on Friday of next week on the 12th. We've also got a Bank of Canada rate meeting on the 10th. We've also got the Bank of England financial stability report, UK GDP and UK manufacturing. Before we look at that though let's look at some of the key levels on some of the key indices and as we can see from the S&P that 3,000 level that's going to be a big big level over the course of the next few days. Do we push above it and consolidate above it or do we come back from it? Now it's going to be a very key psychological level so we really need a strong close above that to really push US equity markets higher and they do appear to be a little bit frothy but nonetheless many people have gone very very poor trying to pick the top in this market and we've certainly seen that over the course of the last few months. This big decline here prompting the big rally back here and now we've gone higher again so we do need to be very very careful about calling the top at the 3,000 level should act as a decent area of resistance in the short term. We've also seen a big move higher in the FTSE 100 we can see that here back above 7,500 so that could well act as support on any pullbacks to the downside. Try to get back above 7,600 we're still below the previous peaks of last year so that's likely to be a fairly key resistance level as well as those peaks here around about 7,800 but we could get a pullback to 7,500 so I don't expect to see that come crashing off and if it does we could find a few bids around 7,500 if we look at the if we look at the German DAX it's a similar sort of story the big breakout here was 12,450 that is likely to be a key support level on any move back down towards the downside now that we've broken above it we can see that there and a nice horizontal line straight through those highs likely to be a key support on any dips right so let's talk about the upcoming week let's start with the Bank of Canada. Canada payrolls have been actually fairly decent over the course of the past couple of months so it's unlikely that we're going to see any easing from the Bank of Canada irrespective of what the Federal Reserve is likely to or is expected to do over the course of the next few days or weeks for that matter which would appear to suggest to me that we could expect to see further strength in the Canadian dollar and further weakness in the US dollar now that we've broken above or broken below rather the February lows that we saw earlier this year we've broken below them the likelihood is that even if we do see a bit of weakness in the Canadian dollar and a bit of strength in the US dollar any pullbacks are likely to come back to around about 130 130 for a move back towards that 130 level in the short to medium term we are looking a little bit oversold at this point in time which might suggest that we might see a little bit of a rebound back towards 131 and 132 but overall this break to towards the downside could be significant particularly if the recent strength in the Canadian economy that we've seen over the course of the past couple of months continues going forward so I think that's going to be a key arbiter the Canadian jobs market relative to the US jobs market in terms of China trade the picture on China trade continues to paint an uncertain picture certainly if German factory goods orders are anything to go by there has been weak demand for new orders which would suggest that China's obviously not buying anywhere near as many goods as it used to internal demand still looks weak exports have been slightly patchy oscillating between positive and negative territory for China trade and in May we did see a modest rise of 1.1% in the export data which suggests that in June we might see a slide back for all the pessimism around manufacturing in China services have been doing slightly better and that would suggest that despite the gloom at wages holding up an unemployment fairly low global demand is likely to be more sticky we do need to be aware though that the trade numbers are likely to be skewed by front-running ahead of the various tariff announcements and the tariffs that have kicked in in the past two months there will be an awful lot of forward-buying or forward-selling to try and beat those tariff deadlines so that could make these China trade numbers slightly ambiguous when it comes to the strength of the export numbers and the strength of the import numbers the pound has also been under pressure but it is finding some decent support in and around that 125 area on 24-20 that has acted as support over the course of the past month or so if we do break below this 125 area these lows here then obviously we have the lows back here in December 2018 which was around about 124 50 120 120 120 460 so there is a big big area of sport in and around there but unfortunately for us and with the Conservative Party leadership campaign in full swing the the bias has shifted to the downside as a no-deal Brexit becomes that much more likely I would say that's not surprised to me that is still the default position until as such times as MPs decide that they want to change that default position we've got UK GDP certainly seen a much weaker second quarter than we have in the first quarter concerns about global trade disruptions whether they be brexit related China US related has also seen the services sector activity start to slow this week's UK data for April is unlikely to shift the narrative so anything that we get out next week with respect to manufacturing is not likely to be too much of a surprise and certainly I think all of this talk about the Bank of England hiking rates I think the expectation has now shifted quite sharply towards the next move in the Bank of England rate cycle being towards the downside which will be no surprise to most people who've been listening to me over the course of the past few weeks on the earnings front we have the latest full-year numbers from Superdry and we also have some numbers from Ocado Ocado Group certainly if we look at Superdry and the performance of the Superdry share price that could be a big move it struggled for the most part of this year now that's the founder Mr. Duncan has taken back stewardship of the company we could see whether or not his turnaround plan starts to pass muster certainly there is a nice area of support in and around these lows through here which is just around about 425 430 so keep an eye on that if we get some decent full-year numbers or a decent full-year outlook we could see a spike higher there we also have the latest numbers from Ocado first half numbers and this has been one of the best performers on the FTSE 350 year to date up over 50% shrugging off concerns about his profitability after reporting a pre-tax loss of 44.4 million in its latest full-year numbers earlier this year rising sales have boosted investor expectations with the latest being a new joint venture deal with Marks and Spencer so certainly in terms of the upside an awful lot of the good news is priced in so that could be a significant move over the course of the next few days when it posts its first half numbers on Tuesday if you want to read more about what's on the agenda for next week you can go to the news and analysis section of the website and read my notes on the key stories for the week ahead there is 10 major stories which one of which includes Deutsche Bank we could hear the latest details about their turnaround plan we've seen a bit of a rebound in the share price over the course of the past few days on expectations we could see massive job cuts certainly that's what's needed but Deutsche Bank needs much more radical surgery than that and I think the jury remains out as to whether or not management will be successful in turning that particular little business around seven euros is a key resistance level on that we're just shy of that if markets like what they hear we could see that move higher and back towards 7.2 and 7.6 euros anyway that's it for this week thank you very much for listening it's Michael Houston talking to you from CMC Markets