Keep calm & carry on as focus remains on trade talks

OK, very good morning. It is Wednesday the 8th of May. If you're a Liverpool fan, hopefully you're not watching this briefing. I'm sure you're nursing a severe hangover, so well done. I think it was it, the first Champions League final without a Ronaldo or Messi since 2013, something Something like that. Yeah. So there you go. Get the football stats in early. But yeah, plenty to talk about this morning in particular. Really like what I'm showing you with this graphic at the moment. One of the broadest day of declines since the Christmas Eve sell-off. And you'll remember what the equity market certainly looked like at the end of last year, particularly with the fairly illiquid part of the year around Christmas when we were seeing that definitive low of the Q4 rout that we saw in the US equity market. And so it was the worst day that we've seen since that point. Lots of stats flying around this morning. Obviously, the VIX taking a pop on the upside. It was a multi-month high with some of the sell-off that we had as the, the kind of trade war fallout reverberates across the global markets. And that's very much then a lower close on Wall Street. You have things like technology, industrials, materials, the kind of sensitive areas, if you like, in particular feeling feeling the brunt of the selling. But as this chart would depict, it's the first time we've had kind of the share of S&P 500 members over 90% were all declining. So it was a pretty broad-based sell-off. One thing though that I guess you, you might have missed if you were engrossed in the Liverpool game was a fantastic level that came up in the, uh, the S&P. Last night. And so you had— well, let me just describe firstly this chart which we're looking at. This is the S&P 500, of course, and this couple of annotations here of markup and where we've been going back to, I guess, the summer of last year, the all-time high. I mean, this was the previous all-time high last time this chart was marked up, and obviously that's now— was seen on the 1st of May. But then this pullback came to a really nice level, actually, this 28 kind of 64— well, 64.75 got marked up here, but around that 64 in the S&P, you can see— let me just get— let me just move my, uh, cursor here. So you've got this area, the resistance that we're seeing in the latter part of March after we broke above quite a key area of resistance that had been holding on a multi-month kind of basis when we drove up that was the first port of call, 64. You've also got where that was resistance back in August, support, um, many times actually around that early September. And also we bounced off it in early October before the eventual break. And you can see the importance again that level played on the severity of the break lower. And then you've got the— here the 50 DMA line, which is the red line I've got here on this, uh, daily continuation chart. And that all coming inside around that similar price point. So yeah, I guess you've got to be pretty bold in those opportunities when the market's seen a pretty big down day in that respect. But I still, I'm still pretty confident of the belief that at the moment these, these lower levels— and, and definitely talking to Sam about this, and obviously he much more looking at the markets from a technical point of view— but this area at 64 if that was to breach, there's kind of really, I think, two other levels or key areas where I'd still at this point want to be buying into if the market came back down that low. Now I do have a bit of a feeling that it could be a bit of a missed opportunity not getting in at that point from last night. I'll blame again Liverpool Football Club for that, but the point being is that I really don't think that these trade talks are gonna, gonna break down completely. I think my own interpretation of what's happened here with Donald Trump upping the ante with the tariffs and the deadline on Friday, resetting them back up to 25%, I think that's all, that's all posturing. And at the moment, as the news would depict this morning, China are remaining very calm about the situation. The People's Daily— so this is basically their, I believe it's their state-run kind of national news service— they basically said China will keep calm against threats of higher tariffs from the US, has complete confidence in its ability to face challenges in trade talks. And then they said, responding to Trump's tariff threat, this week. And basically, this is citing People's Daily and People saying that they had seen similar threats before. So we had some comments. JP Morgan's Jamie Dimon was speaking earlier at a conference. I think this was, this was yesterday US time. And he basically said that he would assign— I think I had it written here— an 80% chance that the two nations will reach a trade deal. And, and I And I have to say, I pretty much agree with that assessment. I don't think a deal is going to get done this week, but I don't think either that this is going to be an endgame result, which if that did materialize, the latter point, that would be one of the most catastrophic things