Market Up On Trump Plan & Drug Hopes

Okay, very good morning guys, Anthony here. Welcome to the rundown for Friday the 17th of April. Please remember to like and subscribe to the channel and please do spread the word about our YouTube channel. Hopefully this kind of macro fundamental update is a little bit more unique to what you would normally see online for, for kind of trading sessions. Hopefully it helps, and obviously thank you for the engagement for those who've been leaving comments over the last few days. Monday we've actually got our first kind of fully online intensive program we're running for a week for a, for a batch of kind of new traders. So if you're interested in that type of thing, just check out the Amplitrading.com website. But looking at markets this morning, obviously some pretty big developments overnight. I guess one of the benefits of basically shifting my setup from home, or from like the office to home, is that I just basically leave my, my systems running 24/7 at the moment. So I'm always kind of tempted, I kind of go to the toilet, then pop off into the study and we'll have a quick look, and you can kind of see what's going on. And definitely, yeah, quite a big rally that was seen after the closing bell on Wall Street, as I'm sure you, you've kind of seen as you've come in this morning, and a gap up when Electronic trade reopened and we've kind of come off a little bit from the highs, but we're still very elevated. You can see the Dow future in the top center or in the center, I should say, up about 700, close to 800 points. S&P up about 80 points at the moment. So the DAX has kind of followed suit, gapped up and kind of held on to that, up about 300 at the moment. T-notes down 13 ticks, but kind of well off the lows of, you know, they've already come up about 10 ticks at the moment off the low. And gold down about $7 above the $1,700 level, down $24 at the moment with some of these latest moves. So overall, it's kind of a two-story event here. The President Donald Trump came out and unveiled plans for reopening of— well, again, it's this idea now we're moving to the next phase. It's kind of once we've hit peak, of which we're looking like that is the case now in the areas in in the US and obviously in London we get that plateauing. But now it's all about what markets are sensitive to is the plan coming thereafter for the winding down of the kind of the stringent nature of the lockdowns that have been applied. And what is that going to look like? Because the sooner we can get back to some degree of normality, the more quickly we can address the severity of the economic downturn. Big problem though, and you know, if you are interested Let me just quickly show you, if I transition my screen, a couple of interesting tweets I was doing yesterday which you might want to just check out when you get some time. Uh, the first one was this. I found quite a good table from UBS, uh, and this was something I've been kind of looking for in the last day or so. A lot of questions I've had from various different traders is about what to watch post the peak coronavirus, and I thought this was a nice kind of summary where it gives you a scenario description and criteria for the EU and the US. So when are suppression or mitigation restrictions lifted? So this is obviously what a lot of countries have been extending at this point in time, but we kind of know that really early to mid-May is where a lot of these European countries, for example, and probably likely the UK included now, if being extended for 3 weeks will likely come. When is the medical cure likely to be available? What would be policy responses? When would consumer activity rebound? And a second virus wave and what potential impact could it have. So these are all the key things that I'd definitely be looking for. One of the main things that I thought was quite interesting yesterday when I was just observing some of the mainstream media was, you know, the kind of, I think there's a little bit of the notion of reality starting to kick in about what ending of a lockdown really means. Probably a slight bit of misconception about ending a lockdown means, right, that's it, we all go back to work and so on. I would say it's going to be very far from that being the case. From the contacts that I talk to, particularly people in mainland China who obviously have been at quite the extreme end, if you like, of that situation, even in some of the hotspots, people are only going back to work for potentially 2 days. Offices in certain industries are being manned where there cannot be still congregations of people in any type of large sizes. The actual amount of people in the office is not allowed to be at 100%. People are still encouraged to work remotely. Certain different situations, like in the food industry, for example, being told about planning of potentially controlling the numbers of people that can come into a restaurant at any one point in time. So all of these different things mean that it's a very graduated, multi-phased approach because a secondary wave of viruses picking up is going to happen, unfortunately, because the time frame to getting a vaccine through clinical trials, approved, and then distributed globally is going to take some time. And this is where then this kind of matrix of kind of upside, central, and downside scenarios is going to be quite key then as to ascertain future price movement of assets over the course of the the next 6 to 12 months as we try to work this stuff out. But on that note, obviously one of the big things that did come out last night and has been a predominant factor for also lifting markets, it's not just about Trump and this kind of idea of returning to work, but this