Morning Briefing - 17th October 2018

Hi guys, good morning. Wednesday, 17th of October, just gone half 8 here in, uh, in London. Uh, you can see from my chart equities having a stormer of a day yesterday, their best return since March of this year. S&P pushing through those highs, breaking out that pennant. The Dow Jones and NASDAQ very similar throughout the course of the day, so Uh, yeah, equities, you know, catching a bid there in the, in the US. We'll start off by having a look over how the market sort of reacted yesterday and into this morning, the sort of the drivers of the market overnight. We'll have a look at some of the earnings that are coming out over the sort of the course of the session today and then the remainder of sort of the, the month. Uh, and else what is, uh, sort of driving the market before coming to have a look at the calendar as well. Where better to start really than in the US? This whole morning really, yes, they can see here circled up. If I just bring in the— well, do it as a rectangle, you can see quite contained until really we came to sort of midday here in London. We had the push ahead, broke the sort of the trend line, the R1, the classic of the R1 was a great trade, and really it just catapulted higher from then. By no means is this a a case it's going to be one directional to the, the all-time highs. But certainly an important day, uh, really did have the feel yesterday of, uh, being clear sort of risk-on in the market. The yen came under a bit of pressure, as we'll come on to have a look in a moment. But the US equities, you can see, pushing, uh, well, yeah, massive, uh, sort of green candle. They're nowhere near as obviously big in comparison to when we came back down a week ago today. But considerable sort of retracement there. We'll come on to sort of have a look at the charts in a bit more detail, but definitely would be a case of just sort of getting the, the trend line on here. Not that I think we can get back up to the 2865 in the futures today. I mean, if we had a similar day to yesterday, of course we would, uh, but for me that's going to be the sort of the main barrier around this area if we were to to have a look at a test of those highs that we had, albeit, you know, just a couple of weeks ago, really, literally 4, uh, you know, 2 weeks ago to the day. So key, key resistance area above. Whether we can get there or not, uh, anytime soon remains to be seen. Very similar for the Dow. You can see the, the reaction, but we're just sort of on quite a key resistance level now. And the NASDAQ also the same. If we just go to a bit of a lower time frame. You can see on 9 o'clock last night, Netflix, uh, their earnings came out and obviously a much bigger, uh, sort of release than expected. We've continued really to push on today, albeit this, you know, retracing a tiny bit now. So sentiment-wise seems to, to certainly be better in these markets, uh, for, for equities in the US. And we have pushed on again, uh, this morning. It's followed through into Asia despite a 4-year low in the Shanghai comp. We've had a bit of a bounce there, so Asian equities sort of following on that lead. So one to sort of keep an eye on as we go into sort of the, the back end of the session. Yesterday we also had the, the UK data, uh, which was, you know, slightly better than expected. Nothing to, you know, scream and shout about. We did, you know, briefly push on. We came back to sort of retest the high of, or what was the previous high of the week that you can see marked up here, and then we pushed on, albeit helped by a bit of dollar weakness at the time, to reach the R2 and another sort of key resistance area that we had from last Friday and Thursday. I think it's quite key when looking at the pound— oh well, almost better off not, I would say. It's a comment an hour at the moment, and then when those comments come out, it's every few minutes from then on. It's just a bit of a mess, and the chart yesterday kind of shows that as well. You know, you can break it down in hindsight. Of course, it's easier to sort of look to trade this, but with the comments coming out and obviously got the summit today and tomorrow, I'd be a bit cautious, even more so today with the possibility of sort of leaks of what Theresa May may say going into sort of that meeting this evening and her speech. So I'll just be slightly careful. The dollar index itself has broken below 95. We saw a topsy-turvy day, not just in the pound but also the euro, here in, in quite choppy market conditions and relatively contained. I think yesterday was a day to sort of choose your battles and a nice clear trend in the S&P. Whether you can predict it would go all the way that high or not sort of remains to be seen. We have a look over at the, the sort of the market map. If you don't, I'm going to move the camera out of the way. You see, it's a sea of green, fields of green. Um, Google finishing up 2.7%, Amazon 3.3%, Microsoft 3%, and Apple, uh, up to 2.2%. Uh, solid day all round. And of course, we do have some more earnings coming out, uh, later today. Uh, quite