that can happen to this equity market. A complete breakdown here then. If we were looking at these other areas, it was a complete breakdown. We're going to punch way lower. I mean, if this whole deal goes off, which I must stress again, I see as incredibly unlikely, well then I think we start breaking through these key areas I'll mention in a minute, and we go through 2700, we start pushing all the way back down south to the Q4 levels. That's how important I think this— the outcome of this trade deal is. But by default of the severity of that described sell-off, Trump knows this, and so therefore it can't happen, if that makes sense. So there's a lot of play here politically behind the scenes, and I think, um, this is, as we mentioned on Monday, or Tuesday I should say, the managing of the situation on the US behalf. So again, 64, good level. I think if we break through there, the next area I'd be looking at with interest is kind of this area around the 2821, 2820. So that starts to bring in some of the highs that were seen around the March period, but also that important triple top that we had um, before the December kind of sell-off initiated. So that area there, so here, 1, 2, 3, 4, so that horizontal line at 21, any break below there, then I think the last kind of final key level, um, that would be very strong support would be that trend line from that same triple top. Scaling that down, you can see how the market really nicely responded on the 25th of March, and then you've got the 200 DMA coming in as well, bang on that level. So again, you've got 64s, 20, and then any breakthrough the 2800 handle, 2776, are all key— 3 key areas that I'd say I'd be looking at. And at this point, even though there might be interim disruptions to the trade negotiations would be key levels. Granted, you'd have to reassess at the time all the variables on the fundamental side, but areas where I still feel would be good for a long position at that point. All right, enough on the S&P, enough on that situation. But interestingly, Sam was saying, because I was off the desk most of yesterday, the gold was kind of responding in a, in a kind of classic way of which had been, from a correlation point of view, had broken down a little bit over recent weeks in regards to its kind of safety status. But the flight to quality bid, it appears, was alive and kicking yesterday and helping support the yellow metal. A few other things though that I wanted to mention before I hand you over to Sam. And so let's— let me just wrap up the news headlines for you, and he can look at the charts. So Chinese exports unexpectedly fell in April. That came out overnight. We had the Chinese trade data. Uh, exports dropped 2.7% in April. Expectations were for 3%. Um, let me just double-check that 3% figure. Yeah, that's— expectations were, to be clear, for a +3% reading. And it dropped 2.7%. So pretty disappointing on that side. While imports though did expand by 4%, expectations there were for -2.1%. So a little bit of a flip there against, uh, the consensus readings. Now things to be aware of here is the Shanghai Composite actually continued to recover after this data came out. So it's not as if this came out and the market panicked and it further fueled, uh, the moves. The initial Asian weakness was all derived from the lower close on Wall Street. Now, a couple things here, still kind of supportive factors, if you like, to mitigate any further downside in the Chinese equity markets. And that is, for one, the Chinese government confirmed yesterday that the vice premier would still continue to go to Washington to meet with Trump and his advisers on Thursday. And so that's still going ahead. We saw that a around this time yesterday, a little bit of a positive short-term reaction, certainly in the equity space and the futures on the back of that, because obviously given what's been happening in the context, some were fearing that the meeting might be called off in its entirety. But that's not the case. So that's kind of point one. Point two, yesterday the central bank has also been active. The People's Bank of China said it will cut the amount of cash some banks must hold as reserves. Timing the announcement to help shore up domestic financial markets, which of course been kind of hit by these renewed trade uncertainties. So this idea of again scaling down, cutting the RRR, the reserve requirement ratio, to almost release some liquidity into the market in order to make sure that this doesn't equate to tightening of financial conditions domestically. So yeah, that again, the trade data was out last night and yes, exports fell, but I don't think this is a kind of panic situation. I think that is very much largely reflected on the markets this morning in respect to— we've now stabilized after the rout yesterday. If anything, European stock futures with the DAX were up about 20 points already this morning, still below pivot though in the futures. Other things we have: Theresa May, what's the latest here? Well, if you were in the market yesterday, you you're pretty much up to speed. But to give you a summary for those who weren't, May is gonna