Global Stocks On Track For Best Quarter In 11 Years

So global stocks are set for their best quarter in 11 years as we come into month end, quarter end, and the half year mark for 2020. Today we also had some positive Chinese PMI data from overnight and some positive comments coming out of Jerome Powell ahead of his testimony that he'll be giving alongside the Treasury Secretary Steven Mnuchin this afternoon. My name is Anthony Cheung, I am the head of market analysis here at Amplify Trading, and this is your look ahead for the markets this morning. Looking straight then into the charts, what is going on? And we have actually a little bit of mild risk-off sentiment just going through the European open despite some of those positive comments I just mentioned about the developments overnight where actually Asian markets did move higher on the back of the Powell and some of the data coming out of China. This irrespective, of course, of the COVID situation and also some comments out of the Commerce Secretary Wilbur Ross on the back of the Chinese legislative law on Hong Kong. But we'll look at that in a second. At the moment then, just having a look at these charts, just to refresh your memory, I've got euro and cable in the top center left, gold top right, and gold in itself then just seeing a bit of a breakout of a short-term trend line that I've had on going back to the price activity from yesterday. And as we've just started to accelerate, taking out the overnight Asia-Pacific high, looking to target now a move up toward the high print that was seen yesterday afternoon in gold futures, which would be around $1,787 spot too. So printing green at the minute on session highs, up just over $5, and just comes after a bit of softening. You can see here in these equity index futures in the center charts the S&P 500 just easing off what had been a kind of a narrowing of price activity, bit of consolidation around the 3052 mark before Europe just stepped into the market. We've just sunk below those Asia-Pac lows now. Oil prices pretty similar as well, and a period of consolidation in a similar pattern. And, you know, just keeping an eye on the price activity here as we come close proximity to those highs that we had towards the back end of last week on Friday before the eventual dip. And we're just sitting around $39.37, so down 32 cents in oil. In the currency markets then, reflective of this is back towards the more, I guess, traditional currency movement we have been more accustomed to seeing throughout, throughout the past few weeks. And that has been whenever we get some slight or moderate risk-off, you typically see the dollar strengthen. And this morning, the Dixie just breaking above the high that was seen in the DXY yesterday, so imparting a bit of downside pressure here in the major pairs. You can see EURUSD momentarily just breaking below the low that was seen yesterday evening London time, so worth keeping an eye on there. You've got the S1 fairly close proximity to the current price activity, and then the low that was seen on Friday would be seen down below as potential targets if that trend continues. And then in cable, quite a nice area of resistance actually in cable in terms of the near-term price activity. You've got that low that was seen on Friday afternoon. It got projected a little bit messy here on the actual break that came yesterday afternoon. But now as it's bounced back up, quite a nice area of resistance that has held the Asia price activity, not only from those previous areas of support, but also the daily pivot in the sterling futures today. And since that point, we've just drifted south, just continuing to add some losses that we've seen Yesterday, obviously, a lot of the Brexit talk coming to the forefront once again, as well as some of the political pressure growing on the UK government when it's dealing with COVID as well at the moment. Looking out for that speech from Boris on infrastructure shouldn't come as much in the way of any surprise as he looks to kind of build his way out of economic uncertainty at the moment. So that's the general flavor of things, of what's going on. So just want to get you up to speed then with some of these headlines in a bit more detail. Starting off with then Jerome Powell, the Fed chair, said that US economy has entered an important new phase sooner than expected. Recent economic data offers some positive signs, but output and employment is far below pre-pandemic levels and economic outlook extraordinarily uncertain. This of course comes before he and Steven Mnuchin speak to the House panel later on today, so this was kind of pre-prepared text. So As far as that Powell speech is concerned, the kind of cat is out the bag. It's already been full statement released on the Federal Reserve website last night. If you wanted to read that in full, I did tweet it at the time of its release on my Twitter account here if you want to grab it. So overall though, that main headline I think caught people by a little bit of surprise, and that did act as a bit of catalyst in the overnight session. The fact that he said that he was quite optimistic really about reaching a new phase sooner than expected in terms of the overall US economy. Um, he reiterated pledge to use full range of tools to support the economy, so that kind of remains. And outlook also depends on relief provided by the government to support the recovery as long as needed. So all of that, pretty much a copy-paste-repeat of what we've heard many times before from the Fed chair. Overnight then, we had the China factory outlook brighter in June as recovery continues. So non-manufacturing gauge picks up to the highest since November 2019. Importantly, new export orders also improve, though still contracting. And if we just look at the chart here, it'll make a little bit more sense on the graphic. So this is looking on the various different colored lines. The white line and the red line are the two kind of headline readings— the manufacturing— this is the official PMI numbers, manufacturing and the service number. And then you've got the new export orders PMI, which is the key