Janet Yellen Nominated For US Treasury Secretary: What Does This Mean For Markets?

OK, very good morning to you. It is Tuesday, 24th of November. Hope you're doing well. Really interesting night actually in the overnight session and also late on Wall Street because we had a relatively flat to minor positive close, but we've continued to move higher in the overnight Asia-Pacific session on the back of a number of things. Obviously yesterday we had another positive vaccine update from AstraZeneca. We've also had a latest Wall Street Journal source report saying that it's looking more likely than not that the president-elect Biden is going to choose Janet Yellen, the former Fed chair, as the Treasury Secretary when he comes in. And not only that, the US General Services Administration has given the green light for Biden to go ahead with his formal transition for the presidency, of which Donald Trump has called on his agencies to cooperate, although he didn't go as far as a formal concession The fact that he is willing to cooperate and now the buttons being pressed more formally for a transition to happen, that's eliminated one of the major kind of barriers of uncertainty in the market. That in combination as well with that really excellent PMI data we had out of the US and things are performing really well this morning. So having a look at the charts and how things reside going into the European Open, the Dow futures on the left here is already up over 250 points. S&P up 27, the NASDAQ up about 67, gold down again overnight. So let's have a cycle through some of these charts and, and have a, have a look in more detail actually as I discuss them. So let me explain here some of the price movement that we've had. And if I just broaden this chart out so you can see the whole kind of context of some of the movement, and that was the peak on the top left-hand corner of my chart of the Pfizer spike that we had going back on the 9th of the month. And an interesting trend line actually encapsulating the, the high of the price movement and this descending kind of trend line from the 16th, the 18th. And then we had a close retest of it in the overnight Asia Pacific session, eventual break through it to then find some support at the level. And so that in combination with around the 3600 psychological handle, now an area of support that I'd be looking at on the session. So here right on the level. You can see tested the trendline break and then comes back to find a bit of support around that same kind of level. Two kind of phased moves here. We had a late bid come in going in toward the close on Wall Street on the back of reports about Janet Yellen coming in. I'll talk about her more in a moment. And then we had the kind of break higher as the Asia-Pacific region kind of reacted to all of the developments, and particularly that comment about the, the more formal transition then for, for Trump to Biden, and that kind of really saw things bump up in the overnight session. In step with that, the, the correlated kind of movement has been then the perception of kind of general positivity in the short term. Oil markets also moving higher. Oil's liked when there's been positive vaccine news for some time, and actually then On the near-term price activity, we had the peak from yesterday morning that now acting as a nice kind of line of support now on any potential pullback because we remain pretty bullish, up around $0.50 or so already into the European open. You can see here $0.4337 was that previous high. We broke through it with some of that Asia-Pacific move that was seen in general positive sentiment, came back to test, and then we just kind of clawed um, or edged higher ever since. And looking on a daily continuation, this probably helps with a little bit of context. We're at a really key level now in oil, and just goes to show then the kind of buildup that we've had since here. And this candle here was the 9th, and that was when the first Pfizer news came out, and that's kind of accelerated then the perception of demand being backstopped going forward to secure a better recovery, given the developments we've had from Pfizer, Moderna, AstraZeneca, and Eli Lilly and others. That in combination then with overall OPEC+ continuity on the likelihood then at the end of the month, in only a week's time or so, we're expecting a 3 to 6 month rollover on the supply pack side. Oil's looking kind of set up for potentially a move to the upside and a break here which encapsulates that area of lows from the 2nd of March. Prior to then, the, the deep gap down that we saw on the failed OPEC meeting means that oil now, if it can get above those late kind of August highs, no reason why we wouldn't go $45 or even higher here for the time being. So technically, quite interesting levels to watch there in oil. And then with all of this kind of risk-on sentiment, there was obviously one asset that got really beaten down yesterday, and some excellent activity in the Amplifier live room yesterday. Some really great trades across the board, really. So, uh, well done to all of those who are getting involved. But with gold, we saw a complete breakdown of price through the breach of quite a key level. So this was that Pfizer move that we had on the 9th, and this was yesterday's move here. You can see, and we've continued to move down in the Asia-Pacific session. And they've just carried the baton, if you like, from the depressed price from yesterday. And now again, interesting, we've just come up, perhaps a little bit of profit taking on those short-term shorts. And we've come back up to $18.28, which was that initial low that we had yesterday afternoon. So interested to see how it reacts here. Any further recovery on a retracement, probably be looking up. And I know it sounds like quite large ranges, a $10 move, but I'd be looking up at that $38. 