Boris Johnson Pushing For December Election

Okay, very good morning to everyone. Friday, 25th of October. Hope you are well. Also, a quick shout out to Kurt, although it was for Sam, giving you some love here for the big game coming up this weekend. Depending on the outcome, Sam and I will wear the respective top of the champion when it comes to Monday morning. But back to markets, not actually too much for me to talk about at the moment in regards to actual macro developments. There's been very little updates on the usual things like Brexit. Also, there's a few comments that came out of the Vice President Mike Pence yesterday that I think are just worth being aware of. So very much a reflection really across the charts of what we're seeing this morning. The DXY is pretty flat, so quite quiet in the currency pairs. Likewise in the equity index futures, you can see in the center chart here I've got an ellipse around quite a significant downturn that we saw in the NASDAQ futures after the close last night, and that came after Amazon's earnings. So we'll have a quick look at that as well, but In a nutshell, their earnings drop year over year for the first time since early 2017. Fixed income futures basically flat, and oil just kind of gravitating around that pivot level at the moment in the futures market at around the $56 handle. So I'll leave the charts for, for Sam, and I'll go straight into obviously the ongoing situation that is Brexit. And where are we at the moment? Because what we've had last night is Boris Johnson has, I think now for the third time, called for an election. But in terms of timing, it's quite interesting because he's looking to hold a December election, which would be the first time since 1923, if it does in fact go ahead at that particular time in the calendar. And last time that did happen, uh, back in 1923, it was a hung parliament. Now, a couple things, uh, just to get you up to speed in terms of political parties. Traditionally, they tend to avoid winter votes, pretty much a standard thing because of the weather conditions. It's very hard to canvass support after dark, and they have to get out, you know, to people in the cold and the rain on the polling station day. So it's very— it can be a bit lackluster in terms of the actual participation rate, and therefore also the build-up as well, trying to cultivate support your campaigning period, which is part of a preset period of time that we have for any general election. Another thing as well, that one I saw a journalist from The Spectator was saying, which I thought was quite interesting, he said he thinks one of the attractions of a December 12th date for the Tories is that universities will be on holiday. Tory folklore has it that Theresa May's decision to have an election during term time cost her Tory seats such as Canterbury. The point being here is that university students, if they are registered to vote, are usually registered in their university town. And so what this date of December 12th is trying to do is if they're on holiday, then they're not actually able to vote because most university students are not from the town of which they actually live in, in terms of home. So that could be another tactical move as well. What's happened though on the back of this? What are the opposition parties saying? Because as we know, you need two-thirds majority of Parliament to support you in order to get an election underway. And Labour Party leader Jeremy Corbyn said yesterday that his decision on backing the Prime Minister's bid for an election depends on the length of extension that is granted from the European Union. And this is what we've been waiting ever since those letters got sent. To Brussels earlier this week from Boris Johnson as part of then the exercising of that Benn Bill. Now, that kind of following this chain through, what are the EU saying? Well, EU diplomats, they are meeting this morning, so definitely I think there could be some tweets, some source comments. So keep an eye on the regular journalists as well to be breaking a couple of headlines. But in all reality, what Europe have been saying is that they want more clarity from the UK before agreeing to any type of extension. What they don't want to do is be seen to be picking a side by either at the moment. Obviously, a lot of the opposition parties want a delayed, protracted, long extension because they feel that would take some power away from Boris Johnson. Boris Johnson ideally would like a November 15th if it was an ideal case a few days ago. Obviously, now he's tabled a December 12th date. And all of this is earlier than the January 31st that was initially said to have been in play, the 3-month period. Obviously, the earlier the better, and it kind of supports that argument that he can just focus on campaigning on that people versus parliament kind of mantra. So in terms of an actual EU answer, a couple of the sources this morning on Bloomberg suggesting that we won't actually get anything could well have to wait until Monday or Tuesday next week before they make a decision. Obviously it's a bit of a weird one at the moment. Boris has put it out there, but a lack of commitment almost again from Labour about what exactly they want to do, because they want to wait for Europe, but Europe wants to wait for the UK. All in all, it's just, um, you know, hence the reason why really this situation epitomizes the need for a general election. Because this is a kind of a lame duck government where nothing can get done. And it— you would think that there's only a, a so