Brexit stalemate as parliament fails to find a majority

Okay, very good morning, Thursday 28th of March. Hope everyone is well and had a good evening if you were watching the parliamentary proceedings unfold last night. I hope you've had a good sleep and ready for a new day ahead. My job is becoming increasingly more difficult given the complexity of these events, but I'm adamant that I'm going to try and break this down to be as simple as possible. But overall, first things first, before we get stuck into these headlines here and what exactly has happened and my thoughts about where we go from here with Brexit, let's just take a look and remind ourselves about the, the movement of the pound last night, which, you know, if you didn't have any access at the bottom to define the date I'd be hesitant to say. Show me where the vote happened. Pick it, pick it out from the price action there of where exactly it happened. The point being I'm trying to make here is that the reaction was just hardly anything really. I mean, at the time, a little bit of weight came in when it became known that basically there's no majority for any alternative, and the pound came off. But overall, I mean, just looking at the the, the bigger picture here, you can see that the pound still remains in that kind of consolidation to some extent from that trend line over the last week. And the bottom end of that we've just broken here at the moment, down around the S1. But, you know, these things which get obviously such great media attention, I think from a market's point of view here, what happened last night is absolutely in fitting with what I think we've been saying, is that you know, you bring forward these alternative votes. But the point being is there is no majority for anything else. That's the point. So without further ado then, let's get into some of the details and, and talk about some things to think about going forward. And then we'll go on to the other markets, we'll talk about the broader day ahead, and I'll hand you over to Sam afterwards. So this is the headline: Brexit stalemate deepens as UK fails to agree on a way forward. Theresa May must decide on Thursday whether to bring back her deal. So this is the thing that we're looking out for today. Does she bring it back and table it for tomorrow? I actually think that there is a chance of that happening. I do think that there is some symbolic value of holding a meaningful vote to execute Brexit, even though the deal, unpalatable for many, on the day of which has always been promised to have been the technical kind of end of Article 50. I think given what's just happened here with the alternative ways of being heard, none of them have got a majority, so then the deal is what will deliver on balance the will of the public vote. And so you take Theresa May's deal, she comes back with a meaningful vote on the day of the the kind of, uh, the symbolic March 29th. I do think there is potentially some, some strategy behind the government maybe wanting to do that. However, I think in reality, as we'll discuss, without DUP support, it's almost impossible for that to happen. And I think that if she was going to do this vote, I think she's better holding off and doing it at a later date when she's got a bit more, um, as I've said before, the feet of MPs over the fire, and then they will— I still think, at least at this point— they'll fall in line. Now, a few other things then to discuss, and I'll try and go through this in a sequence. This was the individual numbers and how it stacked up last night with the vote. So this has been chopped up into essentially 3 different sections. You can basically eradicate the bottom one. That was the previous support for May's deal. After meaningful vote 1 and 2 failed. As you can see, a considerable margin of which she did fail, but an improvement nonetheless from 1 to 2. Now, the options that were discussed and voted upon last night, there were 4 that would— could be grouped, if you like, as a soft option, and then you've got 2 which are a referendum or an emergency break in that sense. And as you can see here from the ayes even though the Nos have it on every occasion, uh, the closest being the customs union in terms of the how close the vote was to then becoming a majority. The actual largest Ayes was to that of a confirmatory public vote, i.e., this idea then of kind of like the people's vote, that this isn't going back and doing a renewed kind of question like we had in 2016 This is voting upon the final deal. Does the public accept that? And so, yeah, this then is the current state of play. And as you can see, long story short, there is no outright majority here. Um, uh, you know, it's such a divisive thing with such then fractured different opinions. There's no one clear direction. What happened last night then was this. Theresa May came out and she's obviously trying now to leverage the situation in her favor to get people to back her deal. Now, Theresa May, let's not forget, has already said she was always gonna step down, so her stepping down is not a new thing. What then the more Eurosceptic Conservative members in particular have been requesting is a definitive date, and they want her gone sooner rather than later. And last night Theresa May kind of bowed to that