Explosion in Gulf of Oman sees Oil Spike & Votes for new PM starts

Hi guys, good morning. 7:52 here in London, Thursday the 13th of June. As you can see on my right-hand side, there's a comment that's come through this morning of an incident in the Gulf of Oman, explosions affecting two oil tankers. We'll have a quick look over at at the chart as things are moving this morning. We've already had a 3.2% move higher in the price of WTI and Brent. Decent push from $51.50 all the way above $53. We are seeing a bit of that retracing now just as it comes back below the R1. So worth keeping a close eye on the, the price of oil here. A bit of risk off in the market as well. We are starting to see a bit of a reversal, so keeping a, an eye an ear close to the ground on any developments here. Uh, if we go back to that story, and we'll have a quick look over oil again, um, following yesterday's DOE, which saw price tumble again. But if we have a quick look why this is important, uh, it comes a month after an attack on 4 oil tankers off the UAE in the Gulf of Oman, the US blaming, uh, Iran for that attack. and then again today saying there had been two explosions, uh, where these oil tankers had sent distress signals. Uh, Pakistan, uh, sources also reported the incident, uh, and this was, this was reported— if we go back to the chart— just after 7 o'clock. So just as I was getting in the market, we were trading, uh, around 51.50, not too much going on. And then it started to get traction. You had it from Bloomberg on the TV is where I heard it. And then over the, the headlines as well on the newswires, we saw a decent push higher here, uh, for crude oil. How has that affected the other markets this morning? I just dragged that down where you can see already this morning gold was pushing, uh, slightly higher, but that has continued from 7 o'clock as well, uh, up to near the high of the day. So worth keeping an eye on just the whole zone as a whole here for, for gold. You can see yesterday's highs, today highs marking up there as we are starting to see a bit of risk-on in the market. Equities unsure really what to do. The higher oil price can of course help equities push higher, but being risk— a risk in the market, we can see a slight risk-off. And equities actually since 7 o'clock have been pretty flat. We had a brief push higher, helped by oil price early to come back lower. As we are seeing gold push on. And T-notes, uh, relatively unmoved by this, but certainly one to keep an eye on for, for any, uh, oil traders as we go through the, the beginning of the session as well. Elsewhere, things to, to be aware of. If we go back to what happened overnight— and not overnight, yesterday, uh, with the, the Brexit Brexit headlines. You can see that the headline here was what we talked about in the briefing yesterday, how it could be quite important going forward and almost throw an obstacle in the way of anyone favoring a no deal or a harder Brexit, if you like. And, and the MPs rejected this Labour cross-party plan for a no deal vote. This came at 309 to 298, so quite tight. We were talking about how Effectively, if all Labour voted, you would just need 3 Conservatives to swing the vote, as the DUP obviously helped with their majority. But that wasn't to be the case. If we have a quick look over at the pound on the, on the charts, you can see, uh, if I just put this back onto a 5-minute, it won't take you long to work out where this candle was on this deal not getting passed. So the idea behind the, the deal was that it would have given the opponents of a no-deal Brexit the chance to table legalization to afford the UK leaving without any agreement on the 31st of October deadline. So say that was going to be the case and we were going to leave no deal, Labour would have basically been able to attempt to stop it. That is now not the case, and you can see from where that was released, uh, yesterday just before 5 o'clock, we had a decent push lower um, down to the lows of 127.36 in the futures, starting at 127.87. So 50-tick move, I think that's fair enough. I think it, uh, we would have seen a much bigger reaction to the upside if it had been the opposite, if Labour had got that through. We'd have seen a decent push on. However, not to be the case in the pound since then. Well, it's, if anything, just drifted a bit lower. I did say to uh, the trainees, um, in, in the first stage of our program yesterday. How I was surprised it didn't really move a bit more. You are starting to see that just drift down, uh, a bit this morning. Of course, today we, we do as well have the, um, the first round of the, um, the conservative ballot, uh, if you like. So the— that all starts to kick off today. And, and expecting the results sometime after 1 o'clock. So trading the pound today, there's no 9:30 data, so you're probably still looking for a follow-through from the, uh, the Labour decision or the Labour cross-party vote yesterday, which was net negative for the pound. So probably still looking for a short as we build up into, uh, this, this ballot. Any comments that obviously come out, any leaks perhaps, could move things around. But in, in all truth, I think most likelihood is that Boris is going to have a healthy lead here. It's going to look like he's nailed on, and I would argue that there wouldn't really be a trading opportunity for that. When would there be? Well, if some of the other candidates had a healthier, healthier number of votes, and it might indicate a Brexit