Johnson and Corbyn go head-to-head

Okay, very good morning. It is Tuesday, 19th of November. I hope everyone is well. Good to be back. I hope everyone had a good session yesterday. Playing a bit of catch-up, and so certainly can talk over some of the conversations yesterday apparently happening between US President Donald Trump and the Fed Chair Jerome Powell. Got an interesting graphic to have a look at and some commentary out of the latest research note from the head of, uh, chief economist of Goldman Sachs and what he thinks, Jan Hatzius, on the outcome of the ongoing trade war. So as you can see from the headline here, but we're going to have a look at the charts first and then I'll go over some of the headlines from a fundamental perspective and hand you over to Sam. But before I do so, if you're watching this on YouTube and you're not already subscribed to the channel, do subscribe, just click the button below. But otherwise, just having a look at the general market sentiment for this morning, things are relatively calm. The dollar index not really seeing a great deal of movement. If anything, a little bit of an uptick just given this, the size of the sell-off that the Dixie saw yesterday around the kind of timing of when Trump and Powell were meeting. But the Dixie's ticked up into positive territory, albeit only minor, 0.1%. So a little bit of downward pressure in the last half an hour or so in EURUSD and cable, uh, the former sitting just below its pivot level in the futures at the moment. You can see in the top left, otherwise gold and T-notes relatively quiet as to same kind of case with the US index futures. However, they are in minor positive territory, and European stock futures, both the DAX Euro stocks on the front foot this morning. You can see the DAX here in center left, already up about 52 points at the moment. Um, Bunds flat, oil down a touch, just trading below the $57 handle at $56.87 at the moment. So all in all, I wouldn't say there's been any one big surprising headline or any development from overnight. If anything, it looks like more just a bit of a continuation. Equity still trading up in close proximity to the all-time high. and that in itself just putting a little bit of downward pressure on the US 10-year for the moment. Getting straight into the headlines then, let's talk about a couple of different things. And for one, this was the graphic that I saw, I guess that sums up a little bit the session yesterday. And this is a picture of the Bloomberg Dollar Index, and we're looking at two points of interest here, one being when Fed said that Powell met with Trump and Steven Mnuchin at the White House yesterday. This was an unannounced meeting as far as I'm concerned. It wasn't in the official White House calendar. And then the main point coming from when the press were getting hold of this, that Trump had said that negative interest rates and dollar were discussed with Powell. Now don't get me wrong, that doesn't mean that the Fed are going to do negative interest rates or anything like that. But what it means is that the markets, of course, remain particularly sensitive to these— the notion of just even a conversation of the mention of the word negative rates can have this type of response in the market. One thing is though, Powell did issue a statement, an official comment, and he said that he and his colleagues on the Federal Open Market Committee, the FOMC, will set monetary policy as required by law. And so you remember, central bank like the Fed has a dual mandate: price stability and maximum employment. And so they make their decisions purely on those basis, not that to be then influenced by the likes of the US administration. But nonetheless, a little bit downward movement there yesterday. But moving on then to the actual trade war, what's the current status with that? Well, I mean, this was a research note from Goldman's yesterday. They were talking about the trade war's drag on the world's largest two economies, US and China, will gradually fade into next year as tariffs on imports from China have likely peaked. This, of course, assuming there's no further escalation in tariffs as they exist at this present day and time. This was the kind of graphic, if you like, of which that they were sharing. This is the, the commencement going back to the beginning of last year, the summer, then escalation that we had, and then the last one of a more meaningful way was in September of this year. But probably Goldman's, um, in combination with the way the market is moving, it kind of fits that narrative that perhaps this is the, the peak tariff story. And from now it's more about the management of trying to get some kind of deal at a point in future. I mean, this is one of the things that we were saying, Sam and I, for a number of weeks. We didn't think a deal was going to get immediately signed because what's the point if you're Donald Trump? You know, you kind of— yes, you might have hit maximum tariff, but the unrolling of that I'd want to do as late in the game as possible, as long as equities hold up, just to kind of manage the markets as best as possible in the run-up to this time next year. So I think on that perspective, from our view, everything is going as planned. Do I kind of agree with Goldman's? Well, yes, I do, because the net result here is that he can't afford to re-escalate tariffs come in the midst of 2020, because anything like that would just jeopardize then this weaponizing of the stock market with such a clear simplicity resonates with his base, which you'll need support for come election time. The only kind of get out