a lot of the bank's earnings are, uh, this week. Let's have a quick look at Morgan Stanley yesterday, 5.3%. And the, the graphic here really suggesting, uh, bigger than usual earnings moves, whether that be positive or negative. I was just mentioning, uh, to Anthony on the way in today that it does kind of feel like the earnings here at quarter 3 have just sort of slipped under the radar a bit. You know, quarter 2 is, you know, all this, you know, big focus, you know, what Facebook gonna do, you know, following the, the sort of scandal they had at the beginning of the year. Amazon, you know, making all these highs, are they going to continue? Google, Netflix, all of that. And their reactions were big in the market. Um, but, uh, yeah, you can just see here, might be worth just paying a bit more attention, especially over the sort of the coming days and weeks. In terms of sort of the main movers, if you like, for the next couple of weeks here, you can see obviously on the 17th we had Netflix last night, which I mentioned was better than expected, and we saw that move in, in the sort of the tech sector was the main recovery, but the NASDAQ really benefiting from that. Today you've got, uh, Delta, eBay coming out as well. I mean, looking a bit further on the sort of the main drivers, if you like, of, uh, the US equity markets from the last earnings, you've got Alphabet on the 25th, Facebook the 30th, Apple as well. So the Tuesday the 30th, definitely one to, to keep an eye on. Uh, obviously that's still a couple of weeks ago. Amazon and Microsoft also on the, the 25th with, with Alphabet and Twitter. So in terms of most important weeks earnings-wise, yes, give it a bit of attention, this one, but I'd say the next couple is really where it's going to get a bit more interesting. And if you're looking to, to see moves like we saw yesterday where, you know, we flip back, you need to see the average move from a sort of Morgan Stanley earnings report, 1.6%. We, you know, more than tripled that, 5.3% coming in there. And vice versa for the other companies sort of listed there as well. So one to bear in mind, obviously the calendar we'll come on to in a bit, uh, but the earnings— I'll put this in the chat, uh, later on. But those are, those are the weeks to really, I would say, focus on, uh, as well. Going back to the charts from yesterday, or really into overnight, we also had the Let's bring this into picture here. 9:30. So we all know what, uh, 9:30 Tuesday for oil, the API. No bank holiday on Monday like last week, so back in its sort of usual slot there. And a surprise drawdown. Uh, if I just bring in the Zero Hedge, they do a nice article, but they just put it into a graphic. You can see the draw yesterday, and it's actually a build was expected here. It's a bit of a surprise draw. In oil. We've relatively maintained the push that we had from that in for the API, quite a decent reaction. But, uh, what was expected to be a build of around 2 and a bit mil, uh, a draw of 2.13. So a 4 million, uh, barrel swing, crushing a build, gasoline a draw, distillates a draw. Uh, the reason I think we had this, this reaction, if we go back to the chart, you can see we've sort of sustained stained it a touch, although we did a couple of hours ago, we sort of reclaimed the sort of the low from that API. But yeah, but we, yeah, you can see the reaction is pretty decent actually. But the sort of focus here, if I bring in a couple of the comments people are talking about, it's refinery season in sort of the northern hemisphere. So of course in the US over the summer where there's a lot of sort of internal holidays, long drives, and the demand for oil and gasoline goes obviously through the roof. Coming into sort of the winter seasons, it sort of slows down a bit. A lot of sort of maintenance on the refineries as well. So in terms of what the market sort of prices in and what is expected is more of a sort of build on these inventories going into sort of the remainder of the year. So a bit of a surprise there, uh, whether that be the case in DOE or not remains to be seen. I think that is something to just to bear in mind with the last few readings. There have been quite a few discrepancies between the API and the DOE despite their sort of 80-90% correlation. So possibly an opportunity there if it was to come in almost as expected and that build, and you might see a bit of a push down. But yes, they did feel like a case of sort of buy everything. Whether that remains to be the case today or not, uh, we'll have to sort of wait and see. Um, but yeah, oil, uh, surprise draw there as well. If we have a look at sort of what's driven price overnight, uh, well, not necessarily, I would say, the most surprising headline of all time. I'll bring this into picture here. Trump again talking about Jerome Powell, said the Fed is his his biggest threat. And actually, I'm just going to switch back to quickly look at the pound here, which you can see is just breaking to a new low there. So for those that are trading that, see a few people being sort of long the dollar anyway, but the