7 as an area if we break through this area here. If we don't, then— and equities remain positive as we go out and progress through the day— then be looking for an assault back down to the lows and then onto the S1 in the daily pivots. Interesting to note then that the dollar really got fired up yesterday after the really excellent forecast-beating market PMI numbers that came out of the US, as you probably saw. But the dollar has kind of faded almost 50% of that bid now, and the DXY is down about 0.1%. So you can see here in these major currency FX pairs, both EURUSD and Cable have reversed about half of that initial selling pressure that came in from, from yesterday. So that's the overall kind of take on things. Let's have a look at some of the headlines then in more detail, and starting off with what's happened here, which is the return potentially of Janet Yellen. So President-elect Joe Biden plans to nominate former Federal Reserve Chair Janet Yellen to serve as his Treasury Secretary, according to several people familiar with the matter. For me, and as per then the reaction that ensued afterwards into markets in the overnight session, I definitely think that she's a positive as far as the equity market is concerned. I wrote down some notes here that I was tweeting when the news came out last night, and basically I can only summarize it as her well-known cautious approach and dovish tendencies would be a significant change from Mnuchin and complementary then of working in close harmony with the Fed and with this mantra of lower for longer. If any of you were, were trading over the period of the last kind of several years when she was at the helm of the Fed, she was notoriously erring on the side of being always very cautious and gradual with her approach, very dovish. And that in this environment would be a supportive factor for the equity markets. So although she's been touted as one of the front runners already, confirmation seemingly that we're heading more— other candidates are dropping away and it's leading more to her. I think is a supportive thing for markets going forward. On that note of Fed speak, and in a similar kind of way, remember, as we go in towards year-end, which is only now 5 or 6 weeks away, the Federal Reserve Board obviously sees a rotation of some of the regional presidents. Fed's Evans, who's not a voter this year, will be a voter next year. He said yesterday there's still quite a long way to go for the US economy's recovery from the coronavirus, adding that he expects rates at the Fed to remain near zero well until perhaps 2024. And that, under a kind of combination then with the Treasury Secretary being Yellen, with that type of mentality, would be then supportive in regards to this, this idea of zero-bound rates for, for the foreseeable future at least. The other thing, of course, I mentioned briefly was this. You might not have heard of this before, the General Services Administration. They've basically triggered then the transition can formally begin now in regards to Biden being the winner of the US election. What was quite surprising overnight, that was despite his kind of reluctancy and lack of formal concession He was tweeting quite a lot overnight. President Trump, though, did call on his agencies to cooperate. And a lot of people have looked at this and thought, well, that was an unknown. As much as I felt quite sure that any legal contest between them, Trump trying to overturn certain states in the election ballot, I think was just very far-fetched that would actually materialize into anything. But a couple of people mentioning that they're just liking the fact that it removes just another element of uncertainty from markets. To confirm Biden coming in. So that— they're all the, the positive things. Of course, we did obviously have not only good US data yesterday in the PMIs, we had AstraZeneca. And I just wanted to update you a little bit about Astra now. There's been quite a lot of analyst commentary about this because I wanted to just drill into this a little bit more. There were— well, there was an analyst from SVB Lyric called, um, Jeffrey Porjes. I think that's how you pronounce his name. He said yesterday results from a relatively small group of volunteers in the trial were a slight concern for Astra. He also said they wouldn't get U.S. approval based on the lack of diversity among participants. I mean, remember, AstroShares did finish down 3.3%, but I'll give you my view really of why I think that that occurred. AstraZeneca and Oxford— Oxford University, that is— who they're collaborating with, with this particular venture. And I believe that's because AstraZeneca don't have a vaccine unit, so they're using the, the know-how from the Oxford guys. They will talk to the US FDA this week about setting up a separate arm of the trial to test the more effective lower dose regime and conceded this could affect the speed of approval in the region. Um, some other analysts have questioned AstraZeneca's efficacy, um, to Pfizer and Moderna. That to me is the main real reason why their shares fell yesterday, uh, particularly speculative traders. The reference point is 90-95%, which is the benchmark of efficacy that's been set by the likes of Pfizer and Moderna. And of course, when this news came out, it was more averaging around 70%. Now that I think just locking or latching on to those numbers only, I think is a little bit short-sighted. And I say that because if you think about then the whole host of other issues of which AstraZeneca addresses that those others do not, things like cost. I was looking at the costs this morning and a single dose on the AstraZeneca side is $3 to $4. Maduro and Pfizer, we're talking $50. And obviously this then leads to a lot of the developed or undeveloped countries, I should say, where this definitely— the AstraZeneca one is, is a better, more credible solution, particularly as well given the refrigeration of the vaccine for its storage and distribution is way more, let's say, ability