Markets On COVID Watch As Trump Exposed

Very good morning, Anthony Cheung here, the head of market analysis at Amplified Trading. It is Thursday the 18th of June, so I hope everyone is doing well. Don't forget to like and subscribe to the YouTube channel if you're watching the briefing there. We have my daily macro updates, you've got Sam's weekly look ahead on a technical analysis perspective, and and then Eddie's kind of deep dive into some of the major macro themes that he releases over the weekend. And also, if you would like updates during the day, just generally insights and useful infographics and things of that nature, then check out my Twitter handle below. But looking at the charts this morning, and, and as you can see here, I've got a prepared map of coronavirus in the US, but let's just jump to the charts first and have a look at how sentiment is at the European Open. And fairly, I'd say fairly flat, perhaps ever so moderately negative in the overnight session following generally the lower close that we had on Wall Street. Continuation of focus ongoing on some of the corona kind of hotspots, particularly in North America, but also still monitoring in China. And that has led to then a dip that we saw into the back end of Wall Street's session, and then that kind of continuation that we saw into the Asia-Pacific trading hours. You can see here the S&P just forming a bit of a bottom at around what is respectively the S2 on the day, and that coinciding with around that spike low that we had given some of the volatility that was seen a bit earlier in the week. We have so since recovered So despite quite a lot of the headlines, they almost feel like they're retrospective in a sense, that they're looking back and they're talking about the virus. But, you know, looking at the charts this morning, it almost feels like the market's already over that to a certain extent. And kind of looking now at this chart, I mean, I'm just looking at the S&P here, it does feel like we're, we're relatively range-bound at the moment, and that kind of dictated by then the ellipses here at the top and at the bottom. So, so right now we're kind of right in the middle of that range for the time being. So elsewhere, I mean, gold was ticking a little higher through Asia-Pacific hours, but it has backed off to a certain extent, uh, just given some of the, the pickup that we've had in equities. A bit choppy here more recently, but a trend line I've just had on over the last couple of days going back to the 14th, the reopening of trade that we had, and relatively well in terms of its holding. But again, I'm just kind of conscious of this range high area that's just kind of capping some of the price activity over the course of the last couple of days, really this week, which is more around the 39,740 type mark. And then in the currency markets, The DXY is a touch softer, uh, and again in fitting with the fact that it's seen a bit of up and down movement. But all in all then, the major pairs just ever so slightly higher. The sterling currency obviously awaiting the Bank of England rate decision, uh, not really looking too interesting at this point. If anything, again, kind of similar in extent of a near-term upside constrained by a trend line and resistance from some of the highs that we were seeing in late US or late London hours last night and the Asia-Pacific session. Oil markets, again, the correlation here with equities is still relatively tight in regard to the two moving in tandem. And so finding a bit of resistance near term at the pivot level. So people not really getting too fazed by the infantry data. There really wasn't too much in it, to be quite honest. Yesterday, and from what we've seen from the APIs and the DOE, it's been largely ignored, and I think quite rightly so. I think there's bigger, more clear present risks on the demand side with the tracking and the ebb and flow of people's confidence about the second wave virus and its potential impact, what it would have consequently on energy products, than it is on these, these kind of short-term inventory numbers, which albeit are not really that far away removed from expectations with those numbers that we've seen this week. So yeah, just having a look then, equity markets, as I said, just seeing a bit of a pickup. So, you know, one of the main things I'd suggest here is just being quite objective in your, your analysis and not again getting too influenced by kind of mainstream media, which is definitely kind of jumping on the bandwagon a little bit about the COVID situation. Because looking at the charts this morning you know, as I speak right now, equities are ticking higher, gold's ticking lower, and T-notes are moving lower. And so this would all be indicative of more risk appetite than it would be of people getting spooked at this point. So despite the dip yesterday, it's been a fairly similar pattern to what we've had really the last couple of sessions. You know, we had back