decision elsewhere come the 31st of October. So that all begins today. The last 10, or the final 10 rivals facing the first ballot of those Tory MPs. Conservatives will begin the process to choose the new leader and the next Prime Minister this morning. Voting, as we said, will take place in a secret ballot in the Commons, and expected result just after 1 o'clock this afternoon. So afternoon. Well, that will be the, the main focus, you know, in the early part of that. Any of the 10 candidates who fails to secure 17 votes will be eliminated. Now, if we have a quick look over, uh, at this pie chart here, you can see the percentage of— and this is from yesterday— uh, of where, um, the Conservative MPs are looking to— who they are looking to back. Boris Johnson with 80. So he's safely through, as is Gove, Hunt, and Dominic Raab, and potentially, uh, Javid as well. But you can see the others, the, the remaining 5, they're all below the 17. Now there hasn't been, uh, 100% of people that have put their, uh, their backing behind someone. I think of this tweet it's about 70-80%. I'll confirm that in a moment. But you can see anyone that doesn't get 17 votes would be dismissed. So that's worth thinking about later. I think if Rory Stewart— he's the main one. If you're, if you're looking for the pound to push higher here, Rory Stewart is one that you want to get through. You want him to, to get that 17. That might be a bit of a shock to the market. Okay, maybe there is some room for this softer Brexit, but after the vote we saw yesterday, I would be incredibly surprised the market would be pretty surprised as well. So I don't really see, uh, that happening. But of course, that's what moves markets the most, the unexpected. So one to keep an eye out come 1 o'clock. So any of those 10 candidates who don't get the 17 votes, they'll be gone, see you later, and we move on and do the same again, um, and well, next week actually. And then the 2 most popular MPs moving to a runoff of Tory party members. The winner of the contest And of course, this, you know, when it's the final two, it goes to the 100 and whatever thousand, uh, Conservative members, and they would vote. Uh, if we're going by what is on here, looking like it's going to be Boris Johnson, and then between Hunt and Gove. I think that is what I would expect as well. Of course, things can change. It might be after the first round, those who put their name into, you know, Leadsom or Stewart or Hancock they may, of course, well, they of course will have to then change their votes to someone else. And we might start getting a couple of stories about someone, you know, putting all their votes behind, you know, one of the— not, well, not the front-runner Boris Johnson, but the others. And we could start to see things develop from there. But today, I think the only opportunity is going to be if maybe Dominic Raab gets a lot more than expected, who's favoring of the, the no deal, perhaps more than Boris Johnson at the moment after his comments yesterday. Or— and that would obviously lead to the pound going lower— or if Rory Stewart gets through, and I think that we'll see pound going higher. I'd say those are the opportunities today, uh, anyway, ahead of this week's vote. Of course, next week it continues, uh, and then the 22nd of June, uh, will be the, the vote where the majority, uh, what the Conservative members will effectively vote on the final two, and then expected to be announced the winner, uh, and the next Prime Minister on the 22nd of July. Doesn't leave them much time to get things through, of course, with your, your late August recess and everything that's going on in, in September, October with Europe and the, the new European Commissioner being elected. Well, it doesn't leave much time before the 31st of August. So who's looking like they're going to get through? Gov, Javid, Raab, Hunt, and of course Boris, uh, as well. Those ones that are just struggling a bit— Hancock, Stewart, Leadsom, Harper, and McVey— they're hoping to get through and then build momentum, if you like, to into the next vote. I really, really wouldn't be surprised if it's just those 5, if it's just those 5, and potentially Hancock because he's on 15 as well. Um, Time will tell. Let's have a quick look over the bookies' odds on, uh, on your odds checker. If we just say use Ladbrokes— for some reason Sky Bet have taken it off— Ladbrokes have got Boris Johnson 1/2, so that's the, the shortest he's been certainly for a while. Hunt and Leadsom, unbelievable. I don't really understand why Leadsom's third favorite according to, to, um, well, to Ladbrokes at 10/1. So if we're looking here Goves at 12s, Hunt 5. Yeah, I mean, I guess it makes sense. Ledson, I'd be surprised looking at certainly this, uh, from, from Guido Faulks, who I definitely would recommend following. Doesn't look like they're going to get much, uh, way through, so probably not the best opportunity there to, uh, to be backing, uh, her. Um, reaction of the market, if we have a quick look over the pound, let's just go through those scenarios I was mentioning. Rory Stewart through, I think we get back up to at least the pivot low of yesterday and maybe beyond. Dominic Raab, perhaps if he was to, you know, take a big chunk out of that 80 of Boris, which would, you know, when you've got the public backing already, uh, that'd be quite unusual. I would say you get down to 127, uh, S2, 126.90, uh, relatively quickly. But for now, price contained and going back, moving off