Boris Johnson To Try Again For General Election

Hi guys, good morning. Tuesday, 29th of October, just got 8 AM here in London, so just starting to get the EU open. As you can see on my right-hand side, all-time highs printed in the S&P, printing above that 3025 and extending on the futures as high as 3041 in yesterday afternoon's trade. A big move in the markets. to begin the week ahead of the Fed on Wednesday. And we can just bring in the S&P here. As, uh, you can see, big push from, uh, actually gapping just a bit open, uh, a bit higher on the open, I should say. 3022 pushed above and continued, uh, for a decent move on historically what has actually been the best day for, for stocks ever, uh, the, the 28th of October. However, yeah, decent push, and, uh, and that really did continue into the back end of the session. We'll go over what else moved yesterday. As you can see in correlation, we saw a move lower in gold and bonds as well ahead of that interest rate decision on, on Wednesday. I will be interested to see where those markets finish the day. Worth just keeping an eye on the DAX as we go through the open. Likely start, uh, going down towards the pivot, which has actually a pretty good area of support for from yesterday afternoon. It was the R1, you can see here, and also been tested a couple of times already. So just keeping a watch on that, some support below there as well to keep an eye on. We'll also touch upon the, the latest goings-on with, uh, with Brexit and the, the UK general election. Is it going to happen? Obviously failing at the first hurdle yesterday, but it seems to be more positive in the ideas of Boris that it's going to get done, and December 12th could well be the date there as well. One other thing we'll touch upon, as you can see here, just bringing in the NASDAQ. So while, uh, the S&P printed a fresh record high, uh, it did, uh, actually come down a touch, not as much as the NASDAQ did, uh, around 8 o'clock, but that's because Alphabet earnings came out. And, uh, judging by the color of the candle, you can see that they just missed they did miss earnings as well. So we'll head over to the, uh, that's the stories. And I guess just having a look at the, the map here, you know, it's always an interesting one to bring the map on when there's been a big red day for stocks. But, you know, credit where credit's due, the stock market is resilient and keeps pushing higher, whether you want to call that down to, to trade talks or, uh, lower rates in the US for longer. Another good day, and earnings have, I guess, overall, despite Alphabet yesterday actually surprised to the upside, um, it was just this time last year where they were expected to be the worst in however long. Again, expected there for quarter 1 and 2, but good earnings here for the stocks. And also yesterday we did have Donald Trump speaking, and it's going to bring in the the stock market, S&P 500. Again, we had Donald Trump saying today— obviously yesterday is going to be a very good day for stocks, and we pushed higher pretty much from there as well. It's not the first time he said it, and actually just going back to the last time that he said this, it's— I can't exactly get the date for you, but But either way, the last time he said it, that was actually when we had a gap lower from the weekend. The market was up big yesterday and it's going to be big again today, and the stock market actually tumbled that day. So it's not always guaranteed that the market will follow exactly what Trump says, but however, yesterday was a day where that did happen. Decent push above the highs, good opportunity post-cash open as well, and on a retracement and we continued on into the back end of the session. At the same time, uh, gold— I'll just bring in the gold chart here— you can see broke a trend line that we talked about in the briefing. The first real attempt of it, it was, um, I guess a bit choppy, did snap back, but you can see once we got that confirmed break, retest, really strong move, and we cleared 1,500 with ease, which was on paper anyway, like a good area of support. And we're now back towards that 1492 level, which, you know, I, I like the look of, or did like anyway. However, we are just trying to recover a bit of those gains. So yesterday, very much risk-on. President Trump adding fresh optimism on the US-China trade front, saying the two are ahead of schedule on forging phase one of a trade deal. Opportunity-wise, how much is left on, on this supposed trade deal? Well, the way the market goes, you probably say there's still a bit left, but I guess the, the best move would come on talks, on talks breaking down, uh, as well. And especially with the Fed on Wednesday, if Trump isn't happy, you can absolutely expect him to, to bang the, the drum and say, you know, trade talks are breaking down, to maybe get the Fed to to move in the way he wants. So be cautious ahead. We've got some big earnings coming out as well, yes, tomorrow, which could of course influence price going forward. But yesterday, yeah, Trump saying it was going to be a good day for stocks, that the two ahead of schedule, and we saw very much risk-on stocks push higher. Gold came lower. T-notes, as you can see here, also breaking out of a decent area of support from last week. However, just a slight attempt to recover a bit this morning. Just going back to that DAX quickly, you can see just how violent that is on the open, uh, pushing initially down to that low, snapping back to almost make a