pressure, but as far as I'm aware she did not give a specific date. So really this isn't that new overall, but it kind of just puts more pressure on those Eurosceptic MPs to say, "Look, I'm giving you what you want here, you've got to support my deal." The other thing then that happened though was despite that commitment, there's a big problem because this lady here, Arlene Foster, He's obviously the head of the DUP, and the DUP confirmed that it will not back the withdrawal deal as it stands at the moment. Now, that's problematic because obviously there's a minority government. It's only a working Conservative-led government by the fact that they have 10 seats, um, that support from the DUP. Now, what this leads on to then is, well, Jacob Rees-Mogg. What has he been saying? Because he is an influential member of the European Research Group which carries great sway of the backbench of the Conservative Party and could tip the balance then for meaningful vote 3 to go in favor of the government. Now, this was a source comment that's come out, out of The Times journalist Sam Coates, who's been absolutely excellent during this Brexit saga. If you do not follow Sam Coates from The Times on Twitter, and you do use Twitter to follow Brexit news, you are absolutely missing a beat at the moment. You need to follow this guy. Now, he reported that the ERG source suggested 40 lawmakers have switched to back PM May's deal. 40 though are still undecided. Uh, separately, Jacob Rees-Mogg initially said he would back the PM's deal if the DUP abstain, but later commented he would support the DUP if it continues to oppose the deal. So So, uh, Mogg has kind of warmed up, if you like, but not overtly committed in total to the deal yet. But the point here I want to point out is there's 40 lawmakers, according to sources, that say they may have switched back to May's deal. We are getting then ever closer to basically the greater of two evils and her deal being accepted, in my mind. Now, the other chap here, of course, You guessed it, he's back. Whenever there's blood in the water, the sharks come circling, and Boris Johnson is back in the mix once again. Boris Johnson— this is an open editorial of where he's been talking in The Telegraph, which he has a regular weekly opinion piece he puts out on a Sunday. And now he's saying, actually, I'm gonna back Theresa May. And let me just give you a little flavor for what BoJo is saying. He's saying, "I've done this on behalf of the 17.4 million people who voted for Brexit. I feel very, very sorry." That looks strangely familiar to Donald Trump strategy there— repetition of these words. I'll move on. "I feel very, very sorry, and though it fills me with pain, I'm going to have to support this thing." Sometimes you just have to make a judgment. I've got to get this thing over the line. I think this is absolutely, uh, spectacularly played well by Boris Johnson. For one, he's absolutely taking a page 101 out of the Trump textbook to resonate with the public en masse, where you could argue that even in the beginning the public as a whole, despite how close the vote was, did vote to leave the EU. There is a growing sense of frustration, and it being emotive means that when you start to make this type of quite confrontational comments in this respect, you get a lot of support. And so the way he's talking, I think, is very telling for what his agenda is. And the beauty, I think, thinking of this this morning on my way into work, if I was Boris Johnson, is I now support May's deal. Me being a Eurosceptic and throwing my weight behind it gets me a little bit of public support that, you know what, at the fear of not delivering what you the public want, I'm gonna do what's necessary to support a bad deal but deliver Brexit for you. Theresa May then steps down, which then means BoJo can run for Prime Minister, probably against Michael Gove again. And then at that point, even if it all goes badly, Boris Johnson's always got the risk-free trade of saying, "It was never my deal, it was Theresa May's deal." So, "I gave you what you wanted, it was Theresa May who delivered you such a bad deal." In my mind, that's a win-win scenario for Boris Johnson. So yeah, I mean, I'm not criticising the guy. I think he's a highly intelligent guy, but like with any politician, he definitely is thinking several steps down the line for his own personal political agenda, and I think he's playing his hand very well at this point. I also think Michael Gove is playing his hand pretty well in a different tactic by just kind of sticking by the PM's side onside and staying quiet and letting everyone else self-implode, and then he's the next logical person. Gives a very powerful speech in Parliament a few weeks ago, gets people onside. He's also another contender at that point. Final Brexit stuff. What happens next? The EU leaders have offered— remember, and I know you guys know this, but just to refresh your memory— there's two dates: a delay until the 22nd of May If MPs approve her deal at the third time of asking— remember, although she requested the 30th of June, that's been played down by Europe, and now the agreed date is the 22nd of May, so a month earlier basically. The other date is a shorter delay until the 12th of April, which we now know because