face lawmakers, of course. It's Wednesday, so the regular PMQs, and she's gonna come under some severe pressure, I'm sure, just given the performance of the local elections and the pounding that both the Conservatives and Labour, the main opposition, took in those local elections. The chances, though, of reaching the deal now with Labour looking ever more diminished at this point. And basically they've kind of thrown in the towel. It's looking ever likely then that we're gonna have to take part in these EU elections. And that means then the next now definitive date is going to be end of June, early July, when it's going to be the point of which newly elected MEPs would take their seats on July 2nd. And so that's now the new deadline to try and get it done so that they don't have to take their seats. A few things here around this is that obviously, just given the performance of the local elections and the inability to form a New Deal, and if anything looking to move on potentially the red lines to appease then the Labour Party, particularly on this issue of the customs union, which goes right against the key demands of the Brexiteers, And that is media reports that Graham Brady, the chairman of the 1922 Committee, reports then yesterday that he would tell Theresa May to spell out a date for her departure at a private meeting yesterday. The Daily Telegraph reported that Brady used the talks of the Prime Minister to set a deadline of 4 PM today when the committee's executive is due to meet. For May to provide a roadmap for her quitting. Now again, I wasn't on the desk yesterday afternoon, but Sam did message me and he said there's some rumors going around about Theresa May's resigned. It's always difficult when you're not in front of the screens. I mean, my job typically to be, you know, right finger on the pulse. I need to be watching things pretty much constantly in order to keep you guys abreast of the latest information. So when I'm at the desk— when I'm off the desk, I should say— I'm a little bit reticent because, you know, I haven't got everything available at my fingertips. But I still think the prospects of her resigning immediately are close to none. I really, despite the hype that it receives, I really don't see it happening anytime soon. Um, it's kind of been ratified by the spokesman of the Prime Minister who said she's set out a timetable for ending her premiership in a statement to Parliament on March 29th, and her plans have not changed. I.e., the fact being that she still needs to see out this current process before then agreeing to more definitive dates. So again, internal politics going on. I don't see it as increasing at this point any threat to her leadership at least for now. Other things that we've had— might have realized there's been some movement in the New Zealand dollar overnight. This came, and what you're looking at here is a bit of a visual graphic of some of the key areas of the New Zealand economy. Here you've got the, uh, kind of orange line in the middle, and as you can see here, we've taken a slight decline from 1.75% to 1.5%. So as expected by the majority of analysts, the Reserve Bank of New Zealand have in fact cut interest rates. So bucking the trend of what we saw from their neighbor Australia, where the RBA chose to keep rates on hold, the RBNZ did cut by 25 basis points to 1.5%. As you can see here, quite clear to see that their economy has been continuing to deteriorate. The black line at the top showing annual GDP growth, which has just been consistently slowing now for a period of time. And you can see that inflation conditions are easing at this present point. So the RBNZ said they expect inflation to remain below target until mid-2021, and the central bank said the outlook for employment growth had become more subdued. So again, that idea like what has been the focus at the Fed about the tightness of the labor force. That's not the case in New Zealand, and so they're not then expecting inflationary conditions to pick up any soon, warranting then this move in rates, uh, lower. Final things then I wanted to mention were oil. Now interestingly, just going back to a daily continuation chart, oil's obviously been seeing now for about last week and a half, a pretty decent pullback of sorts from the most elevated point that we got to, which was at the end of— or 23rd of April. We got up to a high point of around $66.60. However, we have retraced now back down a good $6.50 or so, finding support pretty much to the tick at the $60 handle. Now, $60, obviously you've got the psychological level. Interestingly, we haven't yet closed, um, below the DMA here, uh, this being the 50 DMA, the red line. So we have made— we've broken through but bounced each time to close above that. And you've got this area here at 60 as well as the previous resistance and now the previous test that we had. So 60 remains a, a pretty big barrier both technically and psychologically. And for me, still from the, the balance of fundamentals, I do think that there's enough there to support this price at around that level for the moment. Now, a few things here, just wanted to talk you