The document provides a weekly economic and market outlook. It notes concerns about weakening US economic data feeding into the services sector. The Michigan Sentiment preliminary reading on Friday is highlighted as a key gauge that could drive risk aversion if it shows further deterioration. Overall, the outlook presents downside risks for equities and higher-beta currencies dependent on progress in US-China trade negotiations resuming on October 10th. Bonds and safe havens like the yen are seen as potential beneficiaries if trade talks do not yield results and the global economic slowdown persists.

1. Weekly Outlook
Monday 7th October 2019 by Richard Perry, Market Analyst
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ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
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invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report.
Key Economic Events
WHEN: Friday 11th October, 1330BST
LAST: 93.2
FORECAST: 92.0
Impact: One of the big fears on global markets is that the
deterioration in manufacturing feeds into services. The
consumer accounts for c. 70% of US GDP, so confidence
gauges are a key gauge. The prelim reading of Michigan
Sentiment will often be revised, but it would cause
shockwaves though global markets were the October
reading to deteriorate materially. Consensus expects a
decline to 92.0 but this would still be off the low of 89.8 a
couple of months ago. Given the recent retrenchment of
risk appetite anything at multi-year lows could drive
further risk aversion. Treasury yields and USD will react.
Date Time Country Indicator Consensus Last
Tue 8th Oct 1330BST US PPI (headline / core) +1.8% / +2.3% +1.8% / +2.3%
Wed 9th Oct 1500BST US JOLTS jobs openings 7.350m 7.217m
Wed 9th Oct 1530BST US EIA Crude oil inventories +3.1m
Wed 9th Oct 1900BST US FOMC meeting minutes n/a n/a
Thu 10th Oct 0930BST UK GDP (monthly / YoY) 0.0% / +0.9% +0.3% / +1.0%
Thu 10th Oct 0930BST UK Industrial Production -0.9% -0.9%
Thu 10th Oct 0930BST UK Trade Balance -£10.0bn -£9.1bn
Thu 10th Oct 1230BST Eurozone ECB monetary policy meeting accounts n/a n/a
Thu 10th Oct 1330BST US CPI (headline / core) +1.8% / +2.4% +1.7% / +2.4%
Fri 11th Oct 1500BST US Michigan Sentiment (prelim) 92.0 93.2
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1N.B. Reuters data where possible. Please note all times are now British Summer Time (GMT+1)
Macro Commentary
President Trump insists China is desperate for a trade deal. However, the alarming slide in US economic data,
suggests he is deflecting attention away from his own doorstep (shocking, I know). A global slowdown is beginning
to accelerate, the US is not immune. Institute for Supply Management data shows the US manufacturing sector is
contracting at decade lows (bad signal for the global economy), but now the outlook for Non-Manufacturing
(services) sector is at three year lows (bad for US domestic). The US economy is c. 70% household consumption,
so this deterioration in services will ring alarm bells for the FOMC. In a recent deluge of Fed speakers, it was
notable that the dollar weakened as Charles Evans (voter, leans dovish) suggested that in the event of a shock to
the US economy, a “modest policy response will not nearly be enough”. The dollar had outperformed following the
September Fed rate cut as the FOMC appeared divided over the path of its next move. This recent ISM
deterioration will surely push the Fed to further easing (Fed Funds futures are pricing for around one and a half cuts
by December). Progress in the US/China trade negotiations will be key. With limited traction towards an agreement,
a deterioration in the outlook for risk could have further legs to run. Safe havens will again be the big winners, with
yen strength and a new lease of life for gold. So it could after all be down to Donald Trump as to whether the Fed
pushes forward with a sustained program of rate cuts. The trade talks are crucial, resuming on 10th October.
Must Watch for: Michigan Sentiment (October prelim)
Michigan Sentiment
US consumer sentiment has held up relatively well, but could turn
sour. Deterioration sub 80 on “expectations” would be a near 3
year low. “Sentiment” under 90 would cause real shockwaves.