long period of time that this can continue before it's inevitable a general election needs to take place. I was going to talk through a couple of the latest election opinion polls on Westminster, but in all honesty, even though we know Conservatives are kind of ahead at the moment, And obviously the Liberal Democrats have seen a decent return as well to the fold, given their stance of revoking Brexit to capture that real Remain vote. The idea here though is kind of like with Theresa May in April 2017. The polls were suggesting around a 22.5% gain for Conservatives, and it absolutely did not materialize and backfired. I think opinion polls really need to be taken with a large pinch of salt, largely because they're a reflection of people's opinions of what they would do in the future. I.e., what would you do on the 25th of October if you were voting for election on the 12th of December? Well, there's a lot, hell of a lot that can happen in those two dates, and we saw that with the 2017 election, whether it was changes with, what was it, dementia tax, whether it was Theresa May not showing at those televised TV debates whether it was Labour kind of really galvanizing the younger demographic vote. All in all, it meant that all of those polls that were done before are rendered basically redundant. So I don't really see too much point looking at them at the moment. Obviously the resounding sentiment is that Boris would get a majority, but I do actually, on these points, think that he will actually seal the deal. I I don't think he's going to do what May did, which was kind of disenfranchise her regular older demographic supporter. I actually think Boris has got a really strong argument to make, and it's one that's simplistic and will resonate, I think, with his base and will capture— I see not too much threat realistically from the Brexit Party. But for him, the sooner the better in that respect, I would say. So that's it for Brexit. In terms of the actual pound, what is going on? Not a great deal, to be honest. And it, you know, depending on whether EU come out and say something more explicit about their commitment on duration, whether that falls in the Conservative way or the Labour way, might cause a bit of reaction. But as I said, it might not be until Monday, Tuesday we get the result for that. So could be fairly, fairly quiet, but worth being vigilant. I'd say, on Twitter for updates. The other news story that I thought was quite interesting and to bring you up to speed on was Vice President Mike Pence. These American politicians, it's almost like they can't help themselves, stick their foot in their mouth. And he gave a speech yesterday where he criticized China's actions against protesters in Hong Kong. Just that, that's what you don't talk about at the moment. I mean, you can criticize China for manipulating its currency, you can say they do all kinds of other things, but just don't talk about Hong Kong at the moment. They do not take very kindly to that. The Chinese Foreign Ministry came out about half an hour ago and said they stated that they are extremely indignant about VP Pence's speech, and they resolutely oppose it. So if you think about it, at the moment, uh, the stage in which we're at is that we've got this partial trade deal. They're continuing dialogue. Actually, top US and Chinese officials are discussing plans by telephone today. Um, Beijing will request cancellation of some planned and existing US tariffs on Chinese imports, according to people briefed on the talks. Um, essentially what the US want is to China to double its annual increase of purchasing agricultural goods to $40 to $50 billion, whereas China say they want to aim to buy at least $20 billion and then look to scale it up as and when those December tariffs are removed and existing ones are also rolled back. So I guess actually thinking about it, this is fairly reflective of how other trade talks have gone. This time though, it's come from Pence rather than Trump. Before they have these important phone calls or face-to-face meetings, the Americans do tend to kind of wag the stick, so to speak, and it almost feels like that again. Only problem here is, as I said, culturally, Hong Kong is a very kind of contentious issue in mainland China, and at the moment. And so talking about that, I'm not sure that's going to have the best result going into these conversations later on today. Fallout of those talks, a breakdown of the partial trade deal, of course goes into that, that kind of continuous trade war cycle that we've looked at before. And perhaps if that did happen, you could see quite a negative reaction in markets and you'd be looking for downside in US equities at the moment, which otherwise have remained relatively supportive. Through the earnings that we've had throughout the, throughout the week. So yeah, you could, could spark a flight-to-quality bid, uh, I guess then if they're meeting today. You probably though won't like now or start to hear comments until a bit later on, late European afternoon I would say. But something to be aware of. The one earnings report I just wanted to, to mention was Amazon. I did show you the NASDAQ saw quite an aggressive drop last night, um, in terms of the, the headlines there Earnings dropped year over year for the first time in basically 2 years. Projections for their operating income and sales in the period fell short of analysts' estimates. Their shares actually fell as much as just over 9% last night. So obviously 9% is a, is a huge move for a company of that magnitude. Jeff Bezos