through. Oil price is actually rising this morning. We're up about 56 cents, so we've managed to recover back to around the 62 handle. Sanctions against crude exporters Iran, Venezuela, as well as ongoing supply cuts by producers have left the markets relatively tight, just as crude imports from China rose to a record for April. So of course, with the impending sanctions going to kick in on Iran specifically, China, who is the, the country is the world's largest oil importer, and they are also the largest importer of Iranian crude. They have now basically brought up their crude oil imports in April to a record for the month at 10.64 million barrels per day. That's an 11% rise from the same month last year. So a little bit potentially of front-loading, stockpiling ahead of that, given the uncertainties that could come. Albeit Iran have said actually despite the sanctions, we're going to keep selling. There's nothing you can do to stop us. Hence the threats then that we'll disrupt the passage of crude in the Hormuz if you try to stop that from happening. So again, I think there's enough, um, supply-side risks to keep the price elevated. And if you layer in the weakness on the demand side, everything I've been talking about with my summary of the trade negotiations is that ultimately, Despite hitting some road bumps, I do think this trade deal continues in a positive fashion, and in the end there is a positive outcome. And so as long as that holds true with this looming threat of, uh, kind of ongoing tensions in the Middle East, I think that's enough of a cocktail of factors to keep the price of oil supported around the $60 point. Interesting, uh, graphic that I did see, and Let me just blow this up a little bit because it's the really the left-hand one that's the most interesting. And this was looking at US, Russia, and Saudi crude oil production. And it's just fascinating to see just the phenomenal rise of US oil production. And obviously it's gone through two real distinct different periods. It was around 2015 when US law— let legislation changed under the Obama administration, which allowed the US for the first time to export beyond its own shores. And then obviously Trump coming in and this kind of boom in the shale industry that's resulted in this, you know, record level in US output, you know, comparative to where we are with Saudi and Russia, both of which of course are particularly the former Saudi, the green line, you know, looking to meet the demands of their Vision 2030 and, you know, generating the relevant amount of income from the selling of oil. You know, the last thing they want to do is be paying heed to the Americans and pumping up to push the price down. So, you know, Russia's probably been the most steady. I mean, it's just been an incremental, fairly smooth increase from $10 to the current north of $11 that they're pumping at the moment. Saudi has had its ups and downs, but it's, you know, US, when you look at it in comparison overlaid on a chart like this, it's just phenomenal how quickly the oil has come online. Final thing I wanted to mention was you have had some German data, and I do like to keep you guys abreast of that because Germany has been a bit of a focal point economically, has been struggling to some degree. So this further would reflect an idea of potentially bottoming out. This is March data where industrial production came out this morning at +0.5%. Expectations were for -0.5%. So two back-to-back months now of growth in this indicator. Has this moved the market? No. But again, I think it's important just given the macro focus that we've had on, on European growth concerns and particularly that emanating out of, of Germany. In terms of the calendar for today, um, it is relatively quiet. Um, few things that you need to be aware of are really oil inventory numbers coming out this afternoon as per usual. Um, so we'll recap, um, the APIs. I'm sure I'll put them in the chat when Sam comes on so you can have a look at those numbers. Um, Other things then to be aware of are, did we— any updates on Brexit, any updates on the trade front, so any further tweets of course from Trump. But I think we're pretty— I think markets have pretty much baked in now the current status, which is a fairly passive, more positive response and fairly level-headed from China. And I don't think Trump can do a hell of a lot more now to up the ante in that respect. Um, speakers though, few people to look out for. Bank of England's Ramsden, 9:15, speaking again at 10. ECB's Draghi, um, always important to look at the context of where these guys are speaking to get an idea of what's the probability of them saying something that could be market moving. Now Draghi today is at 12:30. I would be mindful of that, but he is speaking on the occasion of the Generation Euro student awards. So typically wouldn't say anything direct on policy or the economy, but the president is speaking, so probably warrants just, you know, 5% of your attention at that point in time, just in case. Fed's Brainard, voter, is going to be speaking at 1:30 as well. Earnings-wise, again, I'll update you in the chat room of anything really significant that's, that's come out. Siemens this again, I'll pop that in the chat, a roundup of some of the European ones. But overall, from a US perspective, it is very quiet today. Some of these companies, mid-cap, some even bigger, but again, nothing that's going to be an index futures moving kind of capability. I would say from that regard, you definitely— as you saw yesterday, it's the trade war which is the overriding macro kind of focal point at the moment. Okay, that's it for me. Let me hand you over to Sam and I wish you a good day. Thanks very much.

