Amazon Pushes The Nasdaq 100 Back To All-TIme Highs

Okay, very good morning. It is Wednesday, the 7th of July. Hope everyone is doing well and going to get you up to speed on the closing Wall Street, so happened overnight in Asia, and generally an outlook for the day ahead. But thought I would start with the heat map because quite an interesting day yesterday. And I guess first of all, starting with actually a macro overview is probably more prudent than looking at the heat map first. Because I do want to talk about Amazon briefly. As you can see here, really bright green. And, you know, when one of the largest companies on the planet rises nearly 5%, well, guess what? The Nasdaq outperforms. And mega tech certainly was a standout yesterday, and we continue to see that somewhat unwind of that reopening trade where the Russell 2000 is underperforming and inflows back into mega-cap tech. And a lot of the catalyst yesterday was certainly coming around the, um, the release of the ISM Services PMI figure that we had quite a large miss on expectations, well below the bottom end of analyst ranges. We also saw the employment constituent move into contraction territory. So irrespective of the fact there's still a lot of the jobs market to make up People still finding it hard to fill those jobs seemingly at this point in time. And so that in combination of what I felt was a lot of technical trading yesterday as well, which was exacerbating a lot of the movement. Um, we saw the US 10-year yield break through the June support levels that saw yields move down to their lowest levels since February of this year. And hence you can see this quite pronounced pop in the US 10-year in the bottom right-hand chart. And we continue to remain up at those most elevated levels. Holding on to those gains, up to flat to 2 ticks this morning. The S&P 500, talking to a couple of the guys yesterday about this because at the time it was selling off, you know, it's a fairly rapid sell-off. And I was kind of having a conversation with a few of them about the reasons and rationale behind that. And, and certainly that it made a bit of sense in regards to while the data kind of not living up to a more positive narrative, leading to then people backing off this more hawkish idea of the Fed, and therefore some of the big technology firms liking that situation on that kind of general sector rotation play, leading to the Nasdaq outperforming against its counterparts, where the S&P actually closed down about 0.2% to Dow 0.6%. So there was a little bit of that, and then there was also the degree of The, the profit taking, um, I think, you know, one thing for sure, we've had such a stellar run in the US equity market, and we were keeping an eye on this rising trend line going back to the 21st that had been retested on the 30th of June and the 1st of July. And we broke through that and the subsequent pivot and the prior session's overnight low, and then we just ran down quite quickly. And at the time when I was talking to them, when we were down here at the time through the S1, I was kind of semi-joking to them saying, well, you know, I don't think it would be any surprise at all, but by the time we go into the close of Wall Street that we would have rallied and recovered the entire loss. And lo and behold, we pretty much did. And, you know, I just think sometimes when the market particularly sells off like that, it's good to just come out of the crosshairs and the grass blades of the day trading environment and just put it on a higher time frame or different perspective on your chart and think, look, we, we pretty much sold off to the point of where we were on the morning of before payrolls came out. So it's not as if this was the, the, a great unwinding, if you like, and okay, this is it, meaningful shift. And, and therefore, with the technical breaches and the market running heavy with some momentum short-term speculators entering the market, you know, you do get— tend to get these big recoveries. Because ultimately, for me, I don't really see too much of a, of a, of a big change here for the equity space. Certainly if it is down to lower yields being depressed and the idea then the Fed are kind of, kind of unwinding bets of tighter policy, reacting if you like, as a catalyst to the service sector data in a similar fashion to what we had kind of with payrolls on Friday, well then I don't really see why equity should remain lower. Definitely can understand why NASDAQ might outperform, but it should be supportive more broadly all round. And, and here we are, we're back up, we recovered, you know, more than 50% of that initial sell-off. This morning we're sitting pretty flat in the futures, but of course still very close to the all-time high at the moment. The one thing that didn't really play true to some of those moves was the US dollar. Um, you would have anticipated in that type of situation, um, then that the US dollar perhaps would have weakened, and it didn't. It's kind of held on to its gains. So that was the one anomaly, I guess, from a correlation point of view. The Dixie's trading pretty flat at 92.50 at the moment, and so the major currency pairs are kind of sideways for the time being as there's a little bit of caution in the air. As we await things like JOLTS later from the US and the FOMC minutes, of course, coming out later on in the session. Um, oil markets as well, um, did move considerably lower yesterday. But again, I think context is very important. And actually, if you put this oil chart on a daily, it's pretty much to the absolute cent that we tested that previous high that we had back in October of 2018. And then we've just come off and yeah, sure, there's a few things going on. It's kind of a dispute unresolved, if you like, from the meeting with OPEC, UAE causing some headaches. I think media are totally exaggerating about this idea of the potential price war that could ensue on the breakup of OPEC. I think that's just putting a little— making a bit of a mountain out of a molehill, to be honest. I think more so for price. I mean, if you look even from where we were trading back in May, this is a 25% move here. I think, I guess if you go even further back to that previous low we had in March at the end of Q1 to the end of Q2, pretty much where we are at the moment, we're up 34% on that rally and