Morning Briefing - 24th July 2018

Hi guys, good morning. It's Tuesday, 24th of July, just gone half past 8 here in London. The morning briefing just had some data out of Europe, so I'll quickly switch over to those readings that have come out. Um, we had the French manufacturing composite and services PMI, which was relatively mixed, just the manufacturing beating expectations there. But just more recently for Germany composite and manufacturing quite nicely, beating expectations, with the services pretty much in line. And having seen that, uh, come out not too long ago at half 8, we've seen the euro rally off this. Bit of a, uh, strange reaction in the size of it. Usually these readings can move the market, but to this ex— extent, um, not too sure how, how much room this really has in it in terms of just short-term resistance levels. The, the pivot here on the, the futures and, and similar to the spot looks quite interesting, uh, along with that high of the day as a potential resistance point. What else has been happening this morning? Well, you can see the pound has benefited from this weak euro, which is now negative for the day and has actually pushed above its pivot point. Gold Um, has benefited as well from a bit of a weaker dollar just over the last half hour or so and has pushed to its high of the day as well. Remains to be seen whether these moves can be long-lasting or not, uh, going into the sort of the back end of the morning. We do have, uh, the European Manufacturing Service and Composite PMI to come out at 9 o'clock. Um, if anything, uh, these sort of the German and French indicators can be quite a a good— exactly that, an indicator of whether it would be better or worse. So with the manufacturing beating for both France and Germany, you would expect that this figure would be a bit better than expected, which might in turn explain why the euro is pushed higher a bit more aggressively than normal off these releases. So just something to bear in mind going into 9 o'clock. So I'll make sure we're wrapped up in time to, to run through those figures. as they come out on the hour. So yesterday, quick summary of, of what took place in, in what was a very quiet, uh, Monday. Uh, be forgiven for sort of not wanting to, to get too involved with, uh, with everything that was going on. Just the, the main movers in what was a quiet day. You can see bonds, uh, selling off, uh, really from sort of the sort of late morning T-notes coming under pressure, the lowest they've been for quite some time. The Bund, you can see here, this is yesterday and also Friday to an extent, but more so continuing it yesterday in, uh, in sort of selling off. Now this was attributed to a couple of things that we'll come on to in a bit. There's the whole Bank of Japan tweaking of policy to seem to be quite hawkish, which supposedly might have sort of spooked, uh, bonds. And, and that would in turn perhaps, uh, explain why, uh, over in the US and Europe, bonds were coming down and sort of, uh, might give that rollover effect for everyone else to start speeding up as well as there's sort of tightening of monetary policy. Also as well, there was, uh, reports that the GDP reading on Friday, which we mentioned, is going to probably be well, has the potential to be the most important, um, mover for markets data-wise, is, uh, to come in quite a bit higher, 4.8%, uh, which would be the highest since Q1 2014. And you just know Donald Trump would absolutely love that if that was to be the case. Um, but yeah, bonds selling off yesterday was, was sort of the story, one of the main movers. Another one was oil pushing higher into the morning. You had the tensions between obviously Iran and the US, or Trump and Rouhani, whichever way you want to look at it. Didn't materialize really until sort of late, late morning, 11 o'clock, pushing on as you can see here to make that high before sort of drifting down. A few reports sort of attributing that to the oversupply. Cushing in Oklahoma, their production was up in the 4 days leading back up to Friday. Uh, there's sort of the Saudi worries that they're upping output to sort of COVID losses that are expected in November as well. So a few reasons, uh, why we went higher and also why we went lower to finish not too far off actually where we opened the day, only about 34 cents down. This morning, oil, as you can see, quite range-bound, uh, as you would expect for sort of the morning session. But this One thing to keep an eye on there, uh, going into the APIs tonight and then the DOE tomorrow as well. I'm sure you would have heard about it from reading the news, whether it be last night or this morning. Um, Alphabet up 4% after close