came out, which was Gilead Sciences, a US firm, they've been running trials and early peek at data on their coronavirus drug suggests patients are responding to treatment. So this is kind of the one of which most people are saying has underlined this, the, the bounce in markets from overnight. The timing was a little bit off when I was looking at things kind of live last night, but definitely it kind of fits that narrative. So yeah, for sure, this would be obviously a huge relief, obviously, from a, from a health point of view. But a couple of things to be aware of here. Um, the study that they're talking about did not have a, what we call a control arm. Uh, and that basically is where the results cannot be compared against patients who did not receive the drug. And so what's been quite clear, and people have been stressing from the kind of medical community, from what I've been reading this morning, is that this is definitely a, uh, a positive thing, something to be mildly cautious optimism about, but it should not be treated as conclusive but just hopeful at this stage. And so still quite a long way to go. So I can't help but feel at the moment the way markets generally have reacted, which is, you know, big move up in overnight trade, I'm not sure if it's just perhaps a little bit overdone. Markets tend to overexaggerate this type of movement, particularly when it's such an emotive subject of what we're dealing with, with COVID-19 at the moment. So I think you're already seeing a little bit of that with the slight fade in stock futures. T-notes, as I said, have already a decent amount off the low. I mean, we were trading down at 138.17, we're now a good 10 ticks above that, coming up to the— around the high of the, the gap down seen at reopening of trade last night. So a move back up in toward the low from this time yesterday and then a gap fill, I don't think would be too surprising. Um, in addition to the S&P and US indices, I'd keep an eye on that. Any breakdown of that R1, uh, you could see a little bit of a pullback. And if that were to materialize, I'd probably be keeping an eye kind of in that banded area here between the opening of re-electronic trade low and that high that we had if I just— the high that we printed back on the 14th would be an area to keep an eye on. So yeah, just worth bearing in mind, you know, just being someone who's been exposed for news for a long time, I don't think this is too quite a common time of day. Perhaps probably exacerbates and helps the movement, but I do feel my initial interpretation is a bit of an overreaction. Obviously I do wish Gilead all the best, and I hope they do fast-track a drug. But from a reality market perspective, I think we're quite away from that at the moment, this moment in time. So just quickly going back and cycling you through the headlines, uh, Trump has unveiled basically a 3-stage process for states to end coronavirus shutdown. So kind of like what I was referring to with that China example, um, What I thought reading his statement, I thought was, was a classic Trump move. So Trump before was saying he would take total authority about the decisions of when certain states in America would reopen and what that would look like and what the timing would be. He has now flipped that and he's backtracked on that previous commitment, and he's basically saying now that he's passed recommendations to governors governors of the states individually, and it's for them to take action. So again, you know, it's a classic Trump move to disassociate himself from any potential accountability if this goes wrong. So he gets to give the kind of, this is the plan, this is what you should be doing. The governors take on full risk then for the consequence of that decision because Trump can now hang them out to dry. So Doesn't surprise me, to be honest. And the backtracking of commitments, does that water down anything, people's perception of him? No. I mean, this is the kind of what he's managed to create as kind of freedom and flexibility to chop and change, given that it's pretty much what he's done from day one. So, um, yeah, going forward then, Trump's guidelines could allow states and employers to abandon within 4 weeks most social distancing practices to curb the coronavirus outbreak. One company which actually shot up quite a lot last night, I'm not sure if you saw it, but was Boeing. So not only did Gilead Sciences shares rise 10% after market, Boeing shares were up 8% after market, and after saying that they will resume commercial plane production at a plant near Seattle next week. To give you a kind of bit of context there, that's about 27,000 people that will return next week to work on the assembly lines. Now, if you remember from about, what, 3, 4 weeks ago, this is— was similar to what we were talking about in Wuhan. Wuhan is quite an epicenter of manufacturing activity when it comes to, let's say, the manufacturing, exporting of goods in China. And one of the risks here was about these kind of blue-collar workers being in these compact kind of assembly line conditions? And would that then accelerate this fear of the size of a second wave of coronavirus? Well, you know, one thing I thought was quite interesting here— I mean, if you actually look at the spread of the virus across the US, obviously it's the eastern border that's really taken the brunt of this, the state of New York, of course, as we know. But if you actually go over to Seattle, of course, in the state of Washington, if I just move this over here, Seattle was one of the, um, the kind of hot spots definitely on the, on the West Coast. So quite interesting to see how this actually goes down when Boeing do in fact take nearly 30,000 people back to these