Geopolitical Review: EU, Russia, Ukraine, China, US, & UK

Okay, it is Friday the 12th of November. I hope you are doing well. And to kick things off, going to go straight to the charts and have a look how things closed on Wall Street last night, which was flat in the case of the S&P, minor loss in the Dow, down 0.44%, and the NASDAQ was actually outperforming a, a small amount by 0.5%, but that came after some severe underperformance that was seen in the prior day session. Overall equity kind of trade was fairly tame. Obviously the bond market was shut, equities were open because it was US Veterans Day yesterday, so that did impede some of the price action and volumes accordingly. From a currency perspective, you can see here in the top left-hand corner both EURUSD and cable just coming off their lower bound levels that were printed during the Asia-Pac session as the dollar index just fades a little bit after seeing an aggressive run-up on those inflation figures we've seen globally getting red hot throughout the week. And so the dollar's just backed off a little bit from that run-up to pare some of that move. So the Dixie this morning is pretty flat overall, but just again coming off what was a higher move that was seen initially overnight in Asia. Elsewhere, gold, oil just a little bit lower this morning. And that generally is the theme. So fairly quiet all in all. Before I get into some of the news, Don't forget, we've got the latest kind of weekly wrap. Myself and the head of trading and co-founder of Amplify, Piers Curran, are going to be chatting later on this morning, and the episode will then go out accordingly. The aim there is it's your one-stop shop for listening in on a really informal and hopefully slightly funny and engaging chat about markets for the week so that you're always on top of things. So if you're a student, if you're if there's one thing you're going to do that I can help in terms of improving your commercial knowledge is watch the Monday morning briefing that goes out on YouTube and then Amplify Me Hub, and then listen to the end of week podcast, and you're pretty much good to go then as far as getting prepped for interviews and things like that. And obviously if you're a trader, they're going to be equally, hopefully, as useful from that perspective. But let's get straight into some news, and it's a definite geopolitical spin to the news that I'm going to cover. There's a little bit of Russia-Ukraine Ukraine, which involves a little bit of the EU and gas. And we're still coming on the back of that gas crisis, of course. And we're talking about China, Xi Jinping, being the indefinite rule being signed off, very much as expected, but that's gone through. But we're also going to talk about US-China relations. And then you've got a little bit of Brexit thrown in just for good measure as well. So starting off with the headline, I mean, talk about trying to generate as sensational headline as possible. Bloomberg, uh, you know, doing a very good job of that this morning. US warning Europe that Russia may plan Ukraine invasion. And a lot of this has come as there's been some military, particularly naval, US military movement in the Black Sea at the moment, which Russia of course are particularly unhappy about. It must— this actual headline comment comes where actually the US themselves haven't really officially briefed the EU and haven't actually shared any information yet. So it's definitely one of those, I think, political posturing, trying to then just, you know, keep your military involved, some fairly assertive commentary, just so you're managing then dialogue between these, these heads of state and so forth at the moment. Meanwhile, while all of this is going on, Angela Merkel and Vladimir Putin actually did speak yesterday. And in a much more direct fashion. Germany, as I've said before, have always been a little bit more passive than, say, the UK and particularly the US when it comes to Russia, and the rationale there being that they're highly dependent on energy and specifically gas flows coming from Russia. And so the, the dialogue there is much more open in that sense, and they spoke yesterday about Ukraine and Belarus Um, the Russian leader criticized Ukraine's alleged use of combat drones in violation of previous agreement. Now, if you remember, there was the annexation of Crimea, the issues of Eastern Ukraine through 2013-14, peace agreement I think was 2015 that happened there. And what's been happening is increased military personnel from both sides on the Russian-Ukraine borders at the moment, which is causing some of this latest friction, and with addition then of the American military activity that's been seen in the Black Sea. The news comes, of course, amid uncertainty over increased Russian gas supplies to Europe. Remember, Putin came in as the kind of white knight when we were in the midst of that energy crisis several weeks ago and said, you know what, yeah, we'll pump some more gas, we'll help you out. But obviously working in a slightly mafia-esque style, you know, you're in the pocket then of Russia if you do indeed pull on that lever and request more gas, and that order's fulfilled. And so hence the reason why at the moment Putin's pushing for European regulators to approve the operation of the Nord Stream 2 gas pipeline, which basically runs from Russia to Germany. And hence the reason why Merkel is involved at the moment. It's a project the US and Ukraine have opposed because of proposed security risks. So this is where this all comes, and this is why there's a Merkel-Putin dialogue, but there's a US-Ukraine kind of element to the mix as well at the moment. So yeah, for sure, there's been a little bit of movement in the Russian ruble, perhaps keeping our gas prices as well for the time being. As far as a broader market, concern. Equities, T-notes, FX