How Important Is The $JNJ Vaccine News & Implications On The US/EU Rollout Strategy

Okay, very good morning. It is Wednesday the 14th of April. Hope you're all doing well. I'm going to run you through a couple of different things, going to look at the charts, a couple of them from a technical perspective, but of course I'll run through things as well fundamentally and look at some of the major news that's happened. In particular, wanted to delve into the topic of vaccines in a little bit more detail following on from what happened with the pausing of the rollout of the J&J drug in the likes of the US and Europe, which has now happened. What does that mean? What can we take from that in terms of an interpretation for the overall impact that it could have on markets? So starting off then, let's have a look at the overall mix of how different assets are trading this morning. And it's a little bit of where we finished yesterday. We did see record high prints in both the S&P 500 and the Nasdaq. And this, of course, coming irrespective of that initial J&J news, which did exert some initial downside pressure on US indices, but actually more than recovered that after we saw the US CPI print, which although, um, was one of the biggest increases that we've seen inflation in many years, in fact, it was not that kind of wild inflation increase that some had been fearing just a few months ago. And as such, if anything, kind of relief rally on the back of that. And that's been observed across the markets with the dollar still weaker at this point in time. Obviously the Dixie got hit quite aggressively yesterday and that helped support both major pairs. And the Dixie is still down, trading lower by around 0.2% this morning into the European open. So both major pairs in the top left, EURUSD and Cable, up respectively 20 and 30 pips each respectively. Gold still supported US yields also decreasing sharply yesterday post the CPI number. The 10-year's sitting flat at the moment, but it did get a further boost yesterday after demand for the longer-dated 30-year US bond auction was particularly strong as well, which is also alleviating concerns given the kind of breadth of supply coming from the US Treasury. WTI crude— excuse me— also higher, benefiting from the same kind of narrative really because if inflation is not wildly out of control, then there's no need to be fearful about the Fed having to take preemptive action in a more hawkish sense in terms of having this early taper talk or talking about rate rising soon— rate rises sooner rather than later. And as such, that kind of lower environment allowing growth to materialize, and if we have inflation but almost in a positive way, fitting more of a growth than an inflation scare narrative, then that's seen as more positive generally for the kind of growth story, and oil benefiting on the back of that demand. The ongoing commitment from OPEC as well remaining steadfast to help support the market. And we had a bit of a breakout late yesterday through the, um, kind of close of US into Asian trade of that trend line that's been in place since the end of March. We kind of held around that area that was yesterday's high through much of the Asia-Pac session and a bit of a breakout this morning as Europe has come in and also amid the weaker dollar still trend that we're seeing at the moment. So in WTI futures, we've just reclaimed the $61 handle, technically having broken through that high that we had back on the 6th of this month at $60.90. Upside targets now, um, not to a little bit way higher, looking at $61.18, some price reaction that we saw at the end of March. Then beyond that point, up to $61.50 and $75 would be that high at the beginning of the month. So still looking pretty bullish there as well for the time being. While we're on oil, and just to cross it off, um, the other thing of course, we did have the API crude oil inventories last night. Excuse me. And we had a crude drawdown of 3.6 million. That was a deeper draw than analysts were expecting of 2.5. Cushing though was a build of 917,000. Gasoline, a build of 5.565 million. Um, the other thing that we have had on the charts is an ongoing appreciation of Bitcoin. And just having a quick look at the chart here, yesterday saw a bit of a breakout through $62,000. $62,000 was also the, the high that we printed back on the, the 15th of March. And we just see the further acceleration. Futures here have traded up beyond $65,500 in, in the Bitcoin future. Looking on the daily chart, you can see the significance of the breakout. Excuse me, you have to again excuse the coughing. I've, uh, I've tried to record this briefing a couple times, uh, and unfortunately I can't get through it all without at least a small cough, so you have to bear with me. But as you can see here, the— excuse me— the, the technical break— just changing my charts over— um, so what we've had here is the 60,345 level that had been kind of a key area of resistance really going back to mid-March. And the breakout of that has just seen further upside. And you know, why is this happening? Well, beyond the technicals, there's obviously a fundamental matter that people are turning just a little bit more bullish again on the crypto space, particularly the kind of front runners like Bitcoin, Ether, printing all-time highs coming before the Coinbase, um, kind of listing that's happening today, going public. And the NASDAQ have set a reference price of that at $250 for the direct listing. And if you wanted more detail on that issue specifically, what, what is a direct listing? Who are Coinbase? What does it mean for crypto? And so on. Then just check out the Amplified Trading YouTube channel. If you just search and subscribe to Amplified Trading on YouTube, you better sort scroll down and you'll find this Coinbase video that our man in the know, Eddie Donmez, did yesterday in the chat with one of our senior traders, Tim Duggan. So just click on that, check that out, uh, it'll explain everything you need to know about, about Coinbase, uh, and so on. But otherwise, look, let's get back to business and talk of vaccines. And this was one of the headlines that we had last night. So Johnson Johnson said it's delaying its rollout of its COVID-19 vaccine in Europe after US regulators paused immunizations with the shot pending a review of rare blood clots. Now, one thing to be aware of here is that