waking up this morning finding himself now number 2 in the billionaires' top list. So Mr. Gates back on top again. Um, cloud computing unit remains the cash cow, of course, when you're looking at the metrics to underline the strengths of this company. Uh, sales in that division actually rose 35% in Q3. However, 35% sounds pretty impressive, but that's the AWS, their kind of cloud divisions. That growth was the slowest since Amazon ever started, since they started reporting that unit's performance. And this comes amid increasing competition in this area, particularly that from well-funded rivals, essentially Microsoft's Azure and Google's Cloud Platform. But the Microsoft one's probably the biggest in line with competition in that space. So yeah, Amazon was a little bit weaker in that regard. Just quickly, let me just bring up the earnings calendar for today just so we know who's coming out Uh, as per usual, Fridays do tend to be a little bit more quiet as earnings season typically hits its peak during midweek. So today, companies that we've got— Verizon, AB InBev— they're probably the only two real bigger names. The others are more kind of mid-cap size. Calendar-wise, what else have we got to come? German IFO is coming out at 9 o'clock. I'd be interested to see what the general kind of sentiment is at the moment. uh, in regard to forward-looking over the next 6 months. So current conditions, but business outlook for the, um, what they foresee for the future, always going to be quite telling, particularly with that weak German data that we had yesterday. I did, you know, just to summarize the weakness of that German data and why the IFO could be particularly interesting was this was a comment I picked out of the, the Markit report. This is the company that compiles data on the PMIs. And if you actually read the report, the German numbers yesterday— because we remember we had that real blip in the euro where the French numbers came out, services was really strong, and we almost instantly reversed it on the German figures— the German downturn in the economy continues. Employment falling for the first time in 6 years, services in Germany a 37-month low, business sentiment turned increasingly negative. Expectations falling to the lowest level since November 2012. So that later, latter point, be interested to see whether that translates also into the IFO reading. So I'd say on the balance, probably some scope for a downside surprise. So it might be worth just keeping on European assets at 9 AM. Otherwise, for the session, it is pretty quiet. The US, um, University of Michigan sentiment is the final reading for October, so tends to be typically not that market moving. So other than that and any update on the trade dialogue with those high-level talks going on to conclude more detail on the partial deal, they're probably the key things that I'd be monitoring fundamentally today. All right, I hand you over to Sam, and if I don't speak to you before, I wish you all a very good weekend. And even though I am wearing this shirt, I must say, come on England!

Yeah, we'll be having words about that, uh, later. We'll have a quick look over the charts to begin. I think start off with currencies and euro. See a decent enough move to the downside yesterday, and I've been to one of the guys who's about to go into stage 3, and they were short on the euro and looking at potentially taking profit as it it came down and what a good level. And they decided to come out as it just happened to be the low of the day. The high of the 16th, S2, good test, couple of goes at it, didn't want to break. And you can see we rebounded since. So 1.1131, key point to mark up obviously for the day and then the week now, I guess, to keep an eye on. And then to the upside, just where we found resistance is a bit choppy, but on the low of Wednesday as well. So we're keeping a watch on that. Probably worth having potential look at the trend from yesterday's lows to see if that's respected on the third test. Also, you can see perhaps as well now what is the high of today, the high of yesterday evening once we found support on that one, 11:31. To the upside, the couple resistance points that we would have to get through, uh, before, uh, coming to the pivot. You've got highs from yesterday, uh, afternoon as well in the mix. And on the pivot itself, you've got yesterday morning's low. So quite a bit of resistance above where we're trading, but a really key support from yesterday's low. If that was to go, then I do feel you are looking down to towards 111 handle, uh, other than the, the low of the 17th. So been in a bit of a small range. I think everyone will be pretty happy to, to get this week done with. It's been a quiet one. Monday next week does look quiet as well, but certainly Wednesday, Thursday, Friday look like they could be pretty good days, I have to say. I'm going to look at the pound, uh, as well. Decent move in, in correlation with the euro yesterday, stopping at the same time the euro did. Whether you want to call it because of this level, I think more the euro was dictating things there. Key levels to the downside today, if we can get through yesterday's then, you know, I do like the look of this area, 127.73, but it's kind of range-bound, isn't it? You know, we've got failure, I guess, in hindsight, looking back in a couple of weeks to clear above 130. May, maybe, you know, an opportunity there where it's, you know, a bit lower down, but whether that really happens or not, time will tell. See some big developments to come now No doubt. So