pound is breaking to a new low. So just keep an eye on that if trading. But back to the headlines here, Trump talking about Powell again, uh, the biggest threat, uh, he said If I bring it in the picture, not so happy with people he appointed to Federal Reserve other than Chairman Powell. I talked about last week that I do feel Trump's going to get his way and the Fed is going to start slowing down. And, you know, maybe it's not going to be those free hikes and he's going to protect his baby, which is the equity market. And we will continue to just sort of drift higher into the sort of the beginning of next year. If we have a look at the equities over that longer time frame, and again, I'll just bring in that trend line just to sort of draw focus to the importance of it. Um, let me bring that in here. You know, I do feel— well, while it's not going to be a case of sort of buy now and, uh, you're not going to have a down day at all, I do feel, you know, we, we do push on here. I think it was a bit of an overreaction, a bit of a correction if you like. No real reason You didn't see safe haven flow massively increase at that time. And if we go back to look at the yen yesterday, you actually see a decent sort of move there. Let me put it in a 15-minute. Give me one second. So while that correction was happening, you had a bit of, yeah, risk on in the market, money coming out of the yen yesterday, and the dollar just sort of strengthening there, albeit weakening for the most part of the day against other currencies as well. So while the sort of dollar again strengthening against the yen here, I'll be focusing on what equities are doing and favoring the upside, almost looking for a place to get in to go long. That low of the day looks quite good, and we're just sort of trading now on the previous high of the day. While we've already tested that a couple of times, I would prefer to get longer a bit lower down as well. Back to the sort of the headlines and what could drive price today. We'll come on to the calendar in a moment. You've got some inflationary numbers out there, the UK and the EU, before the minutes later this evening. But just having a look at the, the sort of the, the EU summit. This of course was supposed to be when the deal was struck, that, you know, November became the new October, and now it's even talk about December. But they got the arrivals early today, and there's Theresa May speaking this evening. So I just sort of have a close eye on, uh, on your, your tweet decks and ears to the squawk on any sort of releases or leaks, if you like, of what she's gonna, gonna say. And then the press conference tomorrow as well. So Brexit-related day today and tomorrow. Whether that means there's gonna be a clear move in the markets, I'm not too sure, as it's been very, uh, very choppy as of late. Um, just having a look as well. If I bring this sort of PowerPoint into the picture. You can see that I'm going to move the camera quickly just to make that clearer for you guys to see there. So you've got the, yeah, the EU summit, EU Council meeting today and tomorrow, 17th, 18th of October. You've got the Bank of England meeting coming up in a couple of weeks as well, which will be quite interesting to see what they have to say about the matter. You've got this November meeting, the emergency meeting But you know, everything's got to really get done here by December. EU Council meeting on the 13th, because 7 days later, 1 week later, you've got the Parliament Christmas recess. I know what you're thinking, you know, what the country's in turmoil and they're going on their Christmas holidays for a couple or 3 weeks. Whether anything gets done by that or not remains to be seen, but you'd imagine they'd want to at least get something positive on the table. By then. So, you know, next couple of days might give a clearer direction on where we go, but definitely into the back end of the year, uh, we, you know, we need to see some progress or you might start to see the pound decline again. On, on talk of, um, sort of market moves, I do feel as though by April, by, uh, that sort of deadline next year, we will have something positive, and, and the pound will continue to rally. Whether that be, you know, the clearest move against the dollar or not, I think remains to be seen. But I do feel, you know, we continue to, to sort of really have this, um, sort of correct— not correction, I say rebound, if you like, from that August yearly low, uh, as well. But, uh, I think going into the back of the year, we might sort of slip down before pushing higher into in sort of April time. I think on the flip side of that, in the dollar, why this could be a half-decent trade is, you know, you're getting all this talk about, about Trump and, you know, Powell raising rates too quickly. You know, he's the guy at the end of the day that appointed him. I think while of course they're going to act independently, and of course Trump shouldn't be getting involved, well, look, it's Donald Trump and he does what he wants. And I think, uh, he will eventually get the Fed to slow it