the back of a Labour decision, Labour vote yesterday, which obviously provided a bit of an opportunity. The bigger one would have been the other way, uh, round. Um, equities yesterday, let's have a quick look over the charts. You can see just over the last few minutes we have been drifting higher. We put this on a 60-minute. We have been drifting lower, we have been drifting lower. And there's a good, good little chart here from, from Bloomberg as I'll just bring this in. Um, global stocks catching breath after 7-day rally. It's a bit of that. I wouldn't really say necessarily there's a massive game-changing reason that stocks are now drifting lower. Uh, the S&P, great little, uh, win streak for, for this month so far. Nice push higher, 2,900, bit of resistance, failure to push, push on. We're just drifting down a bit. But you know, if we take where we're trading now, well, it's exactly where price closed last Friday. Nothing to, to worry about at the moment. Yesterday was weighed down by energy, tech, and financial stocks. We saw Treasuries push on a bit, gold as well, certainly into the beginning of the afternoon, although it did come a bit lower last night before pushing on today. So relatively flat, to be honest, yesterday. I wouldn't say there was much in the way of a big move for stocks. Um, obviously with, with oil pushing down, uh, yesterday to the back of the session, that did weigh on things certainly overnight. But if we have a quick look over oil just to bring us up to date again, we're still nicely above where we were this morning following the, the Gulf of Oman, uh, fire, or the reports of that, the tankers that are, are on fire. Um, interestingly, this was reported uh, yesterday, and obviously, and then, uh, again released on the wires this morning. Trump says he has no deadline for imposing further tariffs on China. He's got the market in his back pocket. He will get that China deal through when he wants. I firmly, firmly believe that. And for me, this is just saying it's not right now. Uh, G20, back end of the month, could be We'll come on to a couple of tweets by the Global Times, uh, um, Xi— well, Hu Xijin. I don't want to say his name wrong. Hu Xijin, a couple of comments he said about that, about the deal even getting done at G20. That's an opportunity. It looks like the last couple of days, if the last couple of days are anything to go by, uh, things will just be drifting lower into that. But listen, I honestly do think come the, the back end of the year, we will have a deal in place and it's going to be fabulous, um, as, uh, as, uh, or tremendous, as Trump would say. But yeah, here's the headline: Trump says he has no deadline for imposing, um, the tariffs on China. He was saying this to reporters, I have no deadline, my deadline is what's up here, and then he pointed to his head in typical Trump fashion. He told reporters yesterday We'll figure out, uh, the deadline. Those comments to, to be aware of, um, from, from Hu Xijin. As far as I know, China's state media will publish more heavyweight commentaries criticizing the US and demonstrating China's determination. It's rare to see scathing attacks against the US in state media. This shows Beijing is preparing for China-US ties getting further worsening. So that's something just to think about today. Look, you've got T-notes pushing on, gold are higher. Stocks are mixed. Maybe this morning preferring the opportunity to look to go short today. Last couple of days, Trump hasn't been too positive. He hasn't been too positive. So if anything, favoring that to drift lower today. But I do think there'll be a good run at all-time highs again soon. Um, another tweet from yesterday, more recent one from Hu Xijin: From information I have access to, there is no sign that China is relaxing its countermeasures against the US trade war. Chinese basically have no trust in the mild signals the US side sent occasionally. Will there be a breakthrough at G20? I dare not to be optimistic at this moment. It's worth having, uh, you know, a look at these, these tweets and following, uh, Hu Xijin, who, uh, only really a couple of— I'd say a month ago wasn't, uh, as important, but his tweets are talked about, they're squawked about. It's definitely someone to follow if you don't already. And I'm on the Amplify Twitter account and I'm going to follow them right now, um, to, to make sure that we do. Got to pre— uh, practice what you preach, of course. Going back to that, that Trump headline, of course Trump had threatened to raise, uh, tariffs on Chinese goods if Xi, uh, doesn't meet him at the G20. So that would be obviously a big mover that effectively I would say isn't really priced in. We've had a decent recovery of late, so if they were not to get something done at G20, you would come down lower. But of course, if he was to implement them, Trump would still say they have a fabulous relationship, that he received an amazing letter, and they're going to get the best deal done ever. In typical Trump fashion, if it's bad, let's make it good. Um, yesterday as well, Wilbur Ross, uh, the, the Commerce Secretary, played down the chance of a meeting as well. Um, and of course, as yesterday's inflation number was, was worse, um, also stepping up the the criticism of the Fed, urging the central bank to reconsider the hike that we had back in December. Quick look at that data from yesterday. If I just bring this into picture here, you can see opportunity-wise it wasn't amazing. You had a slight miss on