initially US indices dipped when the US came out and said they're pausing the use of J&J's drug. They're going to review it over the coming days. However, we were already recovering off those lows even before the CPI hit. One thing to bear in mind here is that the J&J vaccine, like the one developed by AstraZeneca, uses an adenovirus to deliver the genetic material into the body to provoke a defense against COVID-19. The Astra vaccine uses a chimpanzee adenovirus to achieve the response, while J&J is derived from humans. That's the one slight differential. But Russia's Sputnik V vaccine and one from China, CanSino Biologistics, They also rely on the same approach, and again, this mainly being a different approach from the mRNA technology adopted by Moderna and Pfizer by Entech. So the point being there with this, and the reason why I think that, that there's intraday volatility and how to understand, understand, interpret that, is that when you see a flash headline like J&J pulls their drug in the US the initial knee-jerk reaction is always fairly exaggerated. Because if you think about the way the news is delivered, it's simply just a red sticky kind of headline on Bloomberg, and markets will react in a knee-jerk kind of almost emotive fashion to that. But one of the things I always encourage our traders to do is look beyond the headline and understand the kind of devil in the detail. And actually, I think given the fact that the delivery mechanism, if you like, of how the drug works with J&J, very similar to AstraZeneca, and we're talking about the same issue in terms of blood clots as the, as the risk in question, then actually I think the market was better prepared now than it would have been without Astra having confronted its issues that it's had over the recent weeks. And so that being said then, when Sputnik V comes out or the Chinese company CanSino comes out, then again, it's almost like a diminishing law of return. In regard to the fact that the blood clot issue definitely looks like it's linked in a way to that delivery mechanism. So it gets less surprising each time. A couple of things though, we also got Mike Ivy in our community, very blessed to have him as part of the team because he really is on top of all of this stuff. And he made 3 really key interesting points, I think, about the vaccine, which I wanted to run through. So point one was it shouldn't really affect the US vaccination plan too much. Entirely plausible the FDA could issue a limitation to use along the lines of the EMA, the MHRA, and AstraZeneca. But mRNA vaccines are becoming ever more plentiful in the US, and an interesting graphic here to look at is this one. This is looking at the, the the kind of composition and the timeline of what the US rollout program looks out— looks like for COVID-19. And as you can see, from the beginning they've been very aggressive adopting the more expensive and the technologically different mRNA vaccines in Pfizer and Moderna. J&J is coming a little bit later to the party, only really started to be manufactured and distributed now. To pick up in the future. So one of the things here might be that, um, there may be some operational issues as J&J vaccine may need to be aimed at older people rather than the hard to reach. There's obviously unique benefits to the fact that the J&J drug generally is comparative to say Moderna or Pfizer, just generally easier to store, therefore easier to distribute given the temperature issue. It's also single shot rather than double shot, so on and so forth. The overall takeaway here then is that it could well delay the overall vaccine strategy, but we're talking about weeks rather than months, so it's a little bit more contained than perhaps then the kind of sensational way it was reported yesterday. To further stress that point, this was an interesting tweet that I saw last night I think it was around 9 PM or so London time yesterday evening, and it's the Pfizer CEO. And the Pfizer CEO here saying ramped up production of their COVID-19 vaccine, and actually they can deliver, deliver 10% more doses to the US by the end of the May— end of May. Previously agreed a total of 220 million and will supply a full 300 million agreed on the end of July, 2 weeks early. So almost counteracting it. And if you think about the weighted importance for the strategy of deployment of vaccines in America well, it almost outweighs that percentage increase what J&J were going to bring to market at this point anyway. So it offsets and mitigates then the kind of quantifying the impact of what the J&J issue might have. And at this point, the J&J issue, we're still yet to really see the definitive outcome from the likes of the FDA and so on. The other thing then is How— what does this look like and what's the impact for Europe? So okay, we can ascertain here then from this discussion that perhaps then it's not so bad for the US because of the composition of the basket of vaccines that the US has its strategy based upon. But what about Europe? And unfortunately for Europe, as it has been from the beginning with the whole vaccine saga, it's another significant speed bump actually, given the fact that COVID cases are still generally heading in the wrong direction in a lot of areas who are still facing restrictions at the moment, coming in contrast to generally reopenings that are happening at the moment, like in the UK that initiated on Monday. Um, it's definitely more significant potentially for the EU, and the reason for that is that a lack of supply because of production problems and now possible restrictions on the use of compounds is the same issues that we've had with generally the, the AstraZeneca vaccine. If you remember the ingredients that's required as part of the makeup of then the manufacturing process that might well take place in Europe, a lot of that comes from the UK, for example. Now, by the numbers, I was just looking at this last night, the EU has 200 million J&J doses on order with an option for 200 million more. So this chart we have here of the US— I don't unfortunately have one for Europe But Europe's heavily dependent on J&J coming to market. So this is a significant headache. They had 55 million doses which were expected to hit this quarter. Um, the other potentially problematic thing here is that companies like Pfizer and Moderna have very much been steering their efforts to servicing the