down. I think that in turn will weaken the dollar. I think there'll be positive news out of, uh, the Brexit campers, you know, the EU at the end of the day would want a half-decent sort of deal and relationship with the UK. And I think we push on, whether that be right from now, I think better to sort of wait until you sort of November, December time. I think next year, early part of next year, we'll get a decent trade there as equities in the US push up on the sort of the weaker US dollar scenario as well. So we'll sort of see. But yeah, interesting evening as Philip said. Said there, if we have a look at the calendar, uh, for today, I mentioned we've got the, the UK— that's Tuesday, bring in Wednesday— we've got the, the UK numbers out at 9:30. We'll have a look at the trading economics in a moment though. Then following the UK numbers, half hour late at 10 o'clock, you've got the inflationary numbers out of, uh, the Eurozone. However, final reading, so not expecting too much there. Going into the afternoon Obviously we've got the DOE to come, but before that, a bit of US data— housing starts, building permits, 1:30 respectively— before 3:30 in its usual slot. Again, 7 o'clock this evening, the FOMC minutes. So we'll be having a look to see if there's anything worthwhile of note from that meeting they had back in September, end of September. Speaker-wise, uh, well, scheduled anyway, Cunliffe, uh, sort of at 12:15, obviously something to be aware of, but I think, you know, Theresa May is gonna sort of have the, the main move of sort of scheduled speakers today. Earnings, uh, brought up that calendar and I'll post it again into, uh, into the chat, uh, later on. While, you know, there's a couple ones of note, I feel the week— not next week, the week after and after that— are going to be the main sort of ones to, to be aware of. Just having a look at the, the data for today. Uh, you can see the inflation numbers. So we've got— how long we've got? Just over half an hour. Uh, expected here, uh, to come in at 2.6% for the year-on-year figure. We've had a bit of a rise for the last 3, uh, so expected a bit of a drop down here, which would, you know, wouldn't really be the end of the world. I think the, the range sort of shows it will be relatively tight as well. 2.4 on the low to 2.8. Uh, having a look at the pound this morning, whether you want to attribute anything, uh, sort of to the move lower, uh, it might be that we're expecting a, a worse sort of release, although I'd say it's still a bit too early for perhaps, uh, sort of a leak, uh, if you like. Uh, looking at the, the core number, 2.1 was the, the last, uh, figure, and again, you're expecting a bit of a, a tick lower here back to sort of 2%, uh, which would sort of take the average of the last 3 months to exactly 2% as well. So for a clear sort of beat and, you know, continuation higher, uh, lower in the pound, it'd be a miss. You'd be looking at sort of those yearly lows at 1.8 for the core and, and coming back down to 2.4% for the flat inflation number there. Going into the, the EU numbers at 10 o'clock, 2.1 was the last figure, final reading. So expected to be the sort of the same here. Uh, you wouldn't expect too much of a reaction from this unless wildly, uh, out of line, uh, as well. Um, having a look at the, the charts, how we trade. If I just push us over here, the pound, uh, just coming back to that low of the day. I'd be sort of waiting here before the data comes out and then keeping obviously an eye on, on Twitter and whatnot. Euro broken really there, sort of the choppy range and has found resistance back on that. I think Philip was, was in that trade there in the chat, which was a nice one back down towards the S1, the, the low of the week containing price action today as well. And really, for a clear move, I think you're looking elsewhere for now. I think that if we go back into sort of US equities, as long as the earnings today continue to sort of, uh, beat expectations, I think you're looking to go long here. Is this what this political uncertainty across the globe at the moment, really not having any major effect. Oil opportunities, I think, for now favoring the upside on this surprise draw. However, DOE, if the build is to come in as expected, you might get a bit of an opportunity there. Although how much of that is actually priced in due to the sort of seasonality, uh, of this sort of refinery maintenance remains to be seen. But pound again just coming down to test that low So that's sort of where I'll leave the briefing for now. Of course, any questions, please, you know, do let me know. I'll come on, or Anthony will come on the mic just before the numbers out at 9:30 as well. But it seems a few stops have been triggered there on that low of the day for the pound. Doesn't seem to be any sort of comments that have come out. So bear in mind going into the data that we are pushing to the downside. Rather than maybe anything else about it. So I hope you all have a good trading day, quite a busy one, things to look out for, uh, and I'll catch you guys all in the chat later on.