Can The US & China Reach A Trade Deal Today?

Okay, very good morning, Friday the 11th of October. Hope you are well. Quite a bit to talk about this morning, and really two big stories, that being the ongoing trade wars. You go into day two of talks in Washington where Trump is now going to get involved, and also updates on Brexit after the biggest 7 biggest rally in 7 months that we had in cable yesterday on an apparent breakthrough in conversations between the Irish and the UK prime minister. Then quick look as well in the oil market. The price of oil at the moment currently trading up in WTI about $1 on the session. So we'll have a look at some of the reasons behind that because there has been an incident in the Red Sea overnight which has helped reignite then some tensions within that region. That in addition as well to obviously some of the trade war potential optimism of a breakthrough helping just lift some of that short-term demand kind of expectation. Before I get into the headlines though and hand you over to Sam to look at the charts in more detail from a technical perspective, the setup this morning is still one, as I said, of optimism. US equity index futures still holding on following the moves that was seen yesterday on Wall Street. The Dow closed up about 150 points last night, and that means then European index futures have followed suit. DAX center left already up, just having a little move above its R1, which had acted as a near-term point of resistance initially. The very early move seen this morning when Europe came in. Oil up, as I said, we just had another little push here. Keep an eye on that R1 on the daily pivots as I'm delivering this briefing. It's just having a push on that at the moment, $55 sitting just about 30 cents above current price. Um, elsewhere, T-notes remain suppressed after the move that was seen yesterday, uh, on that technical breach of the support point from the prior day's price action, uh, and also with some of the equity movement that we had seen, uh, and the renewed optimism. However, at the moment, gold is actually having a bit of upward movement testing its pivot level at the moment. We're just touching session highs. So despite the, the setup in the other indices, gold kind of bucking the trend almost and having a bit of a push for the moment. Just having a look then, going straight into the news. Let's not hang about, let's get straight into the main story, and that is in regards to President Donald Trump finished the first day, or his, his team of advisors led by Obviously the Trade Secretary and the Treasury Secretary have said the first day of high-level trade negotiations between the US and China, apparently as Trump sees it, went very well. The biggest thing here then is that Trump is going to meet with the top Chinese negotiator later on today, but that actually is not going to happen until 7:45 PM London time, so Eastern Time In the States, on the East Coast, that's going to be at 2:45 in the afternoon, just before, of course, going in towards the close on Wall Street. So either way you look at it, I think even though the market obviously has responded, that there's an idea that US and China both appear to be willing to work towards some kind of partial deal. And whether that gets confirmed or whether the whole thing breaks down, which is still a very high likelihood given how previous meetings have gone, it's going to be a pretty lively close on Wall Street. So for any of those who are looking at US indices, perhaps then it could be a bit of a late finish to the week because I do think that that final hour or so of trade on Wall Street, if we get to the point that there isn't a, uh, a breakdown or a source comment that comes out before It could be well worth sticking around for that or just turning on your, your terminals when you get home later on tonight to see how it plays out. Now, one of the important things here is that the US and China, although they've said they're both willing to work towards a partial deal, it's also reported that they're said to leave the more controversial issues for later discussions, which, talking to Sam this morning, we both think that that's quite an interesting point because it almost feels like if you go back just a week ago, we had that string of weak economic data, we had a breakdown in trade war, the market was almost in a state of borderline panic and we were seeing quite sizable downward movement in equities. And obviously that doesn't just have repercussion for the US, has repercussion for the global market and the Chinese economy as well. And perception about the pessimism over global growth in the future. So both countries lose in this situation. So it's just quite interesting to see. It almost feels like they're both committed to trying to avoid this kind of worst-case scenario unfolding. So it's almost, it's almost like a very— well, I don't know the best word to describe it. It's almost like an artificial sense that they're getting towards the deal without actually having real substance. So it's very material— or