of jail free card perhaps if there was to be any type of meaningful sell-off would be the Fed coming in and intervening by cutting rates further. Doing more QE, these types of things. But I think for, for Trump, if he can kind of remain in the status of where we are at the moment, which is keeping the pressure on China, but the markets are kind of happy where they are at the moment, then he's kind of in a winning situation. My only fear here, though, is that I think this is more coming towards year-end. I think people feel quite satisfied about what's happened so far this year. I think as we get in towards the Christmas period, there's obviously quite a sweet spot in the middle of December where we've got the Fed meeting, got the UK general election, we've got the next level of tariffs potentially on China. I think once all of that passes, let's say the Fed hold, Boris gets a majority, uh, and then the tariffs get delayed again, then I think really we kind of stay close to where we are at the moment in the equity market, i.e., we just kind of consolidate up and around these record high levels. It would be my baseline view at the moment. Anything else that's happened overnight? Well, you can see there was a bit of a pop lower in the Aussie dollar. If you're looking in the FX markets, the Australian Central Bank released their policy minutes. They said they considered cutting interest rates at its latest meeting but decided instead to hold steady and monitor the impacts of earlier easing amid concern that households were being spooked by very low borrowing costs. Again, this Comes after the RBA, much like the Federal Reserve, have cut 3 times by a total of 75 basis points in 2019. As far as this is concerned, I mean, the Aussie has recouped some of its losses overnight. In the Aussie futures, we sit around support on the S1 at the moment, not really looking for anything in the near term, but traders are, as per market pricing, looking for another quarter percentage point cut in the first half of next year to take their cash rate down to 0.5%. So a little bit dovish in terms of they, they considered a cut but wanted to just assess the impact for the time being. And we've kind of leveled out since that point in time. So again, the main two forces here for the Aussie, the Chinese economy, got to keep an eye on data. How is that performing? Are we bottoming out in that recent rout that we've had? With the pressure of the trade wars. Now that that is kind of coming to a more, um, a period of, let's say, uh, dialogue between the US and China, that counteracted with the RBA on pat for the moment. I don't really see too much in a way fundamentally to shake things up in the near term. Other thing I wanted to mention was these two. I see Jeremy Corbyn and the UK Prime Minister Boris Johnson are going to be going head-to-head on ITV at 8 PM later this evening. It's only these two. Jo Swinson of the Liberal Democrat Party tried to say— she tried to make an official complaint that there was no Remain party being represented in the discussion or debate this evening, but the courts just basically threw that out. The SNP as well wanted Scottish say within the conversation, however that's also been thrown out. So it's just a head-to-head from the two traditional parties, Labour and the Conservatives. And ahead of this, Boris Johnson has written a letter officially to Corbyn, basically asking him four main points to just kind of keep the pressure on. Uh, the four main points being: you're proposing a second referendum on EU Membership, is that referendum, would you recommend UK should leave or remain? 2, would you end, maintain, or extend free movement? 3, how much you'd be willing to pay into the EU budget to return for access to markets? And 4, can you guarantee that every Labour candidate supports your Brexit policy? So all of this, of course, is being strategically done because all 4 points are the real key ones which Corbyn has really struggled to have clarity on. So I don't know really too much the point of this, because if I was Corbyn and you had front-run with a lot of these questions ahead of time, that would give me approximately 12 hours to prepare with the best possible response. So, I mean, as much as this makes a good headline in the papers this morning and does show up Corbyn's shortfalls, if I was Corbyn, I'd be saying, well, thank you very much, now I'm going to come at you with really great answers because I've had time to prepare essentially for all 4 points, but maybe I'm talking up Corbyn too much and we'll see how he performs later on tonight. So those two will be going at it. One thing to be aware of is YouGov are going to be publishing an immediate opinion poll as soon as the debate finishes at 9 PM. That's always quite telling to see how it appears that who's come out triumphant on that particular, uh, stage. Now, talking about general elections, uh, and the polling, I, I was doing a couple tweets at the weekend, and, and this certainly is, is the current state of play. Uh, basically, as the election has been called, there's been a distinct move back into the two main traditional parties. So you can see Liberal Democrat support actually has fallen away quite, quite significantly ever since the election's been called. And we've seen this kind of revision back to voting either Labour or Conservative. So not only are Conservatives now have their most strongest support in the opinion polls since the snap election was called in 2017, Labour have also been making some significant gains as well. The biggest casualties being the Lib Dems and the Brexit Party at the