outside of the ruble, it's not really a thing yet, but definitely worth monitoring. Otherwise, just going to jump over to a couple of things in China first before I get to this headline. So China's reached a new historical starting point. Essentially, the top leaders in China's Communist Party have paved the way for Xi Jinping to rule indefinitely by signing the first historical resolution in about 40 years. This is all very much as expected. The context here is that there's been a plenum happening throughout the week, Monday through Thursday. So this is kind of the conclusion of those gatherings. It's one of 7 major meetings in China's 5-year political cycle and regarded as the most important, the meetings that have happened. It's one of the last chances for kind of horse trading before the Party Congress which the communiqué said would be held in the second half of next year. And hence the reason why these kind of political maneuvers have been happening. But all of that pretty much as expected. So what does this then lead on to? Well, a couple of things. Biden, the US president, yesterday signed legislation to prevent companies like Huawei and ZTE Corp, who are deemed security threats, from receiving new equipment licenses from the US regulators. Is called the Secure Equipment Act. It's the latest effort from the US government to crack down on Chinese telecom and tech companies. And it's quite interesting, obviously this happens whilst Biden and Xi are kind of all smiles and trying to get on with each other, because the two of them are expected to address leaders today of the Pacific Rim gatherings amid heightened regional trade and geopolitical tensions that have obviously come to the forefront at the moment over Taiwan and various other things as well. So it's just interesting how on the sidelines of these guys obviously trying to thrash out things like the ongoing trade dialogue and so forth, that they still continue to kind of pull the trigger with kind of escalation, but in a much more moderate sense to keep the pressure on so that they have a strongest position as they come to negotiate over some of these other top-level topics. So yeah, it's super interesting at the moment. How much of this is kind of relevant for markets right now in terms of immediate market impact? It's not really. It's much more of a kind of keeping on track of the maneuvers that are happening, as I said, that will help then leverage and give potential influence to negotiating power for bigger, more important topics. And that's, that's pretty much it. The final thing is Brexit. There's been a whole kind of buildup from last weekend, slightly, and kind of came off the boil on Tuesday after the— I think it was the French said that they weren't going to do certain acts around some of the legislation that was going to kick in. And now it's down to the fact that the chief negotiator of the UK Frost has said to his EU counterpart essentially that the UK will renew its efforts to get an agreement on the Northern Ireland Protocol and enter discussions during the next few weeks. Frost will also assure Brussels that the UK Prime Minister does not wish to trigger Article 16. So I think I said this on Monday's briefing where the tone of what Frost was saying was the absolute opposite of what he's just said now. And that's what caused that Irish minister to come out and talk about, well, if you do that, the Brexit entire deal is off. And that's when it peaked, kind of around midweek. And so, as I said on Monday, as, as kind of provocative as the comments sound, it's just Brexit. We've been here for, what, 5 years now? This is just what happens. It's just the art of the negotiation again. As they say, you know, these very— what seem quite meaningful words which they flip on, and it's all to do with just posturing, and that's it. So how are they going to solve the Northern Ireland Protocol? To be quite honest, they haven't done it in 5 years, they're not going to do it anytime soon. So this kind of tit-for-tat, pull the trigger on Article 16 or not, It's going to be a sticking point for a considerable period of time still, I would imagine. And thus, as far as pound is concerned, the pound's really not reacting to this a great deal for those aforementioned reasons. In terms of today, what have we got? It's particularly quiet session really from this morning. You've got European industrial production at 10 AM, but I don't think that's going to really move the needle a great deal on any European assets intraday. You've got no 130s out of the US, but you do have JOLTS job openings, and you've got the November University of Michigan preliminary number, which is expected to show consumer expectations of inflation in the coming year having climbed up to around the 13-year high. Obviously, just in keeping with the narrative of that 6.2% blockbuster, 31-year high US CPI we had earlier in the week on, on Wednesday. As far as speakers are concerned, ECB's Lane speaks a bit later, Fed's Williams just after 5 PM London time, neither of which we're expecting too much direct on anything on the economy or monetary policy at this point in time. And then that is it. So again, don't forget to check out Spotify, Google, Apple Podcasts, just search for Amplify Me Market Maker. Really appreciate if you check out the latest episode, go back and have a look at some of the previous ones. Um, some of them are not just about the news. There's some other things from an educational learning point of view about markets, investing, trading, stuff like that that you might find particularly interesting. And, and yeah, hopefully you'll subscribe to the, the podcast as well. All right, that's it from me for today. I'll obviously be active on Twitter if there's any meaningful news that does break. But thanks for listening. Wish you a fantastic weekend. Take care.