US, not Europe. And as we've just seen from the Pfizer CEO, they're looking to ramp up production to top up the speed of that, of delivering to America, given the fact that generally how this has worked is the first orders in are the first clients to be served. And America were very aggressive for Pfizer and Moderna. UK was very aggressive to AstraZeneca. Europe's been a little bit slow on the, on the pickup on the order side, and so therefore they're kind of last in queue. And so it's just another problem after the AstraZeneca one, now for J&J for Europe, um, going forward in terms of their ability to really continue to speed up the vaccination rollout, which of course will be imperative for the eventual reopening of the economy and a divergence in timing that we might see between the US, UK, and mainland Europe. The third point and the final point here is really about vaccine hesitancy. There were some charts, if you remember, I shared briefly a few weeks ago which showed that after the kind of vaccine war saga that we're still kind of seeing to a certain degree, but when it was at its most venomous between the European officials and Britain, what we actually saw was that UK people have remained pretty confident with the acceptance of the AstraZeneca drug, but the confidence in the validity of that drug has decreased substantially in mainland Europe. I.e., they don't trust it, they don't want it, which is another real problematic potential issue. Because if, let's say, the J&J drug is said to have had blood clot issues and this gets significantly blown out of proportion by the media, then that can have negative connotation then for people's perception about the safetiness of that drug. And so if then J&J does come to market and it is able to then be seen by the medical authorities as being accepted that the benefits outweigh the risks, like what we've heard with the AstraZeneca drug from the EMA in, in terms of for the UK and Europe. Well, then the problem is then do people believe that? In mainland Europe for AstraZeneca, we've seen they don't, irrespective of the medical advice. So this is another third final issue that could potentially arise from the vaccines. Situation. So yeah, a couple things there. I know quite a lot to take in. The final comment was the White House. What have they said about this? Well, their COVID coordinator has said the US has more than enough Pfizer and Moderna vaccines to maintain its current pace of vaccinations. And I think there's some legitimacy in that, just given the kind of what we've just discussed with the composition of the vaccine basket in the US. All right, we'll move on. A few other things to talk about just very briefly. Fed's Harker spoke last night, said the US economy could grow 5 to 6% this year, buoyed by the increase in vaccinations, strong fiscal aid. But importantly, the Federal Reserve is not going to pull back from its support just yet. Separately, Fed's Rosengren said sees no urgency for the Fed to raise interest rates even with a positive economic outlook, as long as inflation is in a 2 to 2.5% range, he is not particularly concerned. Noting though that both of these are non-voting members of the FOMC. But again, re-emphasizing that idea that although improvements are happening, that they're not in the mindset yet of that having any impact for their policy path at this point in time. Overnight, very brief mention, uh, we did have the RBNZ rate decision. No surprises at all there, kept rates at 0.25%, kept their, um, large-scale asset purchase program at $100 billion Kiwi. Um, in fact, actually, the Kiwi dollar rallied. Obviously comes amid the, the softer dollar at the moment. Just looking technically at the Kiwi chart on a daily continuation, um, just quite interesting here to keep an eye on, uh, the upside level of 71 psychologically. 71 in Kiwi, you've also got the support levels from, uh, mid to late Jan the support level that held in early March. We're coming back up for a test of that at the moment. It's quite an interesting technical level there for the Kiwi to watch as we go through the session for the rest of today. Finally then, let's have a quick wrap-up of, um, the calendar for today, what's in store. So going through the UK European morning, it is particularly quiet. You've got the IEA monthly oil market report for any energy traders interested. You've then got the industrial production numbers from the Eurozone at 10 o'clock as well, but wouldn't be anticipating too much move on the back of those. You've then got US import-export prices at 1:30. The DOE oil inventory numbers to follow the APIs last night will come out at 3:30 as usual. You've then got a whole plethora of speakers today. Just sticking with the main ones, you've got Fed's Powell. The Fed chair is speaking later on today. Okay, speaking at the Economic Club of Washington, there is going to be a moderated Q&A That's happening at 5 PM London time. You do also have Fed's Williams and Clarida who are voting members, and Bostic, but they're not going to be speaking until very late towards the close on Wall Street. From ECB perspective, Christine Lagarde does speak at 3 PM at the Reuters event, and you've also got the Vice President de Guindos speaking this morning at 8 AM. And then you also have Bank of England member Haskell as well talking later on this afternoon. So quite quite a lot to be aware of there. Um, finally, uh, there is earnings as well happening. Earnings season really starts to kick off, um, today with the bigger US financial firms reporting. Uh, and it's always the first couple of companies from that sector that generally carry the most influence because then they act as a precursor for generally how that sector has performed. So today is probably quite interesting for the financials. GS, JP, Wells Fargo, all reporting pre-market as you can see here. Generally, as earnings season gets underway, analysts are expecting earnings for S&P 500 companies to have jumped 25% from a year earlier, um, driven by strength in consumer discretionary and financial companies. So looking for good numbers today from these guys, uh, the kind of bar is set. Are they going to exceed that bar is the question. And That is it. So I'm going to leave it there, let you guys get on with the session. Hopefully the, the discussion of the vaccines was, was useful, and I wish you a good session ahead. Thanks very much.