2. Weekly Outlook
Monday 7th October 2019 by Richard Perry, Market Analyst
Foreign Exchange
The nuances of the ISM data disappointments have had a varied impact across major pairs. The dollar strength
has broadly moved into reverse since Tuesday, but it is the outlook for risk appetite that has been fluctuating.
ISM Manufacturing at 10 year lows is a reflection of the global slowdown (factored in already by the Fed) and
was seen as negative for higher beta currencies (such as AUD and NZD) against the dollar. However, this has
been flipped on its head by the ISM Non-Manufacturing slowdown which is far more US economy specific. This
is something that the Fed will now need to take into account for the coming meetings and could tip the balance
on further cuts. With the sharp fall on US shorter terms yields (on elevated expectation of rate cuts) this is
therefore dollar negative and would therefore help to support higher beta currencies against the dollar. This is
why we are seeing the Aussie and Kiwi starting to recover. Friday’s payrolls report does little to change the
narrative on this and as such momentum is building in their rebound. The main winner with this deterioration
across global PMIs should still be JPY though. Inside the Brexit bubble, GBP still flies around on newflow from
the UK Parliament. Although PM Johnson’s deal will surely not fly with the EU, could agreement in the UK
Parliament be seen. We are cynical enough to believe that this could be part of a bigger picture for a general
election (which is surely inevitable now). If Johnson can get his side to broadly support his “deal”, then he can
frame an election as Parliament versus the people. GBP falling again suggests this could be the case.
WATCH FOR: US/China trade negotiations. FTSE and GBP are still negatively correlated on Brexit
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FX Outlook
GBP/USD
Watch for: Consolidation has taken hold but is a
renewed negative bias about to set in?
Outlook: After the sell-off was curbed at
$1.2205, there have been a run of candlesticks
lacking conviction and the market is struggling
for real direction. Sterling has begun the week
lower but unless support at $1.2205 is breached
then then market will continue to lack direction.
Momentum has hovered around the 50 mark, but
a negative drift on MACD is still in process and
the Stochastics are also struggling. Closing
under the moving averages again would be a
sign of increasing deterioration in the outlook
and would pressure $1.2205. A closing breach of
$1.2205 would open the key lows around
$1.2000 again.
EUR/USD
Watch for: The confluence of resistance
between $1.1000/$1.1025 is key this week
Outlook: The near term rally means that
EUR/USD is once more back to a crossroads
moment with the downtrend channel this week.
Given the importance of the US/China talks in
the coming days, this could be a crucial inflexion
point. On a technical basis, the momentum
indicators have been unwinding but could simply
be renewing medium term downside potential.
The recovery seems to be losing momentum shy
of the resistance of an old key low which is
pivotal at $1.1025, but also around the 21 day
moving average (c. $1.1000) again. The trend
channel also falls from $1.1025 to $1.1000. This
is a key confluence area of resistance now.