one, which is this kind of purple one down here. So it has seen a decent move back to the upside. And obviously this is something I was talking about in the briefing and writing in the macro menu at the weekend about the idea that as the rest of the world is kind of suffering or slowly trying to get back on its feet, but COVID providing some obstacles about the sort speed and pace of the reopening of some of these economies, that's going to be problematic somewhat for their country's ability to import these goods. And so new export orders could be quite a good barometer really for where appetite lies then for, for manufacturing activity, which is obviously a key component in the makeup of the Chinese economy going forward. But it has seen the bounce, albeit we're still below that kind of, uh, expansionary-contractionary 50 level by quite a strong margin. but that was seen as, as a slight positive in the overnight session as well. However, worth bearing in mind that China has now approved the Hong Kong Security Law, and this was expected. Um, just going back to here, this is a, a graphic or a chart of the Hong Kong Hang Seng Index value from previous close. So just looking at the percentage changes on the Hang Seng, and actually what I'm looking at here is the last couple of months of activity through April, May, and June. And stocks plunged on the announcement of the security law. This was going back a couple of weeks now, and that was when we saw that large degree of volatility in the local market that saw renewed protesting in the streets of Hong Kong and so on. But this security law, uh, was most likely to go through. It's one of those catch-22s where now, given then the handover that happened in the late '90s from UK back to mainland China. Yes, this kind of more— or the lack of autonomy now to be seen in Hong Kong has happened probably much quicker than many would have anticipated. And this obviously causes lots of contentious issues about the freedom of speech and, um, the, the rules that will now be imparted in what otherwise has been the kind of gateway into China traditionally. But a lot of this is expected. And so overnight there wasn't too much of a dramatic reaction. That's also being reverberated across global markets. It's not like this is a trigger point now for a renewed sell-off, I would say. However, the things to obviously look out for going forward is that the US Commerce Secretary Ross said overnight that regulations providing preferential treatment to Hong Kong are suspended and further steps to eliminate differential treatment for Hong Kong are being assessed. So further confirmation of what the US had threatened before. But if you remember, this was a phase of trade war, kind of verbal tit-for-tat that was happening when that initial stock market rout happened in Hong Kong a few weeks ago. So I don't think any of this is particularly new information. I guess the point going forward will be then, it— does it lead to more forms of some degree of retaliation on either side of this ongoing trade war, which is going to be key to watch going forward. As I mentioned, um, this is looking at the last, well, 10, 11 years of the MSCI All Country Index. They're trying to look at global equities on a very top-level sense. And actually what we're looking at here, this is looking at quarters. Each bar would represent a quarter of price activity. And obviously we've had that big stock market rout in March when the pandemic took hold. We saw a really big violent move in markets towards the end of March. However, we've had this outperforming recovery, let's say, given the fact that we've seen extraordinary stimulus actions coming out of the government and central banks across the globe. And actually, stocks are set for their best quarter in 11 years after the earlier rout that we had in 2020. Quite, quite phenomenal. We haven't really seen this type of recovery, as you can see from the extremities that we saw during the global financial crisis, where we saw similar kind of downside price movement if you're encapsulating a quarter's worth of activity, followed by extremes then as authorities step in to look to, to counteract and offset them and support the economy going forward. One interesting thing that I did see though was a DataTrek survey, which was basically surveying a bunch of institutional clients and asking them about what their view was for the end target of the S&P 500. I thought this was a bit of a sign of the times really, of what's going on at the moment. And they were asked the question, where do you think the S&P will finish end of the year? And the range of options were from top to bottom that the S&P will be up over 10% from current levels, up 5 to 10, within 5%, -5 to 10%, down more than 10%. And look at that, it's absolutely even pretty much across the board. So if you're asking institutional investors, no one knows where the S&P is going to finish. And a little bit of a sign of the times, I guess, between, um, you know, the two big or three big factors really being COVID, the US election outcome and also what's going on with the trade war. So 3 big, big topics that carry huge risks to markets, and with that then uncertainty about how things are going to play out. And you can see that pretty much even across the board. So, you know, don't feel bad if you are also sitting in a slight indecision situation at the moment. You're definitely not alone. But this is looking at much more long-term, of course, towards the end of the year. Um, so yeah, I mean, that's, that's pretty much all of the news that's come out this morning. On the COVID front, what is the latest that we've had? Um, let me just bring up the, the New York Times situation, and that we're going to act then as a bit of a placeholder for us while we discuss this. So let's have a look. That's Florida. Let's go back to the main United States. This is the current situation in the US. Arizona is closing bars. New Jersey is halting plans for indoor dining as well. That was some of the news that's come out late yesterday. Florida, California, in 7 counties have reclosed bars and restaurants due to some of the