when earnings came out. So you can see here on the futures, um, at 9 o'clock, bit big push higher for the NASDAQ, and we've pretty much sustained that this morning, having made a new high there, but only just to come down in recent traders. Equities have come under a bit of pressure. So in the grand scheme of things, where does that leave us with the NASDAQ? I just bring this chart just to a, uh, shorter time frame, uh, well, just sort of show more, I should say. Uh, made a new high new all-time high off of, off of that. There's the 15-minute candle. In comparison, what did it do with the S&P? Pushed it higher, but, uh, obviously nowhere near as much due to the weighting that it has, uh, on that market. But with earnings coming out thick and fast throughout the week, we'll sort of come on to those as well. But obviously one thing to bear in mind for anyone in the afternoon after sort of the close, not necessarily going to want to have positions left on, um, and obviously want to be monitoring the market if, if, uh, if looking to trade as those earnings are coming out. As you can see, uh, quite a while after sort of the, the close of play there. So in summary, yesterday was about the sort of the bond movement, also seems to sort of died down a touch this morning, although we actually are now coming over in the last sort of 30 minutes or so to those lows. So keep an eye, uh, oil up and down Nasdaq higher on, uh, on Alphabet. S&P dragged higher because of that as well. And what was a very range-bound session for equities until perhaps that, uh, that figure came out. The dollar yesterday, and I'll use euro-dollar just as a sort of a proxy of that, it was stronger but only marginally. You can see we're just sort of drifting down. Uh, here was where we opened and here is where we closed. So not the, the biggest move by any stretch of the imagination there for, uh, for the euro. And you can see now just coming off that high, uh, for the dollar, which is pretty much flat, uh, as we speak. So just transitioning over to the news stories, obviously there you can see the data that has come out. So we've got 15 minutes manufacturing, uh, market composite and services PMI to come out, 54:7, 54:8, and 55. on the dot for those expected, uh, figures. So mentioned the— that Trump— let me just get the article up. Where is it? Here somewhere, I promise you. Yeah, so Trump says US economic growth nears 5%, uh, time to celebrate. So yeah, of the rumor of 4.8, so another reason, as mentioned with Bank of Japan, that bonds may have been under pressure, just a rumor floating about. And if it is 4.8%, well, how good actually is that? Q1 2014, the last time we were there. Here you can see the historical sort of last 5 years of growth and just above 4%, which is kind of what's actually forecasted at the moment, which would be fantastic number. Of course, these numbers do, in terms of the expectations, get priced in, and the more this rumor floats about, if it does come in at 4.8%, the reaction may well be slightly limited depending on what the dollar does now until Friday. With this rumor floating about, it obviously is getting, you know, more airtime. You see it on Twitter, the, the Reuters and Bloomberg, you know, people talking about it. So if it doesn't come in at 4.8, you can perhaps see quite a bit of a dollar weakness reaction from that. Sort of makes you think about why Trump was perhaps trying to weaken the dollar ahead of such a strong release on this Friday. Maybe he's just trying to weaken it a bit because the reaction from this would strengthen it so much. Who knows the way Donald Trump's mind works. I guess when you think of it with Iran, he may well be just causing all this aggro just into 2 months to sort out some sort of deal and look like a hero again. #NorthKorea. But remains to be seen. You know, who does know how he works. Mentioned about the Bank of Japan policy tweak. So did rattle global bond markets. How we— I would keep an eye on, in terms of movements today, those, um, uh, the bonds, obviously the Bund and T-notes, which mentioned are just on their lows, just trying to tick a bit lower here. Um, so we had obviously gold pushing higher, but, uh, bonds, bond market's not interested at all, even with the yen strengthening, uh, as well there. So if we have a look at the sort of reaction from that Reuters report that came out on, uh, on Friday afternoon UK time, 11 PM, or just after 11 PM on Tokyo time, we have drifted lowest since. And you know, while the, the greenback did strengthen slightly throughout the day against the yen You know, what was a strong level— I know a couple of guys were long into this point on the, on the Friday low— acts