Gilead Drug Flops In First Trial

Okay, good morning guys, hope you're doing well. It's Friday 24th of April. Um, a couple things then before I begin. Got the charts up in front of me and a relatively quiet open, all things considered. There are a couple of headlines to get you up to speed. I'm sure you might have seen some headlines about Gilead Sciences yesterday, or Gilead Sciences I should say, and how equities got bumps off their initial highs. Otherwise, UK retail sales has just come out this morning, just a little bit of weight there in the British pound, but not that surprising given that these are reflective of the government shutdown as these were March-related figures. Still a little bit of an impasse with the European officials whether they could coordinate effectively to get a timely pandemic response in play. So the euro touch heavy with the DXY just testing up around yesterday's highs at the moment. Dollar index trading up about 2 tenths. Oil markets pretty quiet, obviously somewhat stabilization as we were commenting yesterday from some of the roller coaster movement that was seen at the beginning of last week. Treasury markets up, bunds probably outperforming, up at R1 already this morning. And then in the equity space A little bit of a mixed close on Wall Street last night and generally lower overnight in Asia Pacific session, but nothing too drastic. Uh, the DAX currently down about 200, but has already come up to around that opening slight gap down that we had here on this left chart in the futures space. So just keeping an eye on that. Any break above, be looking for the gap fill up towards where we were, um, we trading yesterday at the end of the session about 10,382. So about 50 points above where we are at the moment. Um, but yeah, let's get into a couple of things, um, and a few points I want to make. First of all, I think a good session that we did with some of the new traders that have been doing some of the online training with us this week has been about, you know, kind of routine morning preparation. You know, when you wake up in the morning, you're going through the news, you're trying to create or formulate this kind of fundamental view then you're doing your technical analysis across the charts and so on. Um, you know, from the fundamental perspective, obviously that's where I hopefully can help. And, you know, one of the main conclusions here is this morning is a good case in point because, you know, even though my routine at the moment, generally, uh, I tend to get on the screens just shortly after about 6 AM. Uh, so I'm pretty much already have an idea about my view for the day, uh, in about 20 minutes or so once I've kind of scanned through various different things. The point being there is that, you know, this morning I'm pretty neutral. You know, if you were to ask me, do you think equities are going to rally today, you're going to fall today, you know, what do you think is going to happen generally, I don't really have a view, to be honest. And, you know, the point is that that's an okay conclusion to have. You know, Piers, our head of trading, was in discussion about this before. It's like, often, most days, you probably will have a pretty strong opinion on things, but You know, there is that third option, and sometimes then that can feed into the end result that perhaps then there isn't a trade potential or possibility at that moment in time. All I can say from my experience, you know, having always operated in the intraday environment, is that at some point in time an opportunity will arise. Just because at 6 o'clock in the morning in London there's nothing that clear and apparent, that does not mean that by the time we get to the repeat of that in North America, so midday in London, that that might have changed. You know, price— prices move, economic data comes out in the UK and the eurozone, there could be some unexpected events that unfold. And so there's always opportunity, um, in that respect. So that's where I guess the discipline, the patience, and these types of principles come into play. But yeah, I mean, overall that's pretty much how I feel about, uh, this morning. I think I'd rather like we, we often say, is kind of let the market show its hand a little bit and then look to take action accordingly. But at this point, from the fundamentals, which I'll give you of course a run-through and a recap, not too much really going on to really give a high conviction on VUE. Going through the headlines then, and before I do, um, obviously this is, uh, you're watching probably most of you on the YouTube channel, so don't forget to like and subscribe. We'd really appreciate it. We've done some really, I hope, useful videos for you, particularly around the oil market at the beginning of the week. And, you know, it's been amazing to see the community grow in such a short period of time. So we'd love to continue that. And obviously any questions that you have on these videos, feel free to leave comments. Eddie, who is one of my colleagues, who often drops a video every now and again where he goes into some more specific points. Anthony Cheung. He just shot a video yesterday about quantitative easing, liquidity, and fallen angels, which is kind of combining a little bit