materialistic on the surface in that respect. But as long as they can manage markets, I think we remain in this kind of trade war cycle of having these moments of— remember that trade war graphic I've shared with you before? We're almost in that period of real positivity. It almost feels then that the inevitable downfall comes when we hit this impasse. And although it might feel feel like we feel quite confident at the conclusion of talks, and equities could well rally to see out the week. We'll probably get to middle of next week and then the whole thing will start going, going a bit wrong again. Now, why is all this happening and why is there a pressure point to get a deal done? Well, time-wise, without progress, the US is due to increase its tariffs on about $250 billion of Chinese imports to 30% from 25% on the 15th of October. Now, the 15th of October, of course, is next Tuesday. Now, this was the one that they delayed back in September, which was originally October 1st, to buy another 2 weeks to have these talks, which are happening today and yesterday. So if that doesn't happen, obviously these tariffs kick in. Also, more duties on $160 billion of Chinese imports are due to kick in on December So all of this has come at a point where, you know, when the deals get brokered, well, deals get brokered right when the 11th hour is coming, and certainly that October 15th deadline is looming. Now, Chinese officials, what have they said? They've said they're open to reaching a partial deal as well with the US that may include the purchasing of large amounts of agricultural goods. This has always been the kind of carrot of which China has gone with in order to appease the US officials, saying that they'll buy things like corn, wheat, soy, and these types of products. But they added that success though was contingent on Trump halting further tariffs. So the thing you're looking out for today, if we are to see a meaningful extension of positivity for equities to push on and for it to pressure T-notes back down again, and for crude also to be supported by the idea of eliminating any near-term concerns of it impeding global growth, what you need is China not only to commit to further purchases of agricultural goods, but you need Trump to say, actually, that October 15th, it's not going to happen. We're gonna temporarily again push back that date and freeze these tariffs. I think if anything, that's the most likely. I do not think that Trump will say we're not going to do tariffs going forward. He would want to keep that option on the table. He'd want to appease his domestic base by showing that he's not conceding too much, and also it acts as still leverage for further negotiations. So if anything, I just think that October 15th date, if there is a positive outcome in these talks, that just gets pushed out, and maybe that gets pushed pushed out for another few weeks. That doesn't mean it's, it's gone away, it just means that the worst case, the market breathes a sigh of relief in the short term. So lots to come and more noise, I'm sure, via, as we've seen in the past 24 hours, from various journalists, publications. So be fairly active to listening out on Squawk Box for any updates, but the talks officially between Trump and the head lead Chinese negotiator, 7:45 PM, 2:45 Eastern. Moving over, let's have— let's check out Brexit. What's going on here following the biggest jump in cable? We're trading in the futures this morning flat, so we've not added any more to yesterday's big pop in prices where we moved from really a sub-123, so 122 handle, all the way up to a 125 handle, which which is where we're at at the moment. Now, this all came because constructive talks between the UK and the Irish Prime Minister. And the reason for the such positive response is this isn't like any other EU official. This is coming from the Irish Prime Minister. And that's what's very important and created such a meaningful response yesterday. So because Northern Ireland and the Republic of Ireland That's the key sticking point to whether or not a deal in fact can be achieved by the Prime Minister. And in this case, a somewhat conciliatory tone between both officials looking to find a breakthrough was, was met very well by the market yesterday. Now, timing-wise, what have you got to look out for today? Well, the UK Brexit Minister Stephen Barclay is actually meeting with Michel Barnier the head of the EU negotiating table. That's said to be underway right now, and that's going to be taking place from 8 AM London time all the way through to 9:30 London time. So mark it down on your calendars if you haven't already done so. I would actually start, you know, keeping a very vigilant eye on Twitter and an ear on the squawk box from around 9 o'clock well, really anytime between now and 9:30, just because the allotted time is due to end at 9:30 when you'd be expecting some kind of comment coming out of that meeting. Of course, it could come much earlier. So the key now here, if you think about it, the pound rallied sharply yesterday. We're in this holding pattern, if