moment. So still to play for. And certainly we'll be watching that debate tonight with some interest. I guess the main points being is with Johnson still with such a resounding gap, an advance at the moment in the polls, it's now translated that I was looking at Betfair last night. It's now 69% priced in by the bookies that Johnson's going to get a majority government. And that's the highest it's been so far and does fit in step with the fact the movement we had in cable yesterday and EUR/GBP printed a fresh 6-month low. So the pound at a 6-month high against the euro at the moment on the back of these— this polling that's looking ever more likely that Johnson is going to secure a majority when the election comes around on the 12th of December. Okay, calendar-wise, what have we got on the session? Let's have a quick look. So we've already had the RBA minutes, as I said, slight dovish tilt, but markets have recovered since, albeit Aussie still just down about 10 pips or so on the session in the futures this morning. In the European morning, it's pretty quiet. The US, you've got housing starts, building permits, and then you've got the API inventories coming later on this evening. Fed's Williams speaking in a Q&A, looking out for any comments as we go through the next hour. And then the debate happening on ITV later. So overall, a pretty quiet day, I'd say. Just keep an eye out for anything more. And this is really a constant vigilance to be, to be adopted throughout the coming weeks, really, for any updates on the trade situation between the US and China. Because typically when all things are quiet on the calendar like this, the— then I'd say the market does tend to react a little more to the technicals, but it only takes one then headline for the market to really latch on to a new, uh, kind of, uh, I guess, direction. And, and so that's really the key, most dominating factor on that hierarchy of kind of macro influencing themes at the moment. Remains to— remains the case for the time being. All right, I'm not going to talk any more than that. I'm going to hand you over to Sam, let him come on, talk about the charts and setups for today. Otherwise, have a good one. Thanks very much.

Hi guys, good morning. As you can tell from Anthony Cheung, it's pretty cold here in London. I thought we'll start off with stocks which are, well, not far away, maybe a couple of minutes away from reaching those all-time highs yet again, which is the Remarkable. Trade talks positive, let's go higher. They turn negative, well, let's get a dovish Fed involved and, and keep pushing on. How long can this last? Well, we have to wait and see. Um, that trend line from yesterday, still, uh, something to have on. And this one's starting here on the daily chart of the 1st of May, of course, where the last— well, I guess where we were this far along last time with the phase 1 of the deal, where that, uh, that broke down, 8% correction, and we're just coming up to test that again. Yesterday's high, R1, uh, in the mix. 3130 on the S&P, somewhere to keep an eye on. 3100 still key to the downside, and then obviously above that you've got yesterday's low, which was Friday morning and afternoon's key level of resistance turned support, uh, 3111. Keeping an eye on that. And of course if we were to potentially have any kind of trend line in the afternoon, uh, obviously worth keeping an eye on those if they were to, to come in. But at the moment, it doesn't seem like much is stopping this market. We haven't had, uh, 2 down days in a row for, well, I think it was 25 days, 25 days last week, and so it must be a fair bit more than that now, which is, uh, pretty incredible to, to think think about there. The euro and the pound is coming under a bit of pressure over the last 30 minutes or so. The euro, obviously, since that German number came out on the 14th, did then make a new low, but we have recovered since then, and we're getting above 1.11 on the futures yesterday, finding some resistance up at what's such a key point. You can see was also the lows here going back to October. October the 25th and 9th, a bit of resistance again on the 6th and 7th of this month. So we'll be keeping a watch on that. Also, just below where we're trading, actually what is basically the low of today, is going to be a pretty key line in the sand around 1.1080 on the futures. Just moving this to the right-hand side of the camera so you can see the low the 7th, high the 8th. Bit choppy yesterday, understandably lower volume trade, but keeping a watch on what happens around there. So maybe a bit of a mini range coming in, uh, and also not that it looks like it's coming into play as of yet, but worth, as usual with the euro, just having on a bit of a trend line. Every time we push higher in the euro, we do snap back and make a new low for the month or year. It doesn't seem like we're having a decent trend line yet, but if we were to continue this push higher, just be aware of that going forward. The pound, uh, obviously spiking to almost 130 yesterday, which was a decent move. And then however, if you put this on the 60-minute, we're kind of in a big, big range, or a very slow-moving one. Of course, that, that's to be expected over the last couple of weeks. But you can see that 130, very key, going back here to the high that we had back on, uh, 31st of Halloween— the 31st of October. Of course, something was supposed to happen on that date. Uh, also the low here, looking at the 8th, was also the low of the 17th. So a couple of key points on the, the longer medium term to, to keep an eye on. And also you're starting to see the pound just