Meaningful Vote 2.5 - What is it & is it important?

OK, very good morning, Friday 29th of March. I hope everyone is doing well. As you can see, what I've got here is a slide about Brexit. It's obviously a very important day, well, at least symbolically, because it's 2 years obviously since Article 50 was triggered. This was that kind of dreaded day where people were fearing economic Armageddon, but as we well know, that date now has been pushed back and April 12th is kind of that new, new deadline now. But before we jump into Brexit and I talk through a couple of slides, let's just have a look at the charts and how we are trading at this present point in time. I'm not just going to talk about Brexit, got a few other things to get you up to speed on. It's obviously the end of Q1 coming today, and there's definitely a few numbers that we can look at. We're seeing, in summary, a huge recovery in financial markets since the, the episode of downside volatility that we witnessed at the end of last year. We've also— can talk about the ongoing trade negotiations that are happening between the US and China in Beijing today, and then I can hand you over to Sam and he can look over the charts again more technically. So I will base my part entirely on the fundamentals. But just having a look at the overall risk sentiment for the moment, relatively neutral. If anything, I'd say marginally positive. We got gold a little lower, down about $2. T-notes are down 3.5 ticks. Dollar's pretty flat, so the currency markets are pretty quiet overall. But the equity markets are slightly higher. If anything, the NASDAQ outperforming a touch. and as such, in step with that movement, we've seen, um, US index futures trade higher, uh, European cash equities also trading higher this morning in, uh, UK and mainland Europe. So yeah, kind of awaiting then, uh, a couple of big things to happen. Of course, one that's going to really saturate a lot of the media attention is of course going to be this, um, otherwise being termed as not MV3 but MV2.5. Now, just to make clear of some of this terminology the press are using this morning, we are due to have a meaningful vote, obviously, from Theresa May. And I think actually, actually a strong strategy from May, in my opinion, just given the, the nature of today's date. Not that it has grave importance now for really so much the negotiation or the final outcome, but just for the fact, for the public I think this is probably a sensible decision to bring this forward. The problem is, is that it's annoyed a couple of MPs, particularly those of the Remain-minded kind of bias, because it doesn't include everything. So what I've done here is I've separated the two parts of the current Brexit deal which is under negotiation, and the point being is that it's only Number 1, and hence the reason why it's 2.5 and not 3, because number 2 is not included in today's vote. So the only part that we're talking about today is the withdrawal agreement, the legally binding document that sets out the terms of the UK's departure from the EU, includes the settlement details of transition period for after we leave and protection for citizens' rights. So it's not fully encompassing of the political declaration. Um, so is that enough then, uh, this kind of slightly watered-down version, that at least for point 1 she can get the MPs required to get this part over the line? Let's not forget though that that does not mean this whole thing is resolved, as we'll see with a decision tree I've got to show you as well. In terms of timing, you're going to get a lot of journalist updates on Twitter, I'm sure, throughout the morning. So the usual suspects I'd be keeping an eye on if you want to just keep ahead of the game or the traditional financial newswires, Twitter of course is the, the best port of call. They're going to be debating it, I believe, as well. When it gets brought forward by the House Speaker, it's an amendable vote, so it means that other points of view can be put forward and debated. He can then choose or not whether or not that gets added into the mix. But otherwise, then the vote today, you can pencil in is at 2:30 London time. So fortunately for everyone, we're not going to have to stick around till 10 PM on a Friday night. They've done us a favor and we're going to get it in the afternoon, potentially. 