you like, waiting for what does Barnier say, because it's all well and good Ireland saying something, But what does Barnier, representative of the whole of the EU, have to say? Now, the EU have been critical of the UK's plan about giving the Northern Irish Assembly a veto over the deal. As far as the EU are concerned, allowing a veto for Northern Irish politicians would undermine the point of a long-term guarantee against a hard border going up on the frontier between the two countries. Where we're at at the moment is how do they interpret this latest idea? Obviously, it's been a meaningful progression given Ireland for the first time, which have been quite anti-dealing with Boris, seemingly have made some progress. The one thing that Bloomberg highlights this morning, and I kind of agree, is that just because we've got to this point, don't forget Theresa May made Europe happy a couple of times and managed to broker a deal. And then what happened? She brought it back to Parliament, and what was it, 3 times Parliament said it's not good enough. One thing I would say, if Boris is willing to kind of meet a middle ground with the EU in order to get a compromise to bring a deal back to Parliament, then actually we go back full circle. If I was a Brexiteer within the Conservative Party, I'd say, 'What are you doing, Boris?' I was like, 'Why are you trying to broker deals here with Europe? This is not what you said we were going to do, and this is not what I'm signing up for, and so therefore I'm not voting through your deal.' And the last thing Boris Johnson wants is to bring a deal to Parliament of which is not going to go through. Yeah, so I still believe that Obviously what Barnier says is important. If he ratifies this as a significant breakthrough where they feel that they can in fact get the EU summit, which is happening on the 17th and 18th this time next week, they can ratify a deal which would avert the necessity for Boris to adhere to the Ben Bill on the 19th to pen a letter to Brussels about an extension. Yes, the pound can rally meaningfully today. When I say meaningfully, another 1, 2, 3 points not off the cards. The reality of that happening though, I think, is low. And so therefore, when Europe come out, I actually think this doesn't really change the endgame. I still think that a deal being brokered is a limited probability, and I still think that in the end this almost further helps Boris in that narrative where he's done his best, he tried to get a deal, Europe now, the ball's in their court. If Europe reject this, I think Boris is in a really great place now for a general election. He can say, I tried to deliver the will of the people, I tried to broker a deal, Europe wouldn't accept it. So therefore it just gives further substance to his idea that, look, we're gonna have to have a no deal. Who blocks no deal? Parliament blocks it. So who's blocking Boris? UK Parliament and Europe. That's a very strong message to send to the UK public if you're of that mentality, that really now it is the people not against Parliament, it's the people against Parliament and the EU. All the more reason why you would gobble up that Brexit support and you would get, I feel, a pretty strong majority in Parliament. And that's a different ballgame then when negotiating with Europe beyond the kind of symbolic deadline of the end of this month. So that's an overall assessment. I'm not going to talk any more than that. I'm sure Sam will jump on in a second and have a little bit more advice about how to deal with it from a, from an intraday point of view. Um, quick look then. This is the, the final kind of thing. So there's trade war, there's Brexit, and then the big one is there's an oil tanker that caught fire after a Red Sea explosion, uh, that's happened. So the National Iranian Oil Company tanker has caught fire after an explosion in the Red Sea near the Saudi Arabian port of Jeddah, according to the Islamic Republic News Agency, uh, the IRNA. Now, one thing we have seen, this has helped elevate prices already this morning. So from a fundamental perspective, you've had that. I can see that there's been a technical break of the high point of price activity that we had as well from late into the US hours, kind of the beginning commencement of the overnight Asia-Pacific session. We've got a bit of resistance just being hit at the R1 in the futures at the moment. Now, where exactly is this? Well, let's just have a look. These are the main ports that you can see here, and if I start to zoom this graphic out very slowly, you'll start to get a sense of geographically where we are looking. So Jeddah is situated west of Mecca and south of Medina, and this is right in the middle of the Red Sea. The Red Sea obviously being a key maritime transportation route of that in the passage of crude oil going from, um, some obviously from the Persian Gulf coming through the Gulf of Aden through the Red Sea and to then pass through the Straits of, um, well, the Suez Canal, I should say, in order to service the Mediterranean. So significant in a sense of