of the statutory instrument passed in Parliament which pushes March 29th to April 12th, is now done last night. is only possible if the UK agrees to hold European elections on the 23rd of May. Mrs. May has said she does not wish the UK to take part in those elections. That would be highly detrimental to the existing formation of the government's pledge to deliver Brexit. Let's not forget as well, you have UK local elections happening, I think, on the 2nd of May, the beginning of May. Can you fancy going back to your local constituents in areas where you voted to leave and you've got to explain this situation. Hence the reason why I do think there's still quite a compelling case here that her deal does still go over the line in the end. The other growing expectation that I have if her deal doesn't get accepted is basically this one. If I scroll down and— this: the only way forward is a general election to create a new House of Commons that will hopefully be able to break the deadlock. Now, this is, this is one of the ways of which I think that this could viably go, and I think the possibility of this may be growing, is that if you remain in this political impasse, then what could happen is if by having a new general election you reshape the composition of Parliament, and then does it tip it in favor of these lackluster non-majorities on the soft options, then go over the line, whether that's a customs union, whether it's more Labour-led alternatives, or whether then you have enough appetite with opposition with other parties like Lib Dems, the Independent Party, to push forward a confirmatory public vote. And then the whole thing puts at jeopardy, of course, the whole Brexit thing happening in the first place. So, you know, who's to, who's to say that could not happen? Final things to show you here. I thought this was a very simplistic graphic to understand this process much easier. So this is what we had last night. If we start from the top of the decision tree, MPs can choose an option. Basically, they failed. Now, that's not to say that they are coming back for another round on Monday. Again, I do think on Monday, at least at this point, we will have a very similar outcome because unless we have this round 2 or 3 of these alternative votes closer to the April 12th deadline, I think most MPs won't budge from their existing positions. So can MPs choose an option? A resounding no. So then we go down to here, the next kind of column. Possible meaningful vote of Theresa May. We don't know yet if that's gonna happen. We might find out today whether it will happen tomorrow. If that passes, well then, we have the fairly straightforward process of legislation to implement the deal. Europe have committed to giving us a number of weeks to execute that plan, and then we have a Brexit deal, and we exit on the 22nd of May and move into transition. Orderly Brexit. If her meaningful vote fails, it will fail. And if we get to April 12th and we remain at that point with no plausible way forward, we crash out with a no deal. So a no deal risk does still exist. We could cancel Brexit, of course, uh, revoke Article 50. Unlikely. Therefore, we go into the talk of a further extension, but to have a further extension, you then need to take part in the European election, and that needs to be based on the premise for Europe to give the nod for that to go ahead of— if I just scroll this down here at the bottom— a renegotiation, a second referendum, or a general election. So that's kind of where we're at at moment is the second half of that, that chart. What are Europe saying? Well, this is— if you're gonna follow again the latest insight on Twitter, if you don't follow this lady, she is the main person from the European side who's absolutely got the ear of Tusk, of Juncker. She breaks all of the latest thinking on the European side. That's Katja Adler. The BBC European editor, and she's been tweeting this morning about latest insights. The EU opinion divided this morning. Those who fear creeping inevitability of a no deal, others are more upbeat. The renegotiated Brexit deal is the last option standing. So again, we kind of come back to the exact same point. You either take a deal that maybe is not the best deal, or you you have a very long extension. What do you want at this point? And it kind of remains the same message. So yeah, that's it. Hopefully that wraps up the latest Brexit headlines. As I say, I think there's quite a few things going on, obviously, but hopefully that gives you some insight and opinion of where we are at the moment. Just looking at the currency markets, we have seen cable come under a little bit of pressure as I've been talking here, more recently. But what I would suggest, if you look at the top left-hand corner, EURUSD has also broken the bottom end of the range that really supported price action from yesterday afternoon and evening. So if you look at it, you've got a technical break of the euro. Dollar then is up. Dollar index is up about 0.3%. I don't think that this is particularly sterling weakness here. I think possibly more dollar strength based on partly the euro break of that level. So yeah, not a great deal to say really on the Brexit side other than what I've discussed in terms of a meaningful move to markets. The other