we've come off 4.5%, 5%. And if you actually look at the incline from May, it's been pretty steady on its ascent. So hitting that technical marker, I think, and just given the news flow at the moment, I don't see any real destabilization to this higher price of oil for the time being, personally looking at it from a slightly higher time frame perspective. So yesterday certainly was heavy. It certainly did weigh on the energy stocks as well. Financials also feeling a bit of a brunt of the move in yields because they tend to benefit bit more in a higher margin, higher yield environment. But as I said, Amazon was a real standout. You can see that, quite incredible really. And Andy Jassy, it was his first day in charge because the formal exit of Bezos happened on, on the 5th. And so not a bad first day at work, but predominantly propelled by the fact that the Pentagon in the US scrapped Trump's $10 billion cloud deal with Microsoft. If you remember, Trump had a bit of a tit-for-tat with Bezos and Amazon at the time because of associations with the Washington Post and critiques of the Trump administration. And so that's been contested then, that that was unfairly— they were unfairly treated. And Amazon have kind of come out then back and revived their bid now that the Pentagon has scrapped the deal with Microsoft. And that's been to Amazon's benefit. And as you can imagine, Microsoft was flat on the day. In comparative terms. Asian markets overall, how did they perform? Pretty subdued, similar picture to the global counterparts on the handover from overnight on the close on Wall Street. Also layering in China at the moment going through quite an aggressive form of crackdowns, quite wide-reaching but predominantly in the tech space at the moment. And that in combination with some of these other factors as discussed has kind of led to fairly fairly cautious tone in overnight trade leading to the open this morning, which I would say is relatively flat overall. I mean, again, from a cross-asset class perspective, index futures are, if anything, you know, flat in the US, still minor performance in the NASDAQ. The DAX is up about 48 ticks this morning. The DAX yesterday, again, quite technical, which I think really did exacerbate some of the downside price action yesterday. You can see here that trend line, same setup as what we're looking at in the other US indices from the 21st, had a few retests on those pullbacks. We saw a definitive break of that and a rundown then to that horizontal same level on the 23rd and the 30th before a bit of a bounce back. And we're just breaking above in the futures space late yesterday and the overnight APAC high, uh, looking to reclaim the pivot here in the DAX. Again, nothing really specific just a little bit of recovery from, from yesterday. But as I said, currency markets, both major currency pairs, EURUSD cable top left, are basically flat, as too is the 10-year. Oil's now in a pretty much a consolidation range after the sell-off from yesterday. Gold a touch higher, I guess. Looking here, just got a trend line on from the 30th that got retested amid the sell-off and move lower that we had yesterday, and it's just holding up at the moment above perhaps a short-term key level of support with that trend line on a horizontal basis from that previous high we had back on the end of last week on some of the volatility on payrolls, the retest of the recommencement of trade this week, and then from the overnight APAC session. All right, well, let's talk about some of the other news in focus. And going to start off with the UK lockdown strategy because there's been a few pieces of news about this. As you've just seen, cable's flat, so this isn't really impacting cable right here, right now. But I definitely think it's worth keeping an eye on the COVID situation in the UK, both from a case count point of view but also for the government's lockdown strategy, which we know has been pretty clear, outlined by PM Johnson just the other day. The Health Secretary, Sajid Javid, came out yesterday and announced that from August 16th, anyone who is in close contact of a positive case will no longer have to self-isolate if they have been fully vaccinated. And the same will apply to under-18s who are not, who are not currently vaccinated. Um, Sajid Javid did go on to say though, this is where this number comes from, this 100K, that by the time we get to the 19th i.e., in 12 days' time, he would expect case numbers to be at least double what they are at the moment, and so around approximately 50,000 cases per day. And as they ease and go into the summer, so when then probably it's going to get to the point of mid-August when anyone close contact of a positive case will no longer have to self-isolate, Sajid Javid, the Health Secretary himself, said that they are going to be expecting a significant rise in case numbers could be as much as 100,000. As we've discussed before, the idea being here is that the impact ultimately on hospitalization rates and deaths is, is much lower because of the fact that now it's mainly young demographic, not the older and more vulnerable of underlying medical conditions who have already received well in advance of time their vaccines. But a bit of context I think is quite important. 64% of adults have had 2 vaccines, 2 doses of those vaccines. Again, on the side point, we obviously saw that Israeli Health Ministry report come out yesterday talking about the efficacy of the Pfizer vaccine. I think it dropped to 64% from the previous 95%, specifically due to the Delta variant, which is the one that's definitely circulating in the UK and, and also in mainland Europe. So there's a few kind of tail risks here to the strategy. And then the Chief Medical Officer Chris Whitty, who of course I think you'd all recognize by now, he did come out yesterday and talked about the fact that while he expected deaths to be much lower proportionately compared to previous waves, long COVID remains a worry in young people. And long COVID being those long-term symptoms like fatigue, shortness of breath, chest pain, cognitive disturbances. So, you know, it's not as if— although they might not lead to ICU admission or worst-case scenario death, there are other kind of side effects as well that people can have on that basis. And certainly with the height of what the