localized spikes that they've seen. Nevada governor is also— if said, if statewide trends don't improve, they will reimpose the previous restrictions. That they had in place. Texas COVID-19 cases, their update came out overnight, and actually, if anything, a little bit of an improvement. The, the figure was at +2.9%. That was quite far below the 7-day average of more like 4.2%. And then in the UK, we've seen that localized imposed lockdown on Leicester in the Midlands, one of the first times that government has took the step rather than acting on a more national level but on a more localized level to just lock down that specific area, which you can see the logic behind. When the government is keen, then if the rest of the country remains relatively controlled for the moment, the last thing they want to do is impede then the reopening process, which obviously is going to help support the economic recovery. If there is these clusters or local lockdowns, better to just deal with them That's kind of in a similar way that China has been doing with some of that market outbreak that we saw over the last few weeks. So that's, that's your COVID situation. The only other thing I wanted to mention was the, just the phenomenal strength of US pending home sales yesterday, surging, what, 44.3%? Phenomenal number. But I have read a couple of things this morning that I thought are worth noting with that figure. Data is taken when contracts are signed, and what some people are basically saying is that we saw a halt in the lockdown, of course, where activity basically ground to a halt, but suggested that most contract signings were delayed rather than actually being cancelled. So it was kind of pent up, and you're seeing that a little bit in the UK housing market at the moment. Um, I mean, I've actually got my house up for sale at the moment, and actually what I'm hearing and talking to lots of agents and so on is that there's massive pent-up demand at the moment, and the actual activity out there for people as well. The pandemic seems to have kind of switched, switched a lot of people's minds of wanting to alter their lifestyles now, particularly looking for more space and outside of city areas. And it's super busy at the moment on that front, but is that going to last? I guess that's the question out for debate, whether or not this is just simply that pent-up demand given the fact that through March and April literally nothing could happen because of social distancing and and work being locked down pretty much. Also as well, on the housing front in the US, I saw one analyst comment that COVID-induced job losses appears to have hit younger renters more so than would-be buyers. And while the drop in mortgage rates for those who have kept their jobs actually makes, makes purchases more attractive, so if anything, what they're suggesting then is you're probably going to see a continuation of US pending home sales increase going forward, uh, over time. So actually, I don't think that data is, is as surprising. It certainly though will help keep that Citi Surprise Index elevated that we've seen of late. Um, but yeah, that's— I thought that just warrants a mention. On the calendar today, what have we got? Well, we've just had the UK, but these are the final Q1 GDP numbers, so they're really irrelevant for the conversation. But year-on-year minus 1. 7% versus expected -1.6%. You've had the Chinese data. So then going through the, uh, into the late morning, you get the Eurozone HICP flash year-on-year reading expected at 0.1%. Worth keeping an eye on if you're trading euro-denominated assets. Then in the afternoon, you've got the Chicago PMI expected to rebound back up to 45 from 32.3. and the weekly oil inventory is coming out the API in the afternoon. Speaker-wise, I'm just going to make this a bit bigger because there is quite a few coming out on the docket. All of these times are in London here, but you've got Bank of England's Andy Haldane, of course the chief economist of the Bank of England, the soul, the center for the bank's decision to increase quantitative easing at their most recent rate decision. So I am quite interested to see what Haldane has to say, and he's going to be speaking at 11 AM this morning. And then you've got ECB Schnabel, Bank of England's Cunliffe, the EU Trade Commissioner— obviously quite interesting given the context of the Brexit situation and today of course being the kind of symbolic deadline where the UK is looking that they won't request an extension to the existing end of 2020 transition period. Fed's Brainard, Fed's Williams, both voting members of the current FOMC board, and they're going to be talking about central banking, the age of COVID-19 in the case of Williams. So that will be at 4:00 PM this afternoon. And then you've got Fed's Powell kicking off then with the Treasury Secretary Steven Mnuchin. That'll be not until 5:30. But as I said, that text we've already covered from the pre-release that came in the overnight session. All right, that is it for me for the moment. Um, so overall, I, from a top level, the sentiment, I would say I feel fairly neutral. About this morning. You've had quite a positive overnight session, some positive comments about the overall optimism assessment of the economy in the US from Jerome Powell ahead of his speech today. Chinese data was, was okay. Um, the Chinese legislative law that's come in, I think, is as expected. So I think you just got to take today marking up your charts from a technical perspective, keeping an eye, of course, for any of those COVID updates that come out. I guess we've got a little bit of a balancing act on that side between tracking actual rates and then looking at what state governors are doing in terms of localized lockdowns and reimplementation of some of these measures in order to close bars, indoor dining, these types of things. And what we've seen in Arizona and New Jersey just yesterday could be decisive for short-term sentiment. All right, that is it. Any questions, feel free to leave me— leave them on the video. Happy to help as always. And I'll see you this time tomorrow. Thanks very much, guys.