it reignites the tension. The reports are that this is a terrorist act, but obviously Saudi Arabia has been facing multiple issues. This now on, obviously the left side of the country having been subject to large disruptions in the south from the drone strike that we saw, um, just a few weeks ago. That was in the central and southern part of the country. And that was then going back about 2 months when you had the US drone being taken down by reported Iranian, um, forces, the Revolutionary Guard, and the capturing of cargo ships in the Straits of Hormuz. So at the moment It almost feels like Saudi Arabia is under assault from many different angles here and certainly under pressure in that respect in terms of potential supply shocks. And all that means then is the price of crude needs to, well, needs to factor in that new risk premium. Not only that though, not only have you got an increased level of potential supply shocks with tension in the region, now you've got the potential of a short-term partial deal being brokered between the US and China. So if anything, if you had this equilibrium between supply and demand short-term sentiment dynamics, you're getting now supply potentially shock coming offline but demand picking up on a trade war. All of this is net positive for crude oil from a fundamental perspective. The other thing you've had finally with crude oil which helps further support that narrative, you had Barkindo, the Secretary General come out yesterday and said that OPEC may consider deeper oil cuts if demand concerns linger. Again, this was looking to address that, you know, if you take yourself out of the last 2 days when we're in now this positive state of outlook for the short term, in the broader context, people are becoming more pessimistic about the future. I mean, actually, if you X out what's been happening the last 2 days, that doesn't detract from the point that the global economy is slowing. Economic data across nearly every nation in the world is reflecting that slowdown. And so in the, in the medium term, oil price or oil demand is decreasing. Hence the reason why OPEC members feel like they need to continue to provide this verbal intervention to give an underlying support to prices at this point. All right, that's it really for the main headlines. A quick look at the calendar, um, what have we got? Pretty quiet for this morning in terms of overall scheduled data. Obviously keep an ear out for any further updates. As I said, the exiting of the meeting underway right now between the UK Brexit Secretary and the EU lead negotiator Barclay and Barnier is due to end at 9:30 in about an hour's time. You've also got the IEA monthly report for any crude traders at 9:00 AM, and then that's pretty much it for the morning. You do, however, though, have speaker in the form of ECB President Mario Draghi. Draghi is going to be speaking at 10:30 this morning. Quite interesting articles in circulation over the last week about how there's a huge divide underway in the Governing Council at the moment, uh, in respect to a lot of people were not happy about Draghi's decision to push forward with quantitative easing to restart at the beginning of November. The interesting point for this, not so much for the intraday but for the next— for the medium term, is obviously Draghi finishes his 8-year term at the end of the month. So Christine Lagarde has her work cut out because she's coming into a very fractious environment at the moment, which has led to a number of obviously officials resigning, probably the most senior of which was Sabine Lautenschlager a few weeks ago. So keep an eye out for Draghi, interested to see if, if he does get a chance to address journalist questions. Certainly I'd be asking him about the division at the moment, how he's going to manage that going forward in the ECB. De Guindos also speaking as well at 11:30. Going into the afternoon, what have we got? Um, US import-export prices, US University of Michigan sentiment, uh, as well as coming out— I think this is the preliminary reading, so keep an eye out for that. And you've got CAD jobs data and the Baker Hughes rig count later. Uh, speaker-wise, you do have a couple of Fed speakers as well to see off the week. You got Kashkari, uh, Fed's Rosengren, and Fed's Kaplan all speaking. Uh, only one of those is a voter, Rosengren. We know his stance on policy. He's one of the most hawkish members. I'd expect that rhetoric to continue, for him to talk down really the necessity to cut rates at the end of this month. But remember, that is absolutely against what markets are positioned for, which is heavily in favor that they'll cut again in October and potentially again in December. You're likely to hear that rhetoric from Kashkari and Kaplan, both of which are of a dovish nature. Okay, that's it from me. I'm going to wish you a good session ahead. Lots more to come. It should be an exciting finish to the week in the intraday environment at least. I wish you a great weekend, and if I don't speak to you before, I'll see you again on Monday. Thanks very much.