as a very strong resistance level. We have drifted lower since. So it'd be interesting to see what happens at the conclusion of that meeting taking place on the 30th and 31st, whether they are going to make their, their first change for, for quite some time. Uh, remains to be seen. Other stories from overnight, you had the, the onshore renminbi hit a 1-year low. Um, but China shares hit 1-month high, so the— on the stimulus sort of hopes there, you can see. I think we've got a chart floating about here. Yeah, so biggest 3-day gain in 2 years for China stocks since 2016. So pushing higher there. Um, but as mentioned, the renminbi just coming under a bit of pressure, making a new multi-year low. So you've got the offshore renminbi here. If I just drag that into screen, you can see that's that new, uh, sort of low. We have actually over the last sort of 30 minutes, it is quite interesting to see. And so I would, if, if you have access to, uh, one of these charts, uh, to keep an eye when the, uh, the dollar weakens here against the renminbi, it is sort of dragging the other dollar pairs around as well. So obviously a lot of focus at the moment is on, um on how, you know, low can this, this market go, or in this case, how high. Um, if I just remove the pivots and we can really look back at that chart, you can see it— that's the, the highest this pair has been since really Q2 of 2016. And it has just been, you know, week after week to the upside, really strong momentum. So if we are to see a bit of a, you know, turnaround here especially with sort of the dollar rhetoric of recent days about trying to weaken it, you may well see the dollar start to weaken as well. If that holds off, however, uh, long may, uh, you know, that continue to push higher, uh, it seems, uh, as well. So going into this morning, the calendar— if I just bring that into play in one second— you can is a pretty sight after yesterday, considering just how, uh, how limited it was there. Of course, we've had the 8:00 and 8:30 data already out, European data, to conclude that, that little session at 9 o'clock. Going into midday, you got some Turkish data, obviously not really going to move the markets that we are looking at. However, on sort of expectations of policy change there has actually strengthened, uh, on recent, uh, on recent times. So for those looking out, obviously, uh, do feel, uh, also do sort of have the idea that has already sort of been priced in, uh, a touch going into the afternoon. Obviously there, Brandon's reminding us as we've got 10 minutes, we're going into the afternoon. You've got the Composite Manufacturing Services PMI from the US. So it's obviously that that, uh, that time of, uh, of the month. Going into, uh, you know, 2:45 there, obviously you'd be looking to sort of exit positions. You've got a bit of lower tier, uh, Redbook data and monthly home price data from the US beforehand, and then the API to conclude things for, for the session, uh, tonight. Uh, obviously compared to yesterday, it's a, it's a big day today, but in reality not, you know, too much other than those those figures at 9 and 2:45, I'd expect to actually do too much. Here you've got the earnings, uh, from this week. Um, Tuesday, you know, got those before the open, uh, and after the close. There you've got 3M, which we know is obviously a relatively big weighting within the Dow, uh, number 5 sort of on, on that list. So while the Dow— or I should say, while S&P and NASDAQ finished high yesterday, the Dow finished slightly lower. So it'd be interesting to see what happens, um, within the Dow today with some of these earnings that are coming out. In terms of what to look for for these earnings going forward, obviously the ones that sort of stand out, your Facebooks and Amazons, uh, after the close on Wednesday and Thursday. So more just to reiterate, the reaction that you saw last night could easily happen either way again for the NASDAQ, uh, for, for those evenings. So you wouldn't want to sort of hold a new trade going into that, or it literally would just be a bit of, um, a bit of a gamble, uh, going forward there. Um, so dollar index, we talked about the, the sort of the 95, uh, handle, and it's still, you know, comfortably below there at the moment, 94.3. No real comments yesterday from Trump regarding the dollar. So it did strengthen a bit in terms of where these markets could go. So just having a look over from more sort of technical point of view, talked about the sort of the high of the day for that euro along with the pivot does look like a good level of resistance. Of course, yeah, you'd want to wait to see what comes out in 8 minutes to sort of give you an indication