of what's been going on this week and some of the terminology perhaps that you might be unfamiliar with. And I'm going to release that on Saturday morning, so make sure you subscribe to the channel, put the— hit the bell for notifications, and you'll get alerted as soon as that goes live. But let's have a look at some of the headlines then that are happening this morning. So a couple of, couple of negative developments that generally soured the tone, I would say, on Thursday. We had the US jobless claims, not a surprise in that respect. US total job losses now exceeding 26 million when you kind of accumulate those, those readings we've had over the last 5 weeks. The eurozone PMI data that came out, that was pretty terrible, the lowest in 2 decades. The Gilead antiviral drug Remdesivir flopped in its first trial, this being a randomized clinical trial, though the company disputed the characterization. What happened here, according to the FT, which— where it was released as an exclusive— disappointing results revealed in draft documents published accidentally by the World Health Organization. They have actually come out and they tried to clarify a few points— the company, that is. But the drug on treating COVID-19 had relied on studies that basically so far has not met the robust scientific standards of being randomized and having a control arm. So this again was obviously quite important because this was one of those headlines about a week ago that saw markets rally in the aftermarket session on the back of what looked quite positive, but then we faded that move the following morning because we were saying, well, you know, the data isn't fully conclusive as yet, and more evidence of that being the case. So unfortunately, no kind of massive breakthrough as yet. And at this point in time, as per what we've heard from various governments around the world, unfortunately, it's probably going to be a very long time before we get something more definitive on this front. Um, the other thing we've had this morning, if we go back to the charts just, just quickly, a little bit of a move down in cable, but quite frankly nothing really too shocking. We just got back down to where we were trading on a test of yesterday afternoon London time on the low. We just had UK monthly retail sales volume fall by 5.1% in the month of March, the largest fall since the series began. As many stores obviously ceased trading on the 23rd of March in the UK following the government's guidance on the containment of COVID-19. So yeah, more weakness and more kind of statistically, you know, some of the worst numbers on record, but you know, a lot of that's been priced in at this point in time. Otherwise, the euro is a little heavy, somewhat by part as well. You've got weak retail sales And you have still a little bit of difficulty in European officials coming together and actually being able to agree on the best course of action in a coordinated effort. So you had recently the European Commission floating the idea of a €2 trillion plan for economic recovery. Apparently though, there's still pretty huge differences between what is believed to be the best course of action, namely the likes of Germany, Netherlands having different views to the likes of France, but then also different to Italy and Spain, for example. Merkel has been quite, you know, positive, I guess, in some of the, the comments, saying that coordinated response is what needs to happen, but her opinion hasn't changed on the idea of that joint kind of issuance idea, i.e., euro bonds. At this point in time. So kind of similar to what we had yesterday, a real lack of outcome. And given the dire situation that's unfolding at the moment, I mean, obviously this was the PMI data that came out, um, and the retail sector of course getting hit particularly bad given the, the stringent nature of the lockdown. But, but equally so, the manufacturing PMI also moving sharply lower. So you know, time is of the essence with this type of thing. And this kind of leads in then to generally what's been happening around the world. So yesterday there was a moment of the whole market rallying, this being equities, bonds, everything was moving higher at one point yesterday after a Nikkei report came out that the Bank of Japan may replace its government bond purchase target to allow for unlimited buying essentially. Much of that move has faded, and any kind of weakness that was seen in the Japanese yen— if you're looking at your dollar-yen chart this morning— has pretty much recovered. And so the move hasn't really been sustained. I guess it's the next evolution for them to go to that level. But then we've got to start looking at the ECB, because the ECB have their rate decision next Thursday, so towards the back end of the month. And And 1 in 4 economists expect the crisis bond plan from the ECB to be boosted next week. So it's not an overwhelming expectation, about, I think, 27% in the latest Economist survey by Bloomberg. The timing as well as the size of the top-up is likely to be influenced, of course, by how governments react, how much they're willing to spend, and when they're able to, to get that implemented. Is probably going to have a big, um, a big point into the composition of what the ECB are