new high for the day. And we're now back below there as well, 7 minutes into the open. One to, to keep, uh, an eye on going forward. Also yesterday, worth, uh, bringing in oil price, which, uh, initially had made a new multi-week high above, uh, the high that we saw on Friday, printing up towards $56.92, almost hitting $57. However, decent, uh, push lower in the end by the time oil moved, and that's continued today, breaking a trend line you can see, uh, here that's drawn on. Nice break, retest. As you can see, this was now around sort of half 5 into the afternoon. So the biggest Well, the first time we dropped in a week amid signs of swelling crude inventories in the world's biggest economy. So data provider Genscape said oil sorted in Oklahoma expanded by 1.5 million barrels last week, which is just reviving concerns about sluggish demand and ample inventories. So yeah, a decent push lower, uh, in, in oil. And just looking at this more technically, you can see where we're trading now, or just a bit below, you've got that really key point from $55 which offered such good resistance as a zone at the beginning, uh, towards the end of the month of October. So can we come back to test that? We're only 29 pips above. So from where we traded, a decent move lower in oil seen yesterday and that has continued today as well. So going over to— well, I guess we'll start off with the overnight headline, uh, the Alphabet earnings were dented. So this was that move that you saw in the NASDAQ. Um, Alphabet in extended trading overnight was, was down a bit. You saw from the Finviz chart— if we quickly just switch back to that— whereas Alphabet But here you can see was actually up 1.95% on the close in extended trading. That was of course down, um, as, uh, it missed the, the share price at $10.12. It came in per share down from $9.2 billion or $13.06 a share in the same period a year earlier. The company reported on Monday, uh, that year-on-year was, was down quite a bit. Analysts had expected a 12-point 3.5 a share according to data. Alphabet shares fell yet 1.5 in extended trading after closing at 1,288 in New York. The stock, of course, on Monday hit a fresh record high. So in the build-up to these earnings, along with general positive sentiment, uh, was already pushing on. So a bit of a snapback there. Whether that can continue for stocks ahead of the Fed or not, I wouldn't be too sure. Just having a look at the— if I just bring in the earnings calendar here, if we just have a look at Wednesday earnings, you've got Apple, you've got Facebook all coming out as well. So just to, you know, get in a strong move just off the, the Alphabet earnings, I'd be a bit hesitant when you've got the big things coming later on. Really, today is going to be the— again, probably the most second least, uh, exciting. There will be the second most quiet after yesterday, and it really kicks on from tomorrow where you've got the Fed, you've got the Bank of Canada rate decisions, got ADP and non-farm payrolls on Friday, Apple and Facebook earnings coming out, which we know can move markets nicely. And then you've got some European data, you've got the Bank of Japan rate decision. So it's going to be, it's going to be a decent 3 days shall we say. Of course, Brexit Day has now been cancelled, uh, as the, the UK accepted the 31st of Jan. But something to bear in mind there. So Alphabet shares down, uh, and now off their, their highs. The NASDAQ relatively flat this morning, it has to be said. Just bringing that in, you can see in trade it's, it's just coming towards the low. Uh, so be keeping an eye on the net— on the DAX, really, whether that is going to break which you can see is continuing here to push down on the open there. So yeah, once, once I have marked up the DAX continues, then sure, S&P and, and, and the NASDAQ could of course break through. Moving on to Brexit, just going to go over a couple of slides here. I saw on, on Twitter last night Anthony Cheung at King's College University, and he's done some, some slides for them. So I was absolutely going to steal these, and thanks to him, he sent them over. So just a summary of what happened yesterday. You can see, well, you would have heard about it, the pound relatively unmoved, it has to be said. But the Prime Minister tried for a third time on Monday to trigger a snap poll to end the impasse and rebuffed again by House of Commons. So the idea here, trying to get the the general election voted through, uh, didn't get the two-thirds, received 299, short of the 434 needed. Just out the corner of my eye, by the way, NASDAQ breaking that low as the DAX continues, uh, to push down. So a bit of risk-off in the market— in the markets as gold, the Bund, and T-notes just trying to push on. But only 12 minutes into the open, so just be slightly careful there. As well. He will try again on, on Tuesday, so today, to get Parliament to allow an early election to take place, this time using an easier legal route. This is known as a one-line bill, a basic piece of legislation changing the date set in law for the next election on December the 12th. So just having a, you know, look around, this is, I would say, more likely to pass, but But just having a look at the way, you know, the markets are pricing in a potential general election, it really feels quite undecided about where the pound is going to go here. So just bringing in— this is the, the longer term, uh, pound chart that you would have seen in the, uh, the morning or the afternoon, I