Thanks, Anthony. Yeah, I mean, from my point of view, I think this week has been fantastic for trading opportunity-wise. I think it's just been Been really, really good. Some decent trades, especially from the guys in Stage 2, the program. I'm really impressed with how you guys have been getting on. We'll have a quick look over. I think best to start off with the pound and then stocks from yesterday. And obviously a decent push to the upside, still flirting around the higher point from that, from the move from yesterday's low to the top was over 2% push. Of course, you know, that could all come crashing down the way Brexit headlines have come through, but it looks pretty good at the moment. And we're just, you know, coming up to the high point of today, which of course is yesterday's high as well. So worth just keeping a watch on that, especially as the volume's starting to pick up again. In, in terms of really important levels, I'm just going to put this on to that daily chart because you can see if I just take these pivots off, just where we're trading now is, uh, has been certainly going back to the beginning middle part of summer a really key level before we had that big push down in the back end of July. Got choppy around September time, but 125, pretty important level to the upside. The next real key resistance I would say you are looking around, uh, 1 26, 27 on the futures. And it just looks so painful, doesn't it, looking down at that 120, just thinking what an opportunity that would have been to be, uh, even, you know, after it had come down from that 126 to, to be where it is now. It's still obviously a decent push to the upside. Okay, we'll get over that one day. Uh, having a look then, I guess, just at potential places for retracements, or maybe when this move to the upside is over for a bit. You just have a look, we can start to get any of these kind of trend lines on from those lows, relatively well respected. You can see here we are of course getting squeezed to the upside, so in theory, uh, waiting for a break above yesterday's high or below this trend line, uh, depending on, uh, which way you want to look at risk-reward and all of those kind of, kind of things. A break below that trend. Obviously we had some nice resistance, uh, yesterday afternoon before we had a final push into, uh, sort of 6 o'clock, uh, and then till, uh, well, for an hour after that as well. So 124.27, uh, is as well to have marked up. And I think headline-wise would, would have to, to be relatively negative, uh, for us to get really below the pivot today. Uh, the dollar doesn't look like it wants to strengthen at all, uh, at the moment, um, against the, the pound anyway. Uh, so yeah, that's how I'd be looking at it. Can we get a break above for an extra long? Maybe a break of the trend to the downside for a quick short, but 1.2427, a key level, uh, to, to have marked up. I know, uh, a few people, we've been looking at the euro dollar with these, the trend line that broke initially yesterday, snapped back and then kind of ended up pretty much bang on. Let me just bring that into picture. You can see here we sort of broke through it and, and retested it. And we also now, if we just put this onto a 60-minute, you can see like the pound, but those lows, uh, just coming in potential, potentially to, to be tested. Just going to remove that longer-term trend line, but you can really see that the big push that we had above retest. I guess the fact that we are now back above it is, is, is pretty key. I'll be looking really at the whole pivot area, retest of the, the lows of the day. This trend line is a very important level of support. Breaks of that, we've seen this a few times when the, the euro does feel like perhaps it's getting, getting away, only to snap back once a trendline does break. I'm just having a look at these lows. There's a lot of support really around that pivot yesterday afternoon's low. I would say that's a, that's a big sort of line in the sand zone for the end of the week if we can confirm. And of course that longer-term trendline comes in the mix there. So will be interesting to see, can we break, uh, confirm that the break above this whole area? Where do we finish the week? 1.1050 on the futures. Above bullish, below bearish. Just from a technical point of view is how I would be looking at that. Obviously stocks, uh, are up, uh, nice end to the day yesterday after, um, the overnight Asian session night before where we came down, uh, quite a, quite a lot, down to almost, yeah, 2880 on the futures and we're now 2953. You can see see the importance of this, uh, level really where we're trading, and call it a zone as well, from 54.55 to 60, 29.60, which of course, if we make this chart a bit smaller on the 60-minute but just drag to the left, you can see how many times we've had good price action around this area. Line in the sand, where do we close the week? Again, that will be pretty key, uh, as well for, for stocks. Worth probably having a look to see if there's any trend lines from those highs as well, which look like they may well come in depending on the time we get there around that area as well. So 29.55 to 60, a key level of resistance to go through. Much like the pound as well, you've got where we've been dragging ourselves higher. Worth having a little look on these trends from those lows, and that's just a guide. You're happy to stay long for now as long as that holds. It's probably the way I would be looking at it. Gold, yesterday it made its way down almost to that 1492 level, the low on the futures coming in at 95. I know it made it on the spot, but of course slightly different level. So still be keeping a close watch on that. So we've gone through the lines in the sand for the pound, the euro, S&P, and certainly to the downside, that 1492 for gold remains the key key point. A bit of a push higher this morning, helped by a bit of dollar weakness as well. Let's have a quick look over at pretty much where we're trading now. Is a pretty key zone pivot high from yesterday afternoon, uh, and then the morning, uh, early afternoon low as well. And also you've got the lows as well from the 9th. So pretty key level of interest, literally where we're trading now. Above that, you'd be looking to to sort of target 14,914, 10 below that, the high of the day that we broke through around 1,500 as well. So gold has been a pretty good, good market, I would have to say, over the last few trading days. And technically we are looking good across the board. I think it would take a comment for pound to really come down, obviously keeping an eye on that high. Euro 1.1050, can we close above above. 2960 for S&P, 1492 for, for gold as well. Any questions, please do let us know. Like Anthony said, I hope you all have a good, good weekend, and if I don't speak to you before then, I'll catch you all on Monday.