2:30 is the time we're looking at. So a few other things then. What could be the outcome? Well, if MPs approve the withdrawal agreement on Friday, they will have met requirements to push back exit day to, remember, 22nd of May. That's the the new agreed time if a deal from the government is accepted by Parliament, not June 30th as was the case a while ago. Will, in the chat, just to be clear, the backstop is in the withdrawal agreement, so the backstop is within this, just to clarify. So that is obviously an important issue, and it is within what today's vote does cover. Important thing here though, even if the, the WA, the withdrawal agreement, does go through, under current law it would not be enough to ratify the deal because only one part would have been approved, as we've just discussed. This then starts to look at graphically, and this is that FT article I was referring to where their analysis basically shows that Theresa May requires winning over all 75 of the Conservative MPs who voted against the deal earlier this month to back the agreement unless the DUP reverses course. Because we know, um, what the situation is in reference to the DUP. They've said quite explicitly that they're not willing to back the government at this point. Could they change their mind today? I actually think that's probably unlikely because, in short, my overall expectation here, in my opinion, is that this vote will get closer. If you remember, there was a huge miss the first meaningful vote 1 that got chopped substantially into meaningful vote 2, where I think she lost by 149. And I would expect today's one to be reduced again considerably, but not quite enough for her to go through. The point being, though, is that that doesn't really detract from the point that I still think there's a good chance that her deal goes through just at a latter date. I definitely don't think a defeat today for Theresa May has any ramifications for her immediate resignation. I think the probability of that is close to zero. I am mindful though that markets are already a little bit sensitive to the potential developments of today, and with that in mind, I've just switched over my charts to have a look at cable futures. We've just come back down to test here, uh, the overnight low— well, really the late US session low, uh, in the futures space. This does, um, look— EURUSD is not really moving too much, so maybe a more sterling-based move there potentially. But obviously, I guess liquidity, overall volumes are likely to be quite thin. That means that cable volatility generally is a bit jumpy, given no one really wants to get caught on the wrong side of a snap headline. So back though to these numbers, I'll let you kind of chew over the graphics in more detail yourselves, but as you can see here, these are the kind of numbers that we're working with. And for Theresa May, for the deal, you need 317 for and against 316, and this starts to then calculate all the different types of numbers. So from the last deal, she needs to retain all 214 42 existing voters. She then needs to win over all 75 opponents in her own party, including 69 Brexiteers, and at least 5 of whom have already indicated they will oppose. 6 Europhiles. Only one Tory MP did not vote in MV2. His vote would give May a majority of 2 votes. So, you know, the nature of it being so incredibly close And also the fact that you also need other opposing opposition parties to also pick up a few votes. I think this is problematic and hence my reasoning why I think today's vote is not going to go through. Is a general election needed to break the impasse? I mean, this is something which we were discussing in the briefing from yesterday. I found this graphic. The left-hand side one is the one from Bloomberg. The one in the bottom right-hand corner is from the BBC, which is the parliamentary process that would be required in order to have a general election. So talking over the left one first, there's kind of 3 options here. Parliament fails to break the deadlock. So one thing to be aware of is that If it fails today, then remember you get a second hearing of what we had from the indicative votes on Wednesday, round 2. Remember, the important thing about that was that Parliament was unable to find any type of majority for a better alternative at this point. And so if Parliament fails to break deadlock today and then they fail to make any more headway in finding a clear majority then May brings back her deal. If it then passes later before April 12th, we then exit on May 22nd's deal. If May brings her deal back and it fails, well then the likelihood is a general election could strongly be on the cards, i.e., a longer extension to find then an alternative way forward to break the impasse. If Parliament though, if Parliament says on Monday Granted, if today's vote, 2.5, fails, if Parliament says we want a soft Brexit— remember, it was the customs union one that technically was the closest, it was very close to getting over the line, which would be akin to a soft Brexit— then if May says no, then she could bring back her vote and we go down that passage again, or we have a general election. If she says yes, then a long extension, that's probably unlikely. If Parliament says there's a second referendum, May says no, general election or a long extension. The point being is there's quite a lot that leads down the avenue of potentially having a general election. I think even at that point, Theresa May can kind of get out of it in a fairly strong manner in a sense that she's tried to deliver Brexit, but