guess, yesterday, the strategy report that got sent out about possible scenarios where the pound could go. And we were trading now on the futures anyway, on the daily, around 128.67, last week's high, up at that 130 that we just couldn't get through. You know, my personal opinion would be a general election comes with a bit of uncertainty, only to see Conservatives, uh, clean up, and, and therefore Brexit deal becomes more likely, uh, and therefore we actually look closer to 134, um, by the time that happens mid-December. However, that uncertainty could absolutely weigh on things, and I think you've got to imagine if it does come down anywhere towards 126, this bottom circle would be a great opportunity to buy. Of course, the last general election didn't go to Conservative plan, so there's no guaranteeing this will, but the recent polls obviously confirming that Conservatives have a, a rather nice lead going in. So yeah, the recent move just really pricing out that no deal uh, which it seems this is completely off the table, both from Europe and from the UK. So I think that's fair, that move. I think we're at fair price right now. However, a general election Conservative win, chance of that deal then going through, I think the pound has to push higher overall. And fair enough, it's relatively choppy at the moment, as you would expect, just on that uncertainty, which we know markets hate. But overall, I'm pretty confident we, we have a decent move higher. Just seen a tweet come through, uh, about Boris Johnson today. So he's trying to whisk through today's election bill in just 6 hours. So sometimes you want to be aware of, uh, write these down absolutely. Second reading vote after 4:30, and the final vote by MPs after 6:30 PM, so UK time. The MPs denied individual votes on amendments if there are too many. Instead, they'll be joined into a couple of combined votes. So times to be aware of, certainly today, 4:30 and 6:30 for those votes going forward. Going back to, to the slides here, so he will only need a simple majority, uh, in the Commons rather than two-thirds of the MPs for the bill to pass. So rather than two-thirds yesterday, one-third— uh, it was just a simple majority today. The risk for Johnson is that politicians could try to amend his one-line bill to say set conditions on the election that he will not like, and the PM would still need support from Lib Dems and SNP, which he has at the moment. It's going to be a day filled with Brexit comments. There was an article— let me see if I've still got it on the chat— regarding Brexit yesterday with just the timestamps of everything that happened, and you can just see how big this article is here on Bloomberg. And I'll just pop it into the chat in a moment for you all to have a read of. And the developments, I guess, are what you would really want to focus on. But there's going to be the same situation today where there's just different comments coming out. Already seen Nora Kuhnsberg is tweeting about this, that, and the other. So the main things, I guess, overall in summary of yesterday, we want to focus on the, the council— EU Council President Tusk confirms Johnson wrote to the EU to accept the January 31st extension, or flex-tension if you want to call it. I have to say, I'm quite surprised that, you know, the press are making a big deal out of the flex-tension when the last one was a flex-tension as well. But whatever, seems to be in the focus at the moment. So he got 299 votes, needed the 434, so fell short. So we're looking for deal number 2 today. Jeremy Corbyn said he won't vote for an election until the UK is no longer at risk of crashing out of the EU without an agreement. So Jeremy Corbyn, who's been pushing for a general election for the last couple of years, just stalling on that a bit at the moment. Pound rises 0.3, uh, percent yesterday. But look, it's choppy, it's choppy, it's very range-bound at the moment. And looking at this from a technical point of view, I'd be looking to see if these lows can start to join up with a trend line. You can see yesterday we got that in the way, starting from the 24th to the 5th to Friday, and not quite— or Monday, I should say— and not quite yet. But be keeping a watch on that because a break below there, fine, we can get a push to the downside. Yesterday, the high, very technically also the support that we had in the morning of the 24th. So I've been to see developments today, but I'd just be a bit careful trading the pound ahead of any concrete decision and general election, despite my view that it will be an overall positive can come with that uncertainty. So something just to bear in mind. The next slide, so the potential timetable. So we've had the agreed January 31st extension 2020, meaning the UK will not leave as planned on Halloween on Thursday. It will only be Draghi that's stepping out the door. EU cancel talks, said it for extension, obviously as we were saying. The Lib Dems, Lib Dems and SNP want Monday the 9th of December, which they say will prevent any chance of the PM's Brexit deal being approved before Parliament is dissolved. There needs to be a minimum of 25 working days before the date of an election to allow sufficient preparations to take place. And hopefully, from a Conservative point of view, they expect they would put in a bit more of a shift this time than they did under Theresa May ahead of that vote in 2017. or the election, I should say, in 2017 as well. Looking here, you know, got some nice infographics from