thing from a news story point of view, just covering off some of the stories, you do have this— I'm getting a bit quite frankly sick and tired of everyone talking about bond yields and throwing out graphics about, um, the last time US stocks faltered we had a move down, equity valuations dropped by an average of 8% every time since the post-World War era. I mean, everything for me has to be taken in context, and I think you do absolutely need to be aware that media agencies, Bloomberg included, they want people, they want traffic. And so talking sensationalist about these things is absolutely, you know, talking their book in that extent. And so a lot of people are saying that this bond yield move, the 10-year Treasury yield fell to its lowest since Dec 2017, comes after the inversion of the 3-month 10-year curve. Obviously then global yields start to follow suit, so Japan drops to its lowest since 2016 and so on. This reignites then people's concern about kind of future growth potential of the world economy, recession risk, and that then fits nicely to curve fit a story of about equity weakness. Yeah, I don't know about that. I think that certainly is what's happening to a certain extent, but I don't think it's quite as clear-cut as that. Equities this morning, if anything, are flatlining. Um, US index futures in terms of the NASDAQ and S&P, you can see here finding a bit of resistance initially at the European entrance at the pivot level. The DAX already above that and has already filled the gap of the futures gap down that was seen this morning. So I don't think people are overtly concerned here. And let's not forget, the yields movement has been happening for some time. This isn't fantastically new or shocking in that development, but obviously it needs monitoring because if the herd start to believe the narrative, well, then this type of thing does become self-fulfilling to a certain extent. On the global growth concern side, obviously oil, that does have an impact from a demand point of view. And obviously I can see here we did see quite a large fall on the back of the inventory data yesterday. I still think that a lot of this play here in oil for the moment is just finding some pretty strong resistance here on the long-term levels, on the 50% fib and the psychological 60 handle. You know, we've come so far in such a short period of time. On the balance, on the supply and demand side, I think we've got kind of fair pricing for the moment. So I think we're just going to go into a period— I think if anything, I would say looking at this daily continuation chart, I think you've got a 5788-60 handle consolidation area here. And that, I think, would be unsurprising unless there's some kind of supply shock at that point of prices to just kind of stay within that range until the next meaningful twist, if you like, from a global macro point of view. Other things to make you aware of, there's obviously the US-China trade talks. So if you remember, uh, Trade Secretary Lighthizer and Treasury Secretary, um, Steven Mnuchin are heading to Beijing to continue their trade talks. This then follows their counterparties coming to Washington next week, and seemingly still some progression being made. Reuters exclusive saying that China has made unprecedented proposals in talks with the US on a range of issues, including forced technology transfer, and the two sides work to overcome remaining obstacles to get a deal done to end the protracted war, according to US officials. So, um, to mitigate almost the focus on the yield curve, um, is one of the biggest risks to markets, which is the trade war. And at the moment that remains for now, obviously subject to change, positive. This was the final thing. Um, Fed's George spoke overnight. US economy faces notable risks and the central bank can wait and see approach in monetary policy. Uh, interestingly, obviously Mester— or excuse me, George, uh, is a hawk, but saying that over the medium term, I see the biggest risk coming from slower growth abroad, particularly China, the euro area, United Kingdom. Actually, US economic fundamentals are still sound. So unsurprising, I think, and kind of just cements the idea of the policy change that we had from the Fed on Wednesday. All right, quick look at the calendar. Let me hand you over to Sam and I'll conclude my part of the brief. So this morning you've got the various German state CPIs coming out. Just to update you, you've already had Saxony, Saxony CPI month, month 0.5%, uh, that's a higher number than previous of 0.3%, year on year 1.4%. So keep an eye out, you'll get the kind of other regional states of Germany drip fed in ahead of the national pan-German figure at 1 PM. Otherwise going through, there's a cluster of European-based data at 10 o'clock. For any new traders, although this does look quite exciting by the, the names used for this data, like economic sentiment, business climate. These data points, very rarely do they move the market. So just to be clear with that, um, going into the afternoon, um, US GDP, uh, again, this is final reading, so really it's not that important, to be honest. People are much more focused on things going forward. Um, we're way ahead now in terms of the, the timings, uh, so fairly redundant data now at this point. You've then got the weekly jobless, kind of similar drill, not a particular focus. Um, but speakers, there are quite a number. I mean, that shot there is your speaker slate for today. So rather than me go through every single thing, all I'm going to say is in terms of your preparation and strategy formation for the day, do not disregard the fact that there are a number of ECB and Fed speakers, the latter of which a number of are voting members of the FOMC. Although we're pretty clear of the status quo, interesting to see whether they feel the need or not to realign, realign market expectations. All right, that is it from me. Let me hand you over to, uh, to Sam, he can talk you through. Otherwise, uh, I wish you a good day and I'll see you in the chat room. Thanks very much.