it's Parliament that's proved a barrier to her executing that. And as such, really, can she be blamed? She's tried to do it and Parliament has said no, so it's not really her fault. And then if there's a general election and she goes, I think it's quite hard to criticize her at that point. If there is a general election to be called, you need two-thirds of MPs to approve. Fewer than two-thirds of MPs approve— if that was the case, then we start going down to government reconsidering all options, of which then goes down the vote of referendum, vote of no confidence, renegotiation, and no deal. Where do we go from today's vote? I know this is— it might be quite small on your screen, but I did tweet this if you want to have a look in more detail. So it's March 29th, we're at the top here at the moment, and these graphics tend to make things a little bit more simplistic. If it passes today, the Brexit date moves to 22nd of May. On the 1st of April, a second day of indicative votes goes ahead. Uh, question mark whether it does or not. And then you follow it down. If though it fails, then Monday, of all days, April Fool's Day, we start talking about potential other options. Is there a clear result? I still think there will be no clear result. And if that is the case, do we have a further extension? We go down the route We have to then basically give notice that we'll take part in a European parliamentary election process, and that then opens up the deal, or the potential alternative routes we could go. If though then there is a clear result, does she accept it? No, we go down the same route. If then we still don't come to a conclusion, we can still crash out with no deal, and then so on and so forth. So I'm not going to spend too much time going into the complexities of this because I'll let you again go over in your own time. But here's another thing that obviously I've had a lot of questions from, from intraday traders. It's about if Theresa May did just resign all of a sudden, what do I think the reaction of the pound would be? So I guess this is a little bit more prudent planning if that ever did materialize. First thing to say though, I think it would be absolutely shocking for me if Theresa May resigned today. I think the probability of that in my mind, I would put about 1 to 2%. I think there is, of course, a possibility, but I think it is incredibly small. One thing that you have seen though is that, you know, I've said before, markets are particularly sensitive to uncertainty, and uncertainty tends to lead to negativity. And if she was to just walk away, I think the initial knee-jerk reaction would be a spike down. However, though, then I think once markets get over that initial knee-jerk reaction, I actually think the bigger move prevailing that would be a quite a substantial rally because I think then it opens up a stronger opportunity for a softer Brexit to go through and a longer extension. The one thing that's been happening obviously in the last 48 hours is that she said she's prepared to quit, the market came back up, but then MPs failed to find any clear way forward and we went back down. Now, the reason why preparing to quit, it's not so much to do with her resignation, it's to do with a higher prospect of her deal going through if her quitting can then get Eurosceptics on board. So yeah, that's, that's my kind of update, if you like, for the Brexit situation. So quite a few things obviously going on at the moment. I would say 2:30 is really when it's going to get a little bit more interesting. So of course I'll be on the mic, I'll cover everything in full. Uh, we have had a little bit of a dip here more recently in cable. I can see a few guys mentioning in the chat room that Liam Fox has been talking, and without even seeing comments from Liam Fox, we all know what Liam Fox's stance is. He is a vehement believer that Britain will survive and be better off with a no deal. Who needs Europe? And so obviously he's a guy that tends to talk a pretty tough game in that there's a real credible opportunity here where we should be still tabling a no deal. And that obviously needs to be factored in to prices because that obviously spooks many investors in the short term, with a technical breach probably just helps exacerbate some of that move. Okay, quick run-through of the other headlines then, and then I'll hand you over to Sam. So let me just have a look at a few things. So unfortunately, I can't, I can't remove Vince, it keeps popping up on my screen, so apologies. But moving on, let's look at the China-US trade talks. He had some comments out of the economic adviser Larry Kudlow from overnight, and he's basically said the administration is prepared to keep negotiating with Beijing for weeks, even months. This, of course, comes with Steven Mnuchin, the Treasury Secretary, saying overnight that they've had productive working dinner in the previous night in Beijing, kicking off a day of talks aimed to