over the last few trading sessions gradually grind higher. Would be worth having a trend line on here for any potential break if that is to happen. Just keeping a watch on all those previous these highs, as of course they could attract a level of support. So to the upside, keeping an eye on 130. Above that, we'd have to get through 129.80, which held as resistance yesterday and then again this morning. And to the downside, that trend line, and also 1, 2, 3, 4 times tested as an area of support, 129.54. Having a look at the Aussie, as I mentioned, did come under pressure in early trade. However, we had the bad data, well, on the 14th, so we were expecting the, the minutes to not really resemble, uh, what was, what was said because obviously the employment data was, was a lot worse. So it's always a bit tricky, uh, when that's the case, you know, those minutes coming out literally just 3 days after, uh, that release. So not all too surprising to see it reverse, but I would still be overall bearish for for the Aussie. Um, you know, while if we do have a dovish Fed and positive trade talks, we would have to, you know, push higher. Um, just being— just wary that the Aussie has been under some pressure in recent times. And actually, just having a look here, that low of the 14th, see if we can get some sort of trend. There we go, and that's lovely. There you got the low of the 14th, got the low of the 15th. We almost touched it again on the 18th. We broke through there in early trade this morning following those minutes. It'll be interesting to see what happens on a retest of that level. Ideally, you also get that with maybe some of those lows from yesterday and also the pivot as well. So that could be something of interest to keep an eye on. Moving over to oil, uh, Charlie actually just before was coming on mentioned about a little trend channel to keep an eye on, just using these, these lows that we've, uh been trading in. You can see also with those highs, really well respected both ways. So, uh, here looking at 60-minute, nothing wrong with waiting for maybe a break retest and get involved on that for a push either way. Which way to, to favor it? It's a tricky one, it really is. Every time you think maybe this oil is going to push and break and hit that $59 after really trying to break out $58, we just snap back and you know, no harm in waiting for that real big push retest and then go to try and break out of this range. And why is that range important? As mentioned, you know, this is the level traded back in September before we broke down at the back end of that. Positive trade talks and maybe a dovish Fed, if you combine those together, you've got to favor oil to the upside. And reverse of that, if we were to see any hawkishness or a breakdown in trade than a break to the downside, but technically it would also show that, I am sure. I'm gonna look over at gold. Decent day yesterday for, for gold, and I know a lot of people have seen, seen this on Twitter, really eyeing up that $1,480, uh, really wanting a test, retest of that level. You can see why, for such good support the 11th, the 15th, the 30th, the 5th, and then breaking down, uh, 12 days ago. So keeping a watch on that. Where's that coming today? Just above the R1. So keep a watch just in case. I know to get through there we'd have to break above what has been a strong resistance on the 8th, the 14th, yesterday, and again early trade this morning coming in around 1473.75, give or take. So a couple key resistance points to get through before that, but certainly that's a key area on the futures anyway, the 1480s. That people will be talking about. The low of the day today, the, the high from Friday evening and overnight trade on Sunday. So in a bit of a mini range. Let's drop this to a 15-minute and you can see that they're well respected to the downside on a few tests. Uh, so keep a watch on that. I wouldn't get too carried away on a break of the low of the day just because you have the pivot, you have the, the low from yesterday afternoon, and also the high from yesterday morning. So again, that's more of a zone I'd be focusing on. So for, for once you've actually got a fair bit of support just below we're trading, and obviously those key resistance levels as well. Do I think we can get 1480? I think we do, and it will be really interesting to see what happens if price was, uh, was to, to get to that area. Quick look over the, the bigger picture now. Let's have a quick look and see what the DAX is doing. Of course, 30 minutes almost into trade and you're looking at a decent push. Got a lot of resistance above here, the R1. You've got yesterday's high, got— I mean, look at that, it's a, a massive resistance zone. Stocks at the moment, it's taking a lot to get them down, to get those lower. Yes, you're in a bigger range for the DAX than you are in, uh, say, for US equities, but definitely keep a watch on, on that point because if we do for whatever reason get a break above it, you know, if we just make this on the longer term chart, well, suddenly you're starting to look at levels not seen since January 2018, and we all know what happened, uh, there at that level as well. So the DAX coming to the top of that range again, keeping a watch on that because a breakthrough there, well, suddenly you're going to get that follow-through in the US as well. And actually, let's have a look, have we got a new all-time high? Yes, we have a new all-time high printed in the S&P 500 witnessing history. Any questions, as usual, please, uh, do let us know. Uh, I hope you all have a good trading day, and I'll catch you all later on.