to conform to those type of standards in areas which don't have such good infrastructure for example. And then manufacturing, obviously Astra, big firm, has strong distribution networks. And then it's not an experimental technology which they're using, which obviously underpins then that of Pfizer and Moderna. So the final point I'd say as well is that regulators and many scientists— and one of the guys in the Amplify Live Room was chatting about this yesterday, uh, he was kind of comparing it to other more known and regular diseases. And this is being ratified by some of the press this morning, is that in a normal situation, let's forget that, that 90-95% efficacy rate ever existed from those other companies. Regulators and many scientists would be more than happy with a vaccine that was more than 50% effective. It's just that the fact that it comes in the context of some of those higher figures that we've had of late. So beyond then, that initial knee-jerk reaction. This is a positive, I guess, is what I'm trying to say. And I think that's now a component of why we're trading like we are in the overnight session. It's not that in isolation, but it definitely is not as negative a story as I think that the Astra share price would suggest from yesterday, which I think was more a reactionary effect of traders rather than an underlying performance of what I think that share price and AstraZeneca's drug in terms of its adoption will be in the period going forward. Moving on, talking of COVID I don't want to dwell on this too much because obviously things are in a quite a positive state at the moment, but it's worth reminding ourselves that COVID in the US is still incredibly bad situation at the moment. I just read as well that actually some of the airport traffic in America even last weekend, front-running that of then Thanksgiving happening obviously in 2 days' time, was actually the highest amount in many of the major locations in America despite the situation that's unfolding with record-breaking numbers of COVID It was the highest traffic they've seen since the pandemic begun. So obviously a lot of focus there on the idea that Thanksgiving could actually turn into a super spreader event And this definitely is going to warrant then watching these numbers as we go further forward into kind of early to mid-December. One of the things that a CDC model was showing yesterday, which a couple of people are talking about, is that COVID's on track to kill 30,000 more in the US by Christmas. And actually, the numbers that they were looking at, I think they had it here from a different study from the University of Washington in Seattle, they were talking about deaths peaking at around 2,000, just over 2,500, which would be in excess of what we had in the initial first wave outbreak, of course. And this is what that kind of steady stepstone approach to the cumulative effect of US deaths would look like, going all the way back to the beginning of the actual pandemic in itself. Talking of COVID in the UK, yeah, I'm not sure if you caught then Boris Johnson outlined the details He confirmed England's national lockdown will end next week, to be replaced though by a tougher three-tiered system of regional restrictions designed to last until spring of next year. Now, what he said was well telegraphed in the press, so it's not really a market-moving thing. But let me give you some of the details here. If you wanted to look at the actual individual line-by-line details of each new tiering system, you can just jump on my Twitter account, you'll be able to see this full kind of breakdown. But under the new rules for England, from December 2nd, shops, hairdressers, gyms will reopen across the country, but bars, restaurants will be takeaway only in areas under the tightest restrictions. Now, what areas are going to be under those tightest restrictions? We're going to find out on Thursday. He's going to announce in more detail. Um, one thing to note though, on a very top level These latest restrictions are more onerous than the previous. Don't think that we're just reverting back to the triple-tiered system that we adopted over the recent weeks. This is actually different and more stringent across all three levels. It's almost like a light version of what we're in now, which is definitely much more stringent than where we were before. Now, people in all three tiers, for example, will be urged to avoid any unnecessary travel. This is even in the lowest tiered, and also work from home where possible if they can. All right, quick look at the calendar for today. German IFO coming out at 9 o'clock, often a fairly interesting figure. Companies on the ground, what is their feeling about the current economic situation and their forward-looking optimism or pessimism about the, the 6-month horizon. So that's coming out at 9 o'clock. We've then got Bank of England's Haskell speaking late morning. From the US, you've got Richmond Fed Manufacturing, the Conference Board's consumer confidence reading coming out at 3, with Fed's Bullard, who's a non-voting member, discussing monetary policy changes at 4 PM London. Christine Lagarde speaks in a virtual roundtable kicking off at 2 2:00, so just ahead of the open on the NYSE. Uh, not expecting a great deal from her, but something just to be aware of, uh, given the context of the expectation of more ECB, um, top-up to their PEP happening in December. Uh, and we're getting quite close to that, that time now. So, uh, that is it. Gonna leave you with that. Um, so yeah, uh, further positive developments to add to the data and the Astra vaccine news. Now we've got Yellen potentially being Treasury Secretary, plus the USGSA coming out and confirming Biden. Hence we have this current, um, performance in the overnight Asia session leading into a front foot then for the European Open. Okay guys, I'll leave you with that, and I will catch you same time tomorrow. Thanks very much.