3. Weekly Outlook
Monday 7th October 2019 by Richard Perry, Market Analyst
Equity Markets
Recession fears for the US have been elevated following the ISM data, and even after there was a mild relief
rally after Friday’s payrolls grew at a relatively healthy level. With the average hourly earnings growth dropping
back below 3% this will add weight to the cause of the doves on the FOMC. The bulls come into this week then
with elevated prospects of a rate cut in October, which would be supportive for equities. However, any positive
implications of this will be quickly surpassed by the looming US/China trade negotiations. The negative impact of
the trade dispute can be clearly seem in ISM data falling to multi-year lows and subsequently, the medium term
outlook for equities could easily be defined by how the negotiations pan out in the coming days. Can both parties
make a pathway towards an agreement? Real traction needs to be made not just in the Chinese purchase of US
commodities (such as a promise to buy soybeans) but on technological issues surrounding IP and technology
transfers. Without this, any improvement in risk appetite will be short-lived and recessionary fears will grow. This
would ultimately be negative for equities. On a medium term basis, the S&P 500 has a key pivot resistance at
2940 which is a key gauge for the market in the coming week, A failed rally under 2940 and would put the
August lows around 2825 under pressure. The technicals are also pointing towards negative pressure on the
DAX now too. A failure under 12,140 would add to pressure on the pivot at 11,865. FTSE 100 is a harder call
due to the negative correlation with GBP, but global trends would still be dominant.
WATCH FOR: All eyes on Washington with the US/China negotiations to resume on 10th October
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DAX Xetra
Watch for: A crucial pivot level at the 11,865
neckline is developing.
Outlook: After the sharp sell-off rebounded from
the support of the old August breakout at 11,865
the formation of a crucial pivot level has come in.
Given the deterioration in near term momentum
this is a move that could accelerate should this
11,865 support be breached. The RSI has held
up above 40 and MACD lines are still above
neutral but if the 11,865 support is broken then
the potential for this correction to go much
deeper comes into play. Supports at 11,550 and
perhaps even 11,265 appear. So bulls will be
eyeing the resistance at 12,140 as an initial
resistance to take a more positive outlook from a
period of elevated volatility.
FTSE 100
Watch for: The importance of support from the
multi-month lows continues to grow
Outlook: The outlook for FTSE 100 is once
more back at a crucial support area. Since
February there have been numerous tests of
support just above 7000. Last week’s intraday
bounce from 7005 means that effectively there is
a 75 tick band of support 7005/7080 which
needs to hold otherwise there would be a
considerable deterioration in the medium to
longer term outlook on FTSE 100. How the
market responds under the resistance at
7200/7230 would be key in determining the next
move. Give the negative configuration on
momentum, a failed rally under this resistance
would see negative pressure grow.
Index Outlook

4. Weekly Outlook
Monday 7th October 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
The outlook on gold has been on a something of a rollercoaster ride recently. The big swings on the dollar have
played a role in this, but the risk aversion across major markets is also a key factor. The global slowdown
seems to be taking hold across sectors now and this is leaving central banks with little option than to ease
monetary policy. In the past week, ISM data disappointments have driven increased expectation of further Fed
cuts and looking past recent fluctuations, falling real yields should help to underpin gold still mid to long term.
With the oil supply risk premium closed (Saudi production/supplies back on track) the focus is back on the
demand story. For that the outlook remains pretty bleak as global PMIs reflect manufacturing
slowdown/recession is infecting across services sectors too. The US/China trade negotiations will be of
paramount importance in the coming days to whether this picture continues down the darkened path or whether
there may be light at the end of the tunnel.
Bond yields falling away reflects the accelerated fear of recessionary forces across major economies.
Interestingly, the shape of the US Treasury yield curve has bull steepened, as shorter duration bonds have
been snapped up at the prospect of Fed rate cuts, with the US 2 year yield at two year lows. This has negative
implications for the US dollar.
WATCH FOR: US/China trade negotiations will be key. US CPI and Michigan Sentiment for US rates
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4
Gold
Watch for: A cautious outlook ahead of
US/China trade negotiations
Outlook: There has been a difficult ride on gold
in the past week. A big breakdown from the large
top pattern was quickly countered by a three day
rebound. The subsequent fallout is also not yet
confirmed, but there is a feeling that keeping
powder dry may be the way to play gold, at least
until there is more of a decisive signal again.
Momentum indicators are very mixed coming
into a week where there is huge uncertainty for
risk appetite (US/China negotiations). Initially
$1500 is a gauge, but a failure back under
$1481 would be confirmation of renewed
corrective momentum. For the bulls there is
effectively a trend lower that falls across last
week’s high of $1518 which is key resistance
now.
Markets Outlook
Brent Crude oil
Watch for: Steep sell-off may be easing, but
prospects of a sustainable recovery are limited.
Outlook: A rebound off the key August low at
$55.90 into the end of last week has eased the
selling pressure. This has resulted in the steep
downtrend (that has been a feature of the market
since the spike higher of mid-September) being
broken. However there is much more needed
from momentum indicators before there can
realistically be a sustainable recovery. Initial
resistance at $60.00, but ultimately the real test
will be the medium term pivot line around $61.30
which is now overhead resistance.

5. Weekly Outlook
Monday 7th October 2019 by Richard Perry, Market Analyst
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