on, uh, what, 2 days ago, so on Tuesday, we had that rally, then quite an aggressive dip and recovery. Somewhere like the same now. Yesterday's session, a dip and recovery before then fall quite late and then repeat once again. So at the moment, I think the market is trying to, as I've said all this week, weigh up the, the prospect of tracking the virus against then the phenomenal response that we've seen from central banks and in stimulus measures from, from governments. And so we're kind of respecting a relative period of consolidation for the time being. And I think you've got to tie that into then your strategy and approach for the day, whereby then it's probably not the most appropriate thing to just be looking for big outright clean directional moves at this point where the market is in somewhat, uh, of a, of a status quo until we see something new development on one of those bigger major themes. So let's have a look at a couple of the headlines and get you up to speed. So what is the deal with the corona situation at the moment? Well, this is coronavirus in the US, the latest map count. So just looking at the US here in terms of cases, and then the 7-day average, which you can see is seeing a slight uptick here in the most recent days. And if we were looking at the hotspots in the United States over a 2-week period, quite familiar to what we've been looking at over the last week, predominantly as the south, the southeast, but namely Texas in particular, Florida. But if you were to go further to the northwest, then looking at around Oregon region as well, that's seen a bit of a flare-up in cases of late. So again, looking at the trajectory of these key areas, uh, obviously Texas, Florida Arizona, Alabama are some of the areas that have seen the most steepest inclines and probably warrant the ones that are worth tracking. When typically London time, we start to see the, the daily kind of update and percentage increment changes at around half past 3 London time is when they generally have been hitting the newswires. Texas reported an 11% surge in hospitalizations, which was the biggest 24-hour increase since the 4th of June. Texas reported a 3.4% jump in new cases yesterday, exceeding the 7-day average of 2.7%. Florida was up 3.3% from a day earlier, comparative to the 7-day average of 2.8%. So those two areas are kind of the, the focus points at the moment. On a national level, the 1.2% increase— so we're looking here back to the original— was in line with the daily average increase really of around 1.1% over the past 7 days. So looking at away from some of those hotspots on a national scale, um, it is relatively in line. What has Trump said? Well, as you would expect, Trump saying that coronavirus will fade away even without a vaccine. So obviously this is completely as expected. He's going to come out and try to defend the situation He said, "We're very close to a vaccine. We're very close to therapeutics, really good therapeutics," of course, quoting him. And that was on a Fox News television interview that he did yesterday evening. So yeah, Trump's really got his work cut out at the minute because, you know, just before I go on to Trump and some of the difficulties he's facing politically at the moment, I don't want to talk just one side of the book here. Yes, Florida, Texas are looking, looking quite, I guess, challenging from a control of the coronavirus situation. But there's some other areas that have been a little bit better. New York City, which was one of the outbreak's epicenters when you think about North America, they're actually moving still toward additional reopening next week. Elsewhere, you've had Germany, the coronavirus infection rate fell to 0.86 on the kind of R-value, and that's the lowest in a week. So there's a bit of a mixed situation at the moment. You know, Africa is not looking good at the minute, neither is Brazil. China, Beijing cases exceeded now 150, given that outbreak in that market earlier in the week, and that now is the worst outbreak since the actual original situation, um, back in the beginning of the year in Wuhan. So there's a few areas here which are a little bit conflicting. Um, I guess though the one that the market is kind of most interested in, such as how markets operate, uh, is not so much tracking, let's say, quite frightening levels of growth of the virus in the African continent, but more so in North America, just given the, the overwhelming focus on the US economic kind of situation. But yeah, as I said, Trump does have his hands full at the minute because not only is he trying to control the narrative on the virus, Trump has been accused by the former National Security Advisor Bolton of breaking the law with tell-all memoir. Now Uh, this is really interesting actually. So what's happened here is, uh, John Bolton, as I said, the former National Security Advisor, which Trump effectively fired, uh, not that long ago, he's— he published part of his memoir in Wall Street