going to do. Economists predict that the €750 billion emergency plan will be increased by another €500 billion. So you can see here, these are the announced purchases that they plan to make for 2020, and then the expectation here is that they're going to top that up north, then total of €1.5 trillion. This comes as well with the US Federal Reserve obviously already their balance sheet now at a record $6.62 trillion. You know, it's quite mind-blowing at those levels. And here's a table of kind of like the options and timeline as we see it today. Obviously earlier this week the ECB agreed to temporarily accept some junk-rated debt as collateral. That decision of course coming as today There could be a possible credit rating cut to Italy as well to look out for later on this afternoon. So yeah, the meeting could expect to boost emergency bond buying program according to 27% of economists. So I guess it's not a matter of if but when. Does it happen now? Does it happen in the following meeting? The majority of economists foresee additional purchases then announced by September for sure, and then most see emergency bond purchases ending not by really this time next year, and no rate change foreseen through to December 2021. It's the current status as it stands today. Otherwise, elsewhere, oil market— so coming off this subject— pretty, pretty stable for the time being. Again, that kind of fanfare around the the extreme contango situation that prompted these negative prices with the, the lack of storage at Cushing is, it's kind of had its moment, I would say. As I said this time yesterday, just looking at WTI crude here in the June contract, the pivot level, perhaps something to keep an eye on if we do start to track lower again, just given some of those price points that it's reacted to in the last two sessions on the upside. And then yesterday, as a level of support in the late kind of European session, US afternoon, and that pivot coming in just above the $16 handle, $16.11. One thing that I am keeping an eye on is what is the progress of the OPEC situation. We know that the deal that they've struck, this kind of $9.7 plus the reputed multi-million coming from the G20 countries in regards to the US and Canada and so on. How is that performing? We know that that cut's probably going to kick in towards May time. Saudi Aramco have started to scale back production from its maximum capacity of around 12 million, according to latest sources, in preparation of lowering its output to 8.5 million when it gets to May. Kuwait, which is the fourth largest by production in the OPEC nations, in size. They've already started to cut their oil supply, and then according to industry sources, Canada is now close to shutting down a total of 1 million barrels per day of oil production. So these things, obviously, as they start to kick in, are going to help to some degree to provide a bit of a floor to prices as we start to see that pullback. Obviously, still question is out on the kind of demand destruction that this, this COVID situation is going to have and whether this is going to be inevitably enough. But also the other thing that we're seeing that I have been tracking is that US oil and gas rig count fell 76 week on week. So we're now below 500, um, according to one of the data rig providers. So in the last 6 weeks, the domestic count now, just given the pressure that prices were already under before this week even begun, uh, US oil and rig count now is down some 41% over the course of the last couple of weeks. and so production rates undoubtedly will start to decline, uh, as we go forward in time. Um, looking at the calendar then, what have we got? Well, retail sales are already out in the UK. Uh, for Germany, you're going to get the IFO business climate figure. Uh, again, could be quite interesting just given that the nature of that being forward-looking and that being, uh, obviously companies in Germany, uh, and how pessimistic are they just given the, the current situation that's going on at the moment. We are looking for a decline from 86.1 to 80 on the headline, with a range of 70 to 85. And then going to the US afternoon, durable goods— the Michigan number is the final reading, so unlikely to provide too much action on the back of that. So overall, it's a pretty quiet day actually, uh, both for this morning at the open. Um, I don't want to keep this briefing any longer than necessary because I want to really reflect that point that I was saying, that you know, it's okay to really be quite standoffish at this point and just wait for things to unfold a little bit. Obviously going into the weekend, generally speaking, I'd say on the balance what we've had in recent weeks is the market tends to get a little bit apprehensive. Whether that will unfold or not, again, I'd be wanting to see a little bit more of a catalyst, whether that comes from a headline or whether that comes from a technical move in the market, to make really that decision. All right, that is it. No more for me to say, I don't think. So I'm gonna wish you a good session ahead and a great weekend. And remember, subscribe to the channel. Gonna drop that latest video from Eddie on Saturday morning, but otherwise I wish you a good session. Thanks very much, guys.