the core year-on-year, 0.1, uh, and the headline 0.1 as well. That's not enough really. It's not enough for a massive reaction either way, and We have a quick look at the euro dollar. Uh, at the time we spiked higher on that miss, uh, only to come back down. You can see we drifted lower into the back end of the session. Uh, and longer term, let's have a quick look here at the euro. It has been messy, hasn't it? You know, we've certainly been confusing people as of late. When's going to be a good opportunity to, to get short this market and, uh, see a reversal? I mean, I probably want a bit more, probably want a bit more here. This trend line, break of that, uh, would perhaps later on be, uh, the— this low area as well that we've had a double bottom on. Then we might start to see a further push lower. Why do I look at that trend line? Well, if we have a look, uh, certainly on the recent, uh, trend of these markets, any decent recovery is broken through, uh, by a trend line. So that's something I would be favoring for EUR/USD? When can we get that key that maybe we are going back down? Time will tell. Going through, uh, 8 o'clock, having a quick look over European stocks. Choppy as usual. Higher, lower, back to where we were. Looks pretty much like the S&P does here. Line in the sand, pivot, high of the morning, uh, that could be your cue to, to get long if we can confirm a break above that pivot. To the downside, it's choppy, but you have a trend line from the, the lows of the day. We're or lows of the, uh, sort of 6 AM candle, uh, break of that might lead to a further rundown to the downside, uh, as well. So that— yet that— those, uh, inflation numbers, not great. Also overnight we had some data out of Australia. We'll bring the, the chart into picture just before we, we go through that. Looking at that, we spiked higher to come lower. Um, yeah, so it was perceived to be worse. Um, the employment— if we just bring this in, the employment change was positive, the participation rate was up, but the unemployment rate, which is what people were talking about here, was worse, up 0.1% to 5.2%. So the Aussie is under a bit of pressure. I'd favor still looking to go short. Can we get a retracement? Can we get to yesterday's low? That would be somewhere I'd be focusing on, uh, as well as a potential opportunity. So the pound, I prefer the short. The Euro, can we break that trend line? The, the Pound, I don't think I said the Pound is there. The short Euro and Aussie short as well. Stocks, I think possibly looking for a bit more risk off in the market is T-notes and gold. Can we get longs? Um, it's quite, uh, interesting looking at headlines and reaction. If you were to read this, Australia's unemployment rate holds steady in May. You wouldn't have said that the Aussie dollar was near the low of the day following, uh, this release. It stayed at 5.2% but was worse than expectations. Uh, you're having, uh, comments coming out, and, uh, certainly from— there was an economist at Capital Economics saying the surge in employment in May is unlikely to be sustained. The softness in the economic activity limits employment growth, uh, given the downturn in domestic activity and the softness in business surveys. We think the unemployment rate is more likely to rise from here than to fall. Growth in the Australian economy fell to its weakest rate in almost a decade in the first 3 months of the year. The country has been grappling with a housing downturn and the slowing Chinese economy. Uh, it looks like the next decision is going to be a rate cut. There it was, you know, take us back 6 weeks ago, we were expecting the next one to be a rate cut as well. 2 in a row, we've got one but then looked like they were going to hold. This data set here, uh, it now looks like we are going to get another cut. Uh, China-US situation, if anything, you can say is just stalling. That's not going to help. Looking for the Aussie short today, maybe more medium term as well, is not a bad decision, uh, to go for. Let's have a quick look over the, the calendar for today just to, to wrap things up. Uh, have I got this up? Yes, I have. Relatively quiet morning. Any hearsay conservative ballot will be worth keeping an eye on as the pound is coming under a bit more pressure this morning. But data-wise, scheduled, it's limited. Not expecting too much. You've got a bit of industrial production at 10 AM if you're in a position for euro de-risking, but it's from April and not expecting too much from that. Into the afternoon, import and export prices at half one with the weekly initial, uh, well, the initial jobless claims and jobless claims 4-week average non-movers unless wildly out of line. So not expecting data to move markets today. I'll be looking for trade comments, G20. I'll be looking at— there we go, DAX just coming down to test that trend line here, just getting a bit jumpy around that little false break. Worth keeping an eye on where this 5-minute candle pushes and how that could bring stocks lower. Back to the, the calendars. I just got a bit excited there. Um, it's relatively limited speakers, you can see as well, nothing of note there as well. Any questions, as usual, please do, uh, do let me know. It's going to be a day dictated by sentiment rather than data, scheduled data. Conservative results looking about 1 PM Can oil sustain its push higher? Will stocks drift lower, uh, as safe havens are pushing higher at the moment? Hope you'll have a, a great trading day and rest of the week.