whether that can be broken off better than expected data, or in fact we start to drift back down and, and the dollar maybe strengthens into the back end of the morning. Um, just highlighted here, you can see those comments on the Thursday from Donald Trump. So we are still elevated above those, and it is the same situation, uh, for the pound. Similar reaction, albeit slightly less from that Thursday. And you know, those markets have been pretty correlated. So the dollar really driving, um, the sort of the, the theme of the week, I would say, for these pairs. Obviously this data in the morning will have an influence as well. But any sort of talks on, uh, you know, the, the sort of, uh, strength or weakness from Donald Trump, whether he's tried to talk it down ahead of, uh, Friday's strong print in GDP remains to be seen. But it's something to think about there. Equities, uh, over in Europe opened higher, but you know what the DAX is like, didn't take long for that gap to be filled. Always, uh um, a sort of a nice trade to sort of see that happen there. Came down and closed the gap from where it, uh, sort of closed late last night. You see even the DAX sort of dragged higher a bit into that close. Not much going on though. You can see pretty much flat for the day, albeit just a tiny bit, um, sort of down from that open. Euro Stoxx as well, similar in, in filling that gap. We'd wait to see how this data comes out. So the German data is in the, the DAX there with the, with the stronger euro as well, helping to sort of bring that down a bit. Going over to the US, obviously earnings week, 40% of the, the S&P coming out by the, uh, by the end of, uh, of Friday. This morning just coming under a tiny bit of pressure. The— I mentioned the yen was, was strengthening, uh, gold was strengthening, so it did have a bit of, uh, sort of risk-off here as we have come down a bit in the morning. In terms of levels of interest, the sort of the high of the range that we broke through is quite an interesting level, sort of around that pivot area. Whether we can get back down there or not, you know, it's all— would be, uh, quite a lot of patience needed. Bit of a break of a trend as well on that push higher, uh, as well. The high of Friday evening, not too far away. You'd expect a bit of support around there on the futures, 2810.25. NASDAQ favoring, uh, the upside following those earnings, and it might be that you're just waiting for a bit of, uh, support lower down to come into play. Those levels you can see work quite nicely as resistance before we did push higher on that 4% beat, or 4% earning, uh, 4% increase uh, in, uh, in Alphabet there. Dow Jones, a couple of their earnings coming out today, so better to have to wait till the afternoon. And it is quite messy around that pivot where we found quite a lot of resistance for the main part of the session yesterday as well. So equities, perhaps best to sort of wait until after this data and then into the afternoon and even the evening for those. I still have a bias of the downside for, for the yen overall following the more hawkishly perceived Reuters article and the policy tweaks that, that may come into play first time for, you know, since 2016. Um, that for now is, is, is, uh, is to the downside a tad there, uh, just as the dollar has given up a bit of, uh, the gains this morning, uh, as well. Mentioned gold push higher, just coming off the high, similar to euro, uh, as well. One to keep an eye on, obviously, that low that we had from the 19th the low of the year, whether it's time for a bit of reversal now. I feel we need to get above 12.35 consistently, which was the low of the sort of the 13th, and, and the high that we had, uh, sort of late last week, early this, uh, week as well. Um, so it could be an opportunity to come into play there. Oil API and DOE to perhaps determine the, the rest of the week. It was a bit of an odd, odd day yesterday, uh, with the, the push higher, obviously coming in from the— well, supposedly from the Iran-US tensions, and then down on supply. There's always a reason, isn't there? You know, if there's a journalist— I wouldn't read too much into those considering where we are now, but just going sideways as well. So you've got just over 3 minutes into the data comes out for the manufacturing PMI. 54.7 expected, the composite 54.8, services 55. Manufacturing for Germany and France has beat expectations. We'll be keeping an eye obviously on the, the euro-related, um, markets here as we're coming in just to over 2 minutes now. So I'll catch you in the chat and we'll do a quick summary of the data after it comes out. I don't speak to you, hope you all have a great trading day.