assembly lines and how that's going to play out. I think that could be definitely something to watch. I do also think that, you know, Trump outlining what he did yesterday, it's probably going to change. A lot of it is lacking a bit of details about the idea of testing and when is that going to happen, how is that going to be executed. So again, as we've kind of said throughout this week, there's a little bit of political management going on here from the administration's point of view onto the perception of the public, as much as there is trying to get the economy kind of back reopen to that extent. So I'd expect lots of changes in the road. And another thing is, you know, with all these dates that these European or UK countries keep putting forward, they're all going to be broken promises. We've already seen this, you know, and that's not me taking a pop at the politicians. They're doing what they're trying to do, but the reality of the situation is that this is going to be a quite a rolling, long-term change to our lives for a prolonged period. I'm sad to say. So let's move on. Let's talk about some other things. Final company I wanted to mention— we've talked about Gilead, we've talked about Boeing, up 10% and 8% respectively after market last night. Roche, one of the largest companies in Switzerland in the SMI index, and they aim to start selling COVID-19 antibody tests next month. And actually, this could be something quite interesting to keep an eye on in terms of the company shares, but just generally overall in terms of the actual virus, because obviously a key component before we get to a vaccine, which is most likely several months away, is going to be the ability for governments to really ramp up their testing. The more people you can test, the better, uh, you can attempt to contain, control, delay the onset of these secondary waves in order to then get to the point of when the virus or the vaccine is then available. So that would be a big lift for that, for the individual company in itself, but also in terms of the ability for countries to tackle this, this obviously unprecedented issue. Looking elsewhere, um, just get up to speed with all the other headlines. Um, you've had China suffer historic economic slump with a hard recovery ahead. So GDP shrunk 6.8% from a year ago, a little bit worse than expected, but the actual bottom end of the range was the most pessimistic estimate was for a contraction of 11%, so nowhere near that. Um, and they had some other figures that came out. So the GDP was the worst performance since at least 1992. Retail sales slid close to 16% and fixed asset investment plunged 16.1% in the first quarter. So yeah, pretty stark and dire readings. However, markets didn't even blink, and that's largely because this type of, um, kind of economic reality is just fully priced in, particularly when it comes to the likes of China over that period of Q1, where if you remember, it was the predominant, you know, amount of Q1. Not like in the Western world, which has kind of been the mid to back end part of March. You know, this has been ongoing for a long time now in China, so everyone was expecting this to happen. The next domino effect here is that, you know, comparatively to, let's say, the UK and the US, and European area. China has, has done quite a lot, but probably nowhere near as much in terms of the fiscal and monetary assistance that it's provided. And so you can probably expect more of that—targeted liquidity injections, these types of things—that will come from the PBOC, I'm sure, over the coming days and weeks as they try to kind of kickstart the economy back into action again. Another thing I thought was was quite telling more than anything was this. Oil prices, you know, have kind of bumped around close to this, this two-decade low. And obviously we still remain heavily down from where we were from the highs around this time last week, really on the back of the OPEC meeting. Um, generally OPEC+ have been quite quiet, and I think that's probably a result of they don't want to over-speak because then if they try to verbally intervene, like with every ebb and flow of a dollar here and there, markets quickly become desensitized to what it is that they say. So they're very cautious and mindful of that. But this is the first time now, having gone about a week and prices really haven't responded perhaps in the way they perhaps would have wanted. We've had the IEA come out, we've had OPEC come out with their kind of monthly reports, and they're all pretty pretty telling in terms of the demand shock that we're going to see. And so basically Saudi Arabia and Russia have come out and said that they will continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if they are deemed necessary. So yeah, this is again, as I've said in many previous kind of episodes of our briefings over the, over the months when oil has been coming lower, through the kind of March period is that this is the kind of staggered approach again as to the way of which they work. So prices start to be suppressed. They then put out the firing shots of a verbal warning about the potential to intervene in the market. They test the water, see if the market does respond to that commitment. If it doesn't, prices keep coming down and then they start talking about the fact that they're going to hold actual conversations or meetings That's kind of your secondary alert phase. And then you get down to the fact that they have these meetings and then we look out for any tangible result that comes of them. So at the moment, I don't think the market's gonna bite. I mean, what they're saying generally is what they said last week, but I think it's almost inevitable. I would foresee at some point