Thank you, Ant. Uh, yeah, we'll start with, um, with equities today. I'm sure reading the, uh, your, your Twitter this morning or the Newswires, you'd have seen the, the golden cross is back in back in town. Let me just clear up a chart here to, to go through it. So while it happened in, in the Dow Jones, uh, a couple of days ago— it's gonna be one second to bring it in— where the smaller moving average, the 50 in this case, closing above the, the 200 hasn't happened since 2016, which actually we might have a little scroll back, didn't end too well. Um, but yeah, should be coming in the next sort of couple of days. If I just zoom in there, you can see here on the S&P, the, the 50 here, the red line, the, the green one being the, the 200, um, looking like it should be, be coming into play to signal that bullish signal, um, which maybe might give the stocks a little bit of a push as we come into— by the time it comes in, last sort of couple of days of the quarter and to begin quarter 2. Um, going back to the death cross, I remember Saif Ali tweeting this when he just started his, uh, his Twitter following. And, uh, since then, well, or after that, you can see we did have a pretty decent sell-off when once that was triggered down to the December lows. So one to keep an eye on. Obviously, the more people talking about it, this is probably the sort of the most famous longer-term moving average cross that people are going to be looking at. So just something to be aware when that comes to play, and once that's confirmed, that, that signal on the, on the daily close would be a bullish one. Having a look at the Dow Jones when that did happen, you can see this was triggered a few days ago, and, and really since then we have actually started to come back down. And the NASDAQ, you know, while not necessarily used as much, you can see similar to the S&P, and it does look like it's it's gonna, gonna come into fruition soon. Uh, on a lower time frame, it's going to move those moving averages off. You can see the S&P yesterday got back down towards that 2790. Um, just put this back on. Still a great level to, to have marked up, not too far away from the S1 and, and the lows that we had back on the 25th. So as a zone goes for the S&P, could get pretty bad if we were to get below that. You can see a bit of potential sort of free space for it to run down through. Line in the sand, probably worth having on just above the pivot here. You've got 2814 on the futures, uh, almost the, the high of yesterday evening from that breakdown where we had support early morning yesterday. So if we were to get above that, then I wouldn't be too surprised to see a further push through and towards the R1. But the way this market has been going, just be careful of that sort of mid-afternoon sell-off, and then you are usually getting a bit of buying into the back end of the, the session. But quarter end coming into play now, so I wouldn't be expecting too much in, in the way of, with, uh, sort of clear directional bias, um, until maybe we, we start again next Tuesday for, for the quarter. Having a look at other markets, the euro this morning's had another leg down, and, and that's, uh, just found a bit of support at the S1, that previous low of the day acting as a resistance now as well. Uh, in terms of where it could go, uh, I mean, if it was to get through the S1, the, the low that we had, um, from the 7th of the year, probably not too, you know, far away. Whether we could get that down there today or not, I I'd be, be unsure. Um, in this market, you can see last, uh, 2 sessions including today, the pivot has acted as a really strong level of resistance. So for any real push higher, you know, while the, the sort of the, the longs off S1 haven't been the, the worst trade as well, again today and yesterday, it might be worth just sort of only really getting involved should these lows of the days go and this trend line, and then you start maybe seeing a bit of a relief there. Euro pound yesterday, um, you can see if I just put this onto a daily chart, came back down sort of pre-voting time and, and sort of found a bit of support on previous levels. Uh, I know myself and Charlie, who are in this short, took a tiny bit of the trade off around here, um, still leaving a bit on in the hope that something positive could have happened yesterday, but of course we were way too wishful in, in thinking that Parliament could come to some sort of decision on anything. Anyway, worth keeping a look on this Euro pound. If that