numbers are, this is one of those points that's being contested at the moment in the political forums of whether this is the correct strategy to deploy or not. But again, medical scientists' point of view is one thing. The government— I don't think Boris Johnson really has a great deal of wiggle room now to back down from his current approach of this unlocking strategy, and given the rollover that's already been witnessed from before. So right now, the cable price is not really that impacted, and I don't think it would be. However, It's definitely worth keeping in mind then over the course of the next kind of 8 weeks, that case rate, definitely given the unlocking as well, is likely to accelerate significantly. So there's definitely a few things to keep an eye on there then. How does it translate in terms of hospitalizations? And then this idea, does more data come out in regards to supportive of the efficacy rate decreasing and by how much for other drug manufacturers, like what we've seen for Pfizer in Israel with the vaccine. And then also this idea about implications of long COVID as well could be something which would be a more long-term impact potentially. Um, elsewhere in Spain, um, that's drawn a bit of attention— the Delta variant and the surge in infections among young people, specifically unvaccinated, in Spain. Has led to the country now being the highest of all countries in mainland Europe. As you can see here, Spain just overtaking Portugal. The response then has meant that the Catalonian region, which has been the worst hit across all of Spain, have said yesterday they're reintroducing restrictions on nightlife, while Castilla y León called for a return to a curfew system as well. So the lockdown measures are being reimplemented in some areas in Europe just at the point of where the UK is, is unlocking. And then elsewhere, similar to Spain, Sydney, the leader of Australia's New South Wales state, came out overnight and has ordered a week-long extension of Sydney's COVID-19 lockdowns due to specifically the Delta variant again, and also given the fact as well their vaccine rollout program is running behind schedule. So a few things to be aware of there. Iran, we haven't mentioned in a while, and that's because there's not a lot really that's been going on. If you remember, they were going through several round of talks. We still haven't got yet a fixed date for the 7th round of diplomatic talks about whether they can broker an agreement to return back to that 2015 nuclear accord. And the latest has been from a UN atomic watchdog yesterday that Iran has begun the process of enriched uranium metal. And in fact, the move could help it develop a nuclear weapon. And 3 European powers have said has threatened then talks to revive these conversations that are ongoing at the moment. So from an oil perspective, I guess, for the geopolitical impact of of this and practically from the physical return of supply of crude from Iran, it just looks ever less likely a prospect. And, you know, if you go back to some of the briefings I was delivering 3 or 4 months ago when people— when oil at the time was kind of moving lower on the fear of return of Iranian crude to market, you know, I was pretty clear at the time that brokering a deal with Iran, just given how that relationship was broken by the Trump administration a few years back was never going to be easy. And hence, you know, we are seeing what you have at this present point in time. So there's still that kind of lingering idea of perhaps the new president-elect Ruhisi wants to get something in before he gets formally inaugurated in a few weeks' time. And could we see some movement so it gives him the ability then, if they signed back up to this accord, to pass on any concessions given to the West onto the outgoing President Rouhani. So perhaps this is just a bit of leverage play to negotiate with a stronger hand. I guess the next couple of weeks will, will really be most telling, but at the moment things are remaining pretty status quo that they're not talking at this point in time. All right, in terms of the calendar for today, it's very quiet. In fact, for the European UK morning, there's not a great deal going on. So really it's a US-centric session. You've got JOLT job openings coming out at 3 PM London time, likely to show a new record for job openings, but that hiring continues to lag far behind given potential workers are either unable or unwilling to get a job. And then the main kind of focal point will be on the FOMC minutes. And of course, this was from that, um, surprising Fed event at the time which did initiate quite a significant move across assets globally on the back of that surprise 2-dot plot rate hike for 2023, of which no one really was anticipating at the time. And the fact they made the admission that inflation perhaps is a little bit more larger and around longer than they previously anticipated, that really triggered that more hawkish development. The world, I think, has moved on a little bit since then. And I think yesterday really was evident of that. So I'm not really too sure how impactful the FOMC minutes will be, because they're probably going to sound pretty hawkish. But I think that in itself is perhaps now a little dated in view, given the fact of what's happened with yields. Equities are back up at the highs. So it could be one of those where you get an initial little, um, kind of bump in prices intraday in the fact that it's kind of, well, these are kind of quite hawkish commentary or tone to their discussions. But then the realization is, is that other things have come out. The ISM has come out, the PMI number yesterday, the payrolls figure, some of the, some of the jobs components are quite in focus. The market is reflecting now that that tightening fear has been reversed because you've only got to look at equities and T-notes to be able to really see a lot of that. So it's coming out at 7, and then separate to that, Fed's Bostic speaks after on the economy, who is a voter, at 8:30. And then the oil inventory numbers after that at 9:30. Remember, come out today a day later than normal given the US holiday on Monday. All right, that is it. Gonna let you guys get on with the session. Wish you a good day ahead, and I will catch you later on in the Amplify Live community. All right, take care.