Hi guys, hope everyone is doing well and yes, we'll reiterate what Ant said, what a game yesterday and congratulations to any Liverpool fans. Hopefully winning that will make you understand stand that we can't have you winning the league now. But, uh, we'll find out Sunday. Having a look at, uh, at the S&P, I came in this morning and Anthony said, would you buy down at 65? And I said, yeah, I think a great level. Little did I know that last night it actually had worked. So priorities, I guess. But looking at that more intraday now, I think the I guess the, the high that we had yesterday morning, pretty much on the brief. And if we just put that down to 15 minutes again, or across the, the board, the Dow Jones, the NASDAQ, all absolutely identical. And just coming to where we had had that previous support, uh, what would have been Monday evening, and that acted as such good resistance. I'll be keeping an eye for anything like that today as well. 2,900 on the futures, just a bit above, but Uh, just above that, 2903, for me looks like quite an interesting level for the bulls if they want to take control of this market again. We're going to want to get back above that, so I'll be keeping an eye on 2903. Obviously the pivot and some resistance from yesterday is holding firm for now, but if we were to push on and maybe the second test of this level would, would see us do that, 2903 would be the area where I'd be more comfortable with that and In fact, this low is the low that we, uh, that we see. To the downside, if we can get below almost the low of the day, but 2881, some support and resistance from last night before a breakthrough, that would be an area where I'd be comfortable to say, you know what, maybe we are going to get another test of these, uh, these lows that we saw. Uh, the NASDAQ and Dow Jones so similar, uh, as mentioned, that high from yesterday pretty much during the, the briefing, I think it was. Yeah, you can see how it acted as really good resistance there in the NASDAQ. That low was a good technical level from yesterday as well. And the Dow Jones, just to reiterate that point of really strong resistance on what was a good support level, and those points all just above the pivot, uh, for the Dow Jones, I would say you're looking more so at, uh, 26,055 around that sort of level, uh, to be keeping an eye on this morning. Uh, the, the dollar slightly worse down on the day, but the pound is not taking advantage of that and actually just pushing to those lows. And I was looking at this more of a longer term chart yesterday when sending out the, uh, the strategy report, and when trying to talk about the, the bias, I was I said neutral, and just because not quite sure how much further it can go for, for now. I think probably worth, you know, we're not too far away from any of these trend lines, or potential trend lines I should say, coming in, uh, starting on that, that low, the 26th. You can see that would be almost testing now. So if you are short, along with yesterday's low, good area to take a bit of profit. You've also got the the previous high of the third. But if we were to get below that, then the 1.3040 area, which has been such a good level historically this year— I'll just bring that in and remove the pivots on the futures. Anyway, you can see every time we come back to this area, going back to, well, what's that, beginning of, well, middle of Jan, you can see acted such good resistance or support on multiple days. So if we were to break that, that trend line from the 26th, then I think a run back down to 130— well, 30, 40 as a zone could come quite quickly. So for the pound, an interesting one to see what happens around here. The high that we had back on the morning of the 3rd, yesterday's low, and this trend line all starting to get quite interesting for, for cable there. EUR, which had a decent push lower yesterday to find support, uh, on the S2. Every time this market seems like it's about to recover, just gets brought back down to earth. Last couple of times this happened, it's been by one of the central bank meetings, either the Fed or the ECB. We have actually pushed higher this morning on that dollar weakness. Quite a key zone just above where we're trading that I'd like to keep an eye on the levels coming in around 1.1254 to 68. You've got the R1, you've got yesterday's high, you've got the high that we had back on the 2nd, and some support, some support on the 1st before that breakdown last Wednesday, uh, would be an area that I'd, I'd have marked up on the chart, um, as well. The Kiwi and