resolve this battle that's been going on. So, you know, amid all the attention that's going to be this afternoon on Brexit, I would say don't get caught blindsided potentially by an update on this type of thing where you could get caught where potentially maybe talks, they run into a barrier in the negotiation because everything's looking quite positive. For me, the bigger market reaction to this trade story would be a breakdown in talks and a negative type of reaction—equities getting hit, oil getting hit—that type of move would be bigger than the positive progression, which I think is already more priced in. Other things I just wanted to comment on was a couple of stats, because it is month and quarter end. Chinese stocks wrap up their best quarter since 2014 with a huge rally. You know, it's been— it's just been such an interesting quarter because if you think Chinese stocks have put in their best performance in the best part of 5 years, oil is also set for its strongest quarter in a decade on the back of these kind of sanctions at the moment— Venezuela, Iran more recently— but more importantly, probably the trade progression on talks from a global level, the central bank support movement to dovishness from the Fed and others. And importantly the OPEC+ deal still being committed to and compliance levels being high have all been important factors to support this, as well as kind of ongoing geopolitical risks emanating from lots of different areas, Middle East to Russia as well. So yeah, it's, it's been quite a stark contrast that we've had in the last kind of 6 months from where we were in Q4 to where we are today, for sure. Look at the calendar then. What have we got coming up for the session ahead? So this morning you've got, in about an hour's time, German unemployment rate and change. Can that move the market? Euro can be, and European assets, slightly subject to potential volatility on the back of that. I think just given the context, the DAX future, for example, found kind of a triple test at that R1, which was kind of relative to the, uh, electronic trade reopening in on Eurex for the DAX future. Uh, could be a catalyst, maybe pop it above it if we got a particularly favorable number, but otherwise I'd say it's normally not that market moving. So then we turn to UK GDP, but again these are quite backward looking. It's this Kind of similar story with US GDP. For this, we're not expecting any meaningful revisions here, so I wouldn't be looking for any real reaction in the pound on the back of GDP at half 9. Definitely more of a political-driven day. Going further forward into the US session, we get core PCE coming out of the States. You've got Canadian GDP, which the loonie is always very volatile to for those types of economic indicators. Chicago PMI, that could be quite interesting just given the sensitivity to some of these regional-based numbers that we've had on a manufacturing side. For sure, we've seen some quite large fluctuations. And then you've got the Michigan sentiment number, but this is the final reading, so again, the lesser impactful of the two that we normally see. From a speaker's point of view, a couple— ECB's Coeur later this morning, 9:45. Fed's Williams, Fed's Kaplan, and Fed's Quarley is speaking later on. I would say the Fed speakers are much more probably going to be important than the ECB speaker in that regard. All right, I'll hand you over to Sam. He can look over the charts, but have yourself a good, good day ahead, and obviously have yourself a great weekend. I believe the weather's going to be nice and sunny, so enjoy.

Hi guys, uh, take a quick look over, uh, the charts, how we're trading. And just, uh, as Ant was mentioning about the DAX, just with that, that top, all equities pushing, pushing higher this morning. And the DAX potentially the, the sort of leader of that in the morning is obviously its volume going to be the highest from, from now, just going through that open. So worth keeping an eye how we're trading around here. The high that we've got, uh, going back to Wednesday, the, the high of the week just been tested. So, you know, even if we were to push through there, some important resistance going back to the 22nd last week. So that and the R1 would be worth keeping an eye on. You'd imagine over the coming days that this would, uh, would go, if not today, those lows every day, every day getting higher. So 1, 2, 3, 4 4, uh, and if it obviously stays like it is, the 5th day in a row where the lows are getting higher, getting squeezed in. Maybe the opportunity isn't right now, but you really be looking here to sort of buy above that R1, and the way the DAX moves, it could go pretty quickly. Elsewhere, S&P at 2790 just held, uh, so well, uh, this week, and, and we're now obviously not far away from the top end of that range. And you can really see that's what it is. It's a range really going back to, uh, well, the Monday, Tuesday, Wednesday, Thursday didn't