them tweaking this deal, whether that's the numbers, individual quotas, whether it's the timeliness of how they're doing it, because remember, it's kind of a staggered approach with this 9.7 million for 2 months, then it drops down. Perhaps they can move those goalposts a little bit so it has a little bit more bite in terms of the, uh, the impact on the supply side. We shall see. But I thought that was quite an interesting headline that came out. Um, final thing before we look at the calendar, I was asked to comment on this briefly. This was an article that came out in the FT yesterday, and it was talking about unusual price swings around daily FX fixes sparking alarm. So Basically what we've been seeing— I think they've got a good graphic here actually, let me just— yeah, it's this one here. So what you're looking at here on these, these lines are basis points, is the axis on the right-hand side, and then the bottom axis is time. So 4 PM is what we call the London fix in the FX market, and the currencies generally that have been under, under watch have been the Australian dollar the British pound and the euro have started to basically behave quite oddly in the run-up to London's fix. And that's the most commonly used benchmark in foreign exchange. So basically, the fix is a 5-minute period of trading used to calculate daily exchange rates, and that rate is incredibly important. And even a basis point here and there can have a monumental difference on then what we base pricing on certain derivatives on and so on. So What we're seeing here though is different months. So you've got February and you've got January, and then from an actual basis point movement over the time frame— so you're looking at this run into the fix at 4. March has been way higher, you know, you can see that kink in that, that green line is way bigger than the pink and the blue line or the teal line. So what this would suggest is perhaps a little bit of manipulation at play. Quite frankly, doesn't surprise me. It's happened throughout my entire career, this type of erratic movement. You know, people have been caught and punished. It still happens. The only thing I'd say here is this is one of those things that I often encounter when I talk to, say, retail, not institutional people. Retail traders love to blame hedge fund managers or banks for manipulating prices. Because as a, you know, as a guy, retail guy, you might be sat there and you're just kind of quite happily in a long position in the euro and it's all looking great, and then all of a sudden the market just dumps, stops you out, and then reverts right back to where it was straight after the fix. And then the market continues as you saw fit and you feel absolutely robbed. Well, the key here is that you've got to take— you've got to respond to what it is that these patterns that you see. If you're trading intraday, if there is anomalies of high excessive volatility around the fix in potentially some of these currency pairs that you're trading, then don't trade around the fix. Simple, you know. So you've got— that's the only advice I would give you. If you do identify these patterns, you've got to respond to it, don't be angry, don't be kind of stubborn and think, oh, it's these hedge funds playing the market again. You know, these things do and will happen. You know, you can't fight it. You know, it's kind of like that idea of your broker knows where your stop loss is and he stops you out to the tick kind of thing. It's like, look, you've got to deal with it. You can't be obsessive about those types types of things. It's going to happen. All you can do is learn to minimize the potential exposure to being in that type of situation in regard to the volatility around the fix. So yeah, just a few words of, I guess, advice in that respect. Looking at the actual calendar for today, what have we got? It's pretty quiet actually overall. Eurozone CPI, these are final numbers. So in terms of the US session, it is pretty light. So perhaps then we'll get a little bit of focus on a bit more discussion around this Gilead drug and, and then for more forthcoming information about it. Um, one thing that I was tweeting, and I'm just going to say this because we've got the Baker Hughes rig count coming out later this evening for any of those oil traders that watch that, and obviously this could be quite telling because how rapid the decline in operational rigs in America could well be a telling sign then for how quickly, naturally, given the low price of oil the production rates of North America generally start to drop in, in the case of the US. One interesting thing, I, again, a tweet that I did if you want to check it out, um, last night was I saw this, which was a company which is a data rig provider called Enverus, or Enverus, and they were talking about the US oil rig count dropped by 74 to 567 the week ended Wednesday. So since mid-March, the US rig count is down nearly 250 rigs. So since mid-March, so a month, US rigs are down about 30%. You know, that's a, that's a pretty big number. And if you want to check it out, there's some information here on infographic that I found via Platts that could be quite useful. But otherwise, do be aware you've got the option expiries across the various different index or indices in both UK, Europe, and in the US today, littered throughout the morning and the afternoon. Otherwise, that's it. I'm going to let you guys get on, have a good day. If you have any questions, just leave a comment. If you need to look at any of those tweets I responded to, there's my handle. Don't forget to like and subscribe to the channel. Take care, enjoy your weekend with your loved ones, and I'll see you back Monday morning. Thanks very much, guys.