the Aussie, well, the Aussie had a little reaction to the cutting of rates there from the Kiwi. You can see the spike, but in central bank fashion, we've pretty much recovered that whole move. So I wouldn't be looking to, you know, get in too aggressively there. The reaction on the Aussie limited and not too far away from its high of the day, but that range, other than the correlated move, is very small for the Aussie. However, that high of the day, which has acted as a pretty good price action level over previous sessions If we were to get a breakthrough of that, you might see an extension, uh, higher. The lows acting— well, starting to act as a potential trend line. If you can see here, we didn't quite get that test, but that low of yesterday evening held quite well. So that's something that I would have for later on if you are in favor of this market making another low. Obviously, that historical low from, uh, previous months— if I just bring that in coming back to the beginning of the year, held, uh, or sorry, I should say broke. And we're not too far. There we go, put that on. You can see held initially on the first couple of tests before breaking through, but the failure— and this similar to gold in that it failed to break it back above one of the support levels that then turned to resistance. So if you are still with the the bias that this market is going to go down. Looking more intraday, it might be worth having that trend line on and waiting for a break of that. So for, for that market to be a bit more patient. Looking at gold, and we'll come on to oil before a general outlook of the markets. You can see with that dollar weakness is pushed higher, uh, yesterday to into the back end of the session. We were pushing on for gold as well as perhaps it was reacting to equities coming down quite strongly. Key resistance points to be aware of. You can see just how important this whole area has been. You've got the high of the 1st, 1289, and just above that, 1290. Really strong resistance going back to the 26th, but also such good levels of support previously. So if you're, if you're bullish gold or you're waiting for a trade opportunity And of course, if you're bearish, what a level this is to, to have marked up and still waiting— I should say, for the reaction might be the, the favored choice. But if you are bullish, waiting for it to break above that level would be the preferred option. That double bottom there, of course, and this could be the, the neckline. So a break of that could see a bit of a relief rally higher. Oil this morning just drifting to the upside. Just actually, as we're speaking, just gone above 62 on the futures. The API was a bit confused. I know Ant's put the, uh, the, the numbers into the chat so you can see, although there was a bigger than expected build, the gasoline was, was a draw, and it was overall relatively mixed. Same sort of process if you are bearish this market. Is there any trend lines that you can get on? You can see we're sort of drifting higher, so a break of that potentially into the afternoon or post-DOE might interest a few people. But it's just starting to get a bit messy, isn't it? I remember yesterday in the briefing saying I wasn't too sure on oil, perhaps best to wait for the back end of the day or the US session to come into play. And just having a look at this, it's starting to, you know, get a bit choppy around this area. However, $60, obviously a psychological handle, and offered a good level of support on that first test. Does that hold? Might help S&P push higher as well. And just having a look at the, the grand scheme of things this morning, because obviously, you know, what happens in European equities is they move lower in correlation. Yes, they could of course help the S&P and the NASDAQ and the Dow push above their pivot. So just having a look at the, the DAX here, Euro Stoxx coming up to a similar level, just testing the pivot. But importantly, if I just draw this line on, you see, this was the low that we had back on Monday. So can we get through here will be key to whether the S&P, the NASDAQ, and the Dow can get through their pivots as well. If we do get a confirmed break, well, that level in the S&P, just to finish up on, 2903 that I'd be focusing on, or 02.5, uh, where we did have some support initially yesterday. And you can see it was also the low on the second the high of the morning of the 6th as well. So key level to have marked up on the chart. As usual, any questions, uh, please do let us know. Just having a quick look over that calendar once again, just, uh, one second. There we go. The morning, we've sort of had the, the data points, and we come into the afternoon, other than the DOE, it's gonna be relatively quiet. Got a couple of, uh, Bank of England— well One Bank of England speaker at 9:15 and 10 o'clock before Draghi at half 12 might offer an opportunity. But other than that, it's going to be relatively quiet, although with equities moving yesterday, don't be too surprised to see some half decent price action in that. Any questions, as mentioned, please do let us know. If not, we'll catch you throughout the day.