Journal, uh, and apparently it said that Trump has asked China's leader Xi Jinping during a G20 summit in Japan last year to help him win a re-election by buying more U.S. farm goods. Trump apparently also encouraged Xi to build detention camps in a certain province in Xinjiang region to imprison hundreds of thousands of Chinese Muslims. So yeah, I mean, this obviously politically— we're in an election year now and it's all to kind of play for in the months ahead, and this is certainly going to be a bit of a blow for him to tackle. So as you can imagine, he's probably gonna be tweeting like nobody's business at the moment. And actually, I'm just looking at my TweetDeck right now. Trump was tweeting 2 hours ago about wacko John Bolton. I mean, that literally is his tweet. And, you know, if he is stateside, which I assume he is at the moment— I mean, what time is it and he's tweeting at 2 AM in the morning? So you're gonna get a lot more of that at the moment as he looks to do his normal kind of tactic of distraction and, you know, kind of fake news and all this type of thing. But interestingly, what the politics is suggesting here is that obviously Trump's trying to play the strong hand against China, but then this would suggest that actually he's kind of in cahoots with Xi to get a reelection and look, buy the US farm goods. And so, you know, is it all a bit of a front? And if that is found to be the case, that's obviously going to be detrimental to the kind of narrative he's trying to spin with the kind of the arm wrestling he's doing at the moment in a more aggressive sense with China in terms of public perception. The other thing here then is obviously the human rights issue about how a certain sector of the Islamic faith are being treated, these Chinese Muslims in the, in the west of the country. And, you know, the US have been quite standoffish on that, but obviously that's a that's a big issue on, on an international, in a developed world sense. And so yeah, if he's— if he appears to be encouraging that type of activity, which obviously China are very sensitive to, but that also he would probably be condemned very heavily on that type of action. So yeah, quite interesting to see this unfold. And I was having a look at the RealClearPolitics, or RCP, which is kind of that main service that's going to come into focus throughout the next coming months because it kind of aggregates all of the polls of polls. And the RCP average at the moment has Biden now clear by about 8.5 points. And, you know, just been looking at it here since really the last month or so. And obviously the kind of reality bites on the economic situation from COVID and now, you know, questionable remarks about the actual virus, but now this latest episode as well. You know, Biden at the moment is, is clear favorite. I mean, I'm not sure I buy into polls quite as clear as suggesting that this is what's going to be the case at this point in time. But, um, you know, Trump has got his work cut out here to try and just get back on an even keel to some respect. Um, moving on, a couple of Brexit-related headlines. These aren't really moving the pound this morning. Do note you've got the Bank of England later, which will, will take precedence because none of these Brexit comments are particularly new. But just getting you up to speed, the European Commission President, um, von der Leyen, signaled that the EU would be willing to compromise on its demands over fishing and the role in its courts in any post-Brexit trade deal, but did warn the bloc is not prepared to sacrifice its principles for the sake of an agreement. So yeah, perhaps a little bit of compromise on both sides we've seen emerge over the last week. And that would mean then that the transition extension request at the end of the month is looking increasingly unlikely. And as per that discussed timeline from yesterday, looking at potential then for an August-type deal, and, and maybe then by autumn, October time, at an EU summit to get kind of sign-off on a very basic level trade agreement. Um, on that point of Brexit, Boris Johnson, UK Prime Minister, is meeting his French counterpart Macron to meet with Brexit trade talks, a key phase at the moment. So you're probably going to get some commentary hit the wires as well today. Could it be market moving? I don't think so. Um, probably just bringing this to your attention so you don't get spooked by any headlines as they come out. Macron's probably been the most resistant to showing any type of weakness or compromise over the Brexit issue. So if anything, I'm sure they will be perfectly professional to one another in a political open public sense, but I don't think that, you know, the, the red lines will be firm as far as both of these two characters are concerned at this point in time, I would imagine. With the Bank of England The Bank of England today, we are expecting an extension of their quantitative easing program. The kind of base expectation here