quite make it up there, uh, and we're sort of just running out of momentum perhaps, uh, coming into the end of the quarter. Uh, for this, this trade opportunity, I think again, you know, if you, if you prefer that long and the DAX does go, uh, a break above the R1 and higher the week is, is a good little trade to, to have an eye on. You can see just how similar it is across the board. The Dow Jones R1, previous highs going back to sort of the 22nd, pretty much the same as the DAX all round. So that correlation trade, um, you know, might be that the DAX gives that the lead for the others to go. The NASDAQ, the only one slightly different, we had a break of, of this trend, albeit pretty choppy overnight, and that as well of course is on the high of the day at the moment. Oil just pushing higher Worth keeping an eye, you know, should we continue to, to go around this area where this trend line would meet up. We also had some good price action on the 26th, so 5982 on the futures would be an area, or roughly around there, that I'd be looking at. To the downside, the high of yesterday morning, uh, not too far away from the low that we made, about 8 ticks give or take. So there's a sort of a little range uh, that price is in at the moment. That's somewhere I'll be keeping an eye on. As we go on to the, the currency pairs, Euro, that, that high of the day, definitely an area I'd be keeping an eye on. It was also the high that we had twice in the back end of the, the session yesterday. So 3 tests of that, uh, for any real push to the upside, you'd imagine that would, uh, would have to go. And then you're looking at some of the levels for them from the breakdown yesterday on the futures, 113 21, uh, where we had some initial support before that breakdown, uh, late morning yesterday. And then if that was to, to break through to the upside, you've got some interesting resistance around the, the highs of yesterday as well. To the downside, if you're looking for this continuation, of course this market has been, you know, one directional. Um, these lows, this trend line, you know, consistent break below that, uh, and then you might get that, that confirmation. The last two days, the pivot has acted as really strong resistance. It did initially overnight. We're just starting to, you know, get choppy around that. So if I was looking for a short, the pivot wouldn't be, uh, an area that I'd be looking at. It's now chopped through and best to look elsewhere. The Aussie dollar, uh, in a bit of a rate— a trend channel, I should say, last couple of days. So not the worst idea to really wait for, for this one to, to come either way, for, for a cleaner kind of move. That the trend, however, uh, you know, over the last— if I just bring it here— sort of few weeks, couple of weeks, it's been quite choppy. Obviously, you know, you had the, the FOMC, uh, which drove price higher and when we came down on Friday. But yeah, controlled for now. S1 might— matches up quite nicely with the, the bottom end of this channel and, and the top side just below the R1. Any real move, like I said, I prefer to wait for that to come out. Same with the pound, although we had that move lower, uh, we're just finding a bit of support. Quite a key level just tested there that you see back on the 21st of this month was also some support that we had on the 12th. So really strong support just been tested there in the pound. The previous low from yesterday, uh, at 30.85 would be an obvious place to potentially take a bit of profit around that. Uh, you see the breakdown as well be an area to look at potentially later on at 1.3114. Gold, what a day yesterday it was to, to the downside, and it continued that push overnight. If you're looking for a reason to get long. Well, look, this— I think unless, unless this trend line here was to go and, and these previous highs, I wouldn't be too keen. I wouldn't be too keen on, on getting in. And that wedge that broke yesterday continued here. You can see just Lovely break of that, that you got over sort of night there, the pullback here to a touch, and it's continued since then. The lows of the, the month not too far away, 1287. The way gold can move sometimes on a Friday recently wouldn't be too surprising to get that. And as long as we really stay below that trend line, I would, uh, would only really be looking to, to go short on here. Stocks just over the last 5 minutes or so have found resistance on the first real, uh, test altogether of those highs of the day. So one to keep an eye on if we were to come back up to later, uh, later on this morning or afternoon. I'd really wait for all of them to sort of be banging on the door before looking to get too aggressively on those. However, any questions, as usual, please do let me know. I hope you all have a good trading day, and like I mentioned, the weather is supposed to be a bit better than what it's been recently, so I hope you all have a great weekend ahead as well.