medium-term position at the moment in the pound probably doesn't make too much sense, I would say. Looking on a 15-minute chart, just above the pivot, uh, so the pivot area for both the euro and the pound, pretty important. And we're in this small range where we've just broken through the low of the day, but failed test of that, and we bounced 10 ticks already. So confirm break below that low, then sure, we can look down at yesterday's lows as well. Bit of a zone above the pivot as well, from the morning area of support around 9 AM to the closing highs that we had yesterday evening. So I don't know, on paper it looks quite choppy currencies for the pound anyway. Um, I don't think there's much harm in just sort of saying, you know what, let's wait and see. Is anyone really going to get in a new big position today? I don't know, I don't know. We'll have to, have to wait and see that. Uh, look over at S&P, which, you know, has been resilient, like Ant was saying, through the earnings. And, you know, we're, we're still trending high. I think there's, there's a nice trend line on from the lows that we had from Wednesday, uh, the second low here that's just been respected this morning. So just dropping this down to 15-minute chart now, once that trend line sorts itself out, and you can see see here, worth having on, especially for, you know, the afternoon when things are going to pick up. Below there, I'm a seller. Above there, and certainly the time, it could well be the pivot in the mix as well. I'd be happy to, to stay long. A lot of resistance up at yesterday's highs and the R1, and on a relatively quiet day, it's not really too surprising that that held as well. So yeah, you can see we're just getting squeezed in, and that's really how I would look to play this Pivot is obviously important, maybe shorter-term trend line as well, and then obviously those highs from the, uh, the week. Putting it onto a 240, what would happen if we get a break above those, those highs this week where you've got quite a lot of resistance? So unless we had a really big push above 3025, uh, which is also the all-time high, but then, uh, I wouldn't be getting too ahead of myself just yet. Quick look over at gold, which pushed higher yesterday. We finally got that, that trendline break that we've been eyeing up. Admittedly, either way, and, and, uh, and this was what I was waiting for, was really thinking just about, uh, let's just get that on, you know, the how unsure I was about which direction gold was going to go. And it was a case of, well, under here to sell, above there to buy. And of course, um, you know, I happen to be out the office when it happened, but but a decent push. And what an opportunity, let's be honest, you know, it came back, retested, and, and then did go. And we're now trading up at where you would probably have said the first real target would have been, that high, the 11th. And, uh, we're quite a lot higher going into the end of the week. Can we confirm a break above here? I'd say that's pretty important going into the back end of the week, because obviously this, as it stands here, looking 60-minute, 1508 is a big resistance resistance level. Uh, so yeah, a confirmed break above, happy days for gold. And you've got to imagine that's going to help drag silver through as well, which you can see also has broken through some key resistance points and trend lines as well. Uh, maybe a bit more to go to really key resistance point here at $18.10. You can see those highs from the 26th. So for those that are watching, that would be the, the area that I'd be looking to to, to be comfortable if I was still long, let's put it like that. Oil, another market which dragged higher, not just yesterday, well, a bit yesterday, but of course the, the Wednesday push and break above that key resistance point around 55. Uh, we almost yesterday afternoon getting to the highs from, you guessed it, the 26th. A lot of commodities looking around those highs from the 26th. Again, can we close above there? Will be important. We haven't had, I guess, a close— a retest back on 55 on another day, so that could be a nice area of support to potentially look at. Um, but again, relatively subdued start to the day, and yesterday was, you know, didn't finish massively higher. Probably just wait to see into the afternoon for oil, gold, and S&P, but certainly some nice levels in the mix there. As well. On the open, let's have a look, quick look at the DAX. 30 minutes into it now, almost choppy, uh, not surprising for the DAX on a Friday. Pretty range-bound over the last, well, let's call it almost 24 hours, uh, so no harm in waiting for a bigger move to come. And of course, on this longer-term chart, we're the highest we've been for, for quite some time, uh, in the DAX. And actually, just looking here on the weekly continuation, we just removed the pivots You can see just how important this area is. Let's get that line drawn on from the week of the 23rd of July 2018. So pretty big, uh, pretty big, uh, level there. Can we close above? Would be massive. Uh, not— you may well get a bit of profit taking into next week, but of course a big one to come next week with the Fed, non-farm payrolls, some GDP numbers, inflation numbers out of the, uh, the EU. It's one I'm really looking forward to, especially after how slow I would say this one has been. As usual, any questions, please do let us know. Good luck to all the England rugby supporting fans, bad luck to the New Zealand ones. It's going to be a blinder. I hope you'll have a good weekend and good trading.