the BBC just about the routes that we could go down. So MPs reject the early election, December the 12th. We're now going for this short bill for an early election. If it passes, then we just have to decide the date. Is it gonna be the 9th or 12th? If it's rejected today, and we'll know this this afternoon, the options are bring back the Brexit bill, a vote of no confidence, referendum, or no-deal Brexit on the 31st of Jan. No-deal Brexit, 31st of Jan, I mean, I think you've always got to give a little percentage to it, but it happening on the 31st of Jan, for me, 1-2%. And the markets have shown that. We've really unpriced all of May's no-deal— not as in Theresa May, the month of May— where we start to come down in the pound. We've sort of priced priced that out in recent times, and I, I just don't see that happening. Um, no one believed, I don't think, Boris Johnson too much over the last few weeks where he said we'll leave 31st with or without. It just wasn't possible, and it's not going to happen. What a vote of, uh, when a vote of no confidence is called, how could, uh, the, the results affect— if government wins, government just presses on with plans. Of course, we had a, a vote, the Labour no confidence vote last year, which, uh, Theresa May survived. If the government was to lose, is there a clear alternative? Yes, then the PM replaces the appointed. And can any government win a confidence vote within 14 days? If the answer is yes, no general election, new or old government continues. If the answers are no, then we can just get our way down to a general election, which again would be quite interesting if we were to get there from a vote of no confidence, you know, would the Conservatives still be leading nicely in the polls? It has to remain to be seen. But it's an interesting one on the general election side of things because, you know, if we go down the route of, say, Labour were to storm it and shock everyone and go down how they were gonna have a second referendum and taking no deal off the table, whatever, this would see surely a pound rise, whereas the Conservatives winning, getting a more of a majority, just getting a deal passed through, which to be honest the main Brexiteers aren't all too happy about anyway, would be surely seen as a pound positive as well. I guess kicking the can down the road, just from a negative point of view, in that we're just delaying things further, is probably what's the stalling price at the moment. So I have to say I'm pound positive. Where certainly against other pairs with the dollar will be an interesting one because of course we do have the Federal Reserve interest rate decision coming up on, on Wednesday and that obviously has the propensity to move all dollar pairs and be an interesting one. Also this week just to keep an eye on everything else that's coming out, we've got the— that's going to bring up the calendar again here, uh, you've, you've got some interesting You've got the ADP Wednesday, you've got, um, the Chicago PMIs out, you've got obviously non-farm payrolls on Friday as well, and some decent earnings which are all in their own right to move the S&P or the US dollar as well. So big week or big 3 days coming up post, uh, today. Uh, just have a look at the calendar for today. You can see if I just zoom in, relatively quiet in the morning has to be said from a data point of view of any significance. Uh, 2, uh, in the more— in the afternoon, usually 3 o'clock, you see the consumer confidence, but obviously the clock change has affected that. That's coming out of the US. So something to bear in mind as you, uh, go into the, the back end of the, the afternoon or the session— European session, I should say. Carney speaking at 6 PM, but no text release for that. So again worth keeping a watch on. A couple of earnings, uh, coming out of the, the US, UK, and EU this morning, uh, but really, as we know, with, uh, the Apple and Facebook tomorrow, that's where I certainly will be focusing on as well. So in summary, uh, of, of yesterday, just having a look at the markets, how we stand now, we, we saw risk on in the market following positive trade talks ahead of schedule, uh, then, uh, we hit all-time highs. Gold coming lower, T-notes coming lower, the Bund lower. Alphabet earnings overnight were worse. We've got a slight bit of risk off here in the morning. DAX breaking that key level support, and that has led to a push lower in, uh, the S&P, NASDAQ, and Dow Jones as well, and just helping gold, T-notes, and the Bund push on. But they're all hitting resistance, uh, at the moment. Euro and pound relatively choppy, not expecting too much in the way of movement ahead of the Fed unless we were to get some real developments from the Brexit general election as well. Oil pushed lower ahead of inventories in Oklahoma storage, up 1.5 million for, for the week, barrels per week there. as well. Any questions, as usual, please do let us know. Obviously be on the mic throughout the day a couple of times just to be aware of. So the second reading, uh, vote after 4:30, final vote for MPs after 6:30. So a lot of movement and talks happening for the pound-related assets came after the EU closed yesterday, and that's expected to be the same today. But of course expect comments to come out. Expect Donald Trump to be busy as well. The market's moving, DAX still lower, uh, so slight risk-off here to begin the session. 25 minutes into the EU close. Hope you'll have a good trading day, and I'll catch you all in the chat.