level and that, that low was to, to go over the coming days, you can see it probably does open up again, and, and you're looking back down to 2017 May time. Uh, the pound intraday, as I mentioned just during the briefing, having a bit of a leg lower I say every day, in, in terms of looking for this from a more technical point of view, it can be pretty tricky. We are sort of still within this, this range, and I think it's— you almost have to be there at the right time for, for this market. We said in the briefing yesterday, the R1, yesterday's high, was a good range play, as was the S1, both finding support and resistance. But at the times they were coming in, you wouldn't really have wanted to to get involved in that. So, you know, while the, the S2 today— if I just move this rectangle down, let me just remove that— you can see it looks like it will find some sort of resistance from the— well, maybe a bit lower, to be honest. I'm not a massive fan of that S2. I think if we were to come back into the pivot area while it has offered some support resistance, again, you probably don't really want to be involved in this too much unless there was any developments that come out. I think best move to, to the side for now. Aussie dollar, I know quite a few people were looking at this, uh, trend line from the, the lows of the month coming in yesterday. Actually, I think it was going back before that. Let me just bring that 2019 low, uh, around there, uh, which offered some decent, uh, support last night. We then pushed higher and the pivot and previous resistance from yesterday holding, holding firm. So any further push in the Aussie above here would be interesting. Trend line coming into play not too far away from, from where we're, we're trading now. One to keep an eye on for, for that pair. I was on the way into work this morning and, and saw a Twitter headline saying, um, BOJ cut rates. I think, what, that's a bit surprising. And then of course it wasn't Bank of Japan, it was Bank of Jamaica. So unsurprising to see that this market has remained pretty calm. And I saw Anthony Cheung turning around there thinking, what have I missed this? Um, but no, Bank of Japan— uh, Bank of Jamaica it was. Uh, but looking at the, the Japanese yen, R1 looks quite interesting. We have again in this market broken a trend line, and usually when that happens, you know, it wouldn't be too surprising to see a continuation if we were to come a bit lower. Um, so R1 is, is an interesting point. Even if that doesn't work, I do like the idea of a long bias in, in the yen today unless stocks were ready to push on. Oil as well, yesterday had a decent push to the downside. I was a bit surprised to see on the, the DOE that we did push higher. However, false break, came back lower, and despite a brief rally yesterday off a strong level of support that we had on the 25th, the market is continue to sort of drift lower today. That trend line though from the post-DOE higher around 4 PM UK time, you can see how well that has been respected, uh, on, on oil. So unless we really were to get above that, I wouldn't really be too interested in buying. I know S1 does look technically pretty decent, but maybe that just confirmed push on a breakout above this trend line is not the worst idea for, for oil. Having a quick look over just at the, the general picture, how we're trading European equities, just pushing above that pivot, filled the gap if you like. Euro stocks just lagging a tiny bit behind, but just having a quick look here at, uh, at the DAX. Oh, just made that accidentally bigger screen. You can see just finding resistance, or there was a resistance point from yesterday evening. Of course, the DAX time's now open uh, later on, but was also the low from the 21st. So quite significant resistance here in the DAX. If we were to get through that, I'd imagine there'd be a bit of a drag through, uh, on, uh, American equities as well. So definitely worth keeping an eye on that. Gold, just to wrap up here, you can see just drifting lower, similar to the euro in, in the pivot, holding his firm resistance, uh, that low of the day offering a bit of support. It. Uh, we had that, that push lower, if you guys remember, UK time 1:55, or around that sort of 15-minute period. No real reason distributed to that, a bit of a technical push breakout of the, the range. And you can see how that was support, offered good resistance, uh, later on. I know a few people were looking at the, the long on that, uh, up towards that level, which wasn't a bad trade. However, broken that trend line, uh, and It does seem that maybe short term for gold now, it does look like a not a bad place to, uh, well, higher up doesn't look a bad place to get short. Maybe looking around 1315, I think still looks quite a good area, if not the pivot with these highs as well. 1318.5 look quite nice. Any questions, as usual, please do let me know. Uh, just to finish up on, on that calendar as well, just for the morning, just to reiterate a couple of those facts. We've got relatively quiet morning on the, on the calendar front, uh, speakers aplenty, and then some US numbers out in the, in the afternoon, which should make it a better second half of the day. I hope you all have a great trading day, and I'll catch you all later on.