is an increase of £100 billion, so anything short of that certainly would be a disappointment. There are a couple of banks, Nomura ING being two, which are looking for £150 billion. I even heard Citi was seeing or calling for £200 billion, so there's a little bit of a spread but the bulk looking for 100. The ones who are looking for slightly more are talking about the fact that that allows them— the Bank of England, don't forget, every month they're purchasing a certain amount of that allotted cap. And so the bigger the cap, then the longer they can commit to then doing these QE purchases without having to then go over this whole kind of forward guidance again. It buys them enough time at 150 to basically continue purchases at the rate that they're doing until around early October. And hopefully at that point then they've got more clarity about the current state of the economy, the current state of what COVID-19 looks like and so on. So it would make a lot of sense. In terms of the reaction here, remember what, 2 weeks ago or so when the ECB announced an overdelivery of €100 billion on their PEPP program, We did see actually the euro rally, which is almost a counterintuitive move, but again, it's to do with the fact that it's going to propel the speed and shape of the economic recovery, and that's seen as a positive factor for, for, uh, given the, the bleak economic situation globally that we face. So I'd probably be anticipating a similar type action if they overdeliver at the Bank of England and go for, say, a 200 increase. Then certainly I think you could see some upside there in the British pound. But again, 100 is probably the base case here. In terms of economic evidence in the UK, I don't think it really points to the idea of negative rates. Market pricing doesn't really see that anyway until, you know, way further out down the timeline. Only 1 of 43 economists surveyed see negative rates at the Bank of England by year end. So that's definitely not on the, on the agenda right now. And as per the negative rate debate, that kind of ended a couple of weeks ago after it was, you know, kind of the talk of the town. No one's really mentioning at the moment, and that's reflected in market expectations. One possibility I have read is that the Bank of England could lower the rate on its TFS, its term lending or term funding scheme, which helps banks provide much-needed credit to companies because that's where really you can assist a lot more direct, uh, the current situation would be more beneficial. It's not so much helping the, let's say, commercial bank sector, but helping actually companies get access to credit on the ground, which then has a knock-on effect in their ability to keep people employed and so on and so forth. So yeah, the Bank of England coming up, um, you know, we'll be covering it live of course, but yeah, it's not I don't really see it being a huge event, uh, to be quite honest, but obviously we'll be quite keen to watch it when it comes out. And then in terms of the calendar for today, uh, what have we got? Well, the morning is pretty quiet, uh, the Bank of England midday, and then you've got the weekly initial jobless claims from the US. And it's kind of a continuation generally of the trend. It's still in the million type figure at the moment, but slowly decreasing in terms of initial jobless And you've also got the Philly Fed Business Index as well this afternoon. So both those figures coming out at 1:30. You've also got the JMMC meeting, so the Joint Ministerial Monitoring Committee. And this is to do with then, you know, how are that OPEC+ agreement, which obviously they rolled over an additional month just a week or so ago, how is that going? What are the compliance levels looking like? And actually, that's quite important because you remember Saudi Arabia, for one, and also getting Russia on board to agree was all contingent that countries were kind of stepping up their game and becoming more compliant, particularly countries like Iraq, for example. So I'd be quite interested to see as and when those comments come out. From a speaker perspective, um, this morning ECB's Di Guindos hasn't said anything so far, um, and should be speaking shortly. Bank of England's Broadbent is going to be speaking with Tenreyro one neutral, one dovish person partaking in a panel discussion on the regulation household. So not so much on policy directly. And just given the, the fact that the Bank of England meeting is happening at midday, it's unlikely that they're going to say anything. Fixed income-wise, some supply coming out of Spain and France this morning to be aware of. And that's it. So if you have any questions, please do let me know. Happy to help as and when I can. And as I said, don't forget to subscribe to the channel because there's plenty more videos coming, including those over the weekend from, from the team, Eddie and Sam as well. Okay guys, have a good day and I'll catch you tomorrow. Thanks very much.