Morning Briefing - 27th July 2018

Hi guys, good morning. It's Friday, 27th of July, just gone past half 8, uh, the morning briefing. And we'll have a quick look over the charts from, well, this week, the sort of main events that have sort of shaped us to get to where we are today, what happened yesterday, and what potentially will happen today, uh, or really, uh, what will happen in the wait until 1:30 for the US GDP numbers. Having a quick look over at the markets from this week, what's the sort of the story been? Um, obviously last Friday you had the Bank of Japan Reuters, uh, comments that came out that were possibly suggesting a, a bit of a policy change. So Monday you had bonds starting to come down on any sort of idea that there was going to be a tweak. You see T-notes coming under pressure here from those comments that we had back on Friday. So the comments came out Friday afternoon, so we did come down a bit and we have drifted down for the remainder of this week. That added with the fact that GDP is expected to be a bit of a beat or a big beat of expectations as well, has weighed on the US bond market. The Bund as well, which came down on Friday, but as well on Monday, sort of suggesting that sort of global tightening may start to take a bit of place. Since then, however, we have gone sideways in the Bund. As you can see, yesterday afternoon did push higher, um, after the ECB meeting as well. So bonds start in the week from the back end of Friday were under a bit of pressure. Depending on how today goes, you may get a continuation of that, or if the number was quite bad as well, I think you could get a bit of a rally up to the, to the weekly highs very quickly if it was a miss of the sort of 4.1 which is expected. Going into the sort of the beginning of the week, we had the Trump tweets with Iran, which you can see in the morning offered nothing until the volume came in on that sort of geopolitical risk. We pushed higher, came back lower as journalists sort of put it down to oversupply. That didn't last till the next day, so I think it was just a bit of an oil day, if you like. API, you can see quite a decent reaction, bigger in gasoline, but we pushed higher. The DOE supported the drawdowns in everything. And we pushed on through $69 and closed above there for the first time of the week. We've sustained a move there now and just below $69.50. So oil, an up week, continuing to push high. You can see a decent trend, albeit with a pullback each day. So those geopolitical Iran-US sort of tweets now almost forgotten about. I guess it won't be long before Trump's a hero for sorting that out. Earnings season has sort of dominated equities this week. You had Alphabet on Monday, you can see there, really, uh, big push higher, um, in, in, uh, in their, um, their earnings. So I just got a summary here. Alphabet react— next day reaction up 3.7%, uh, as well. We go through to the uh, the week. I haven't actually got it written down, but you had Netflix as well. Let me just write that down for convenience. So Netflix miss of expectations, so next day was down 5.2%. Uh, Facebook, the main sort of mover here. You see the Nasdaq gapping lower there overnight, um, after the sort of the missing expectations. The next day down 19%. And last night, uh, we had Amazon, which you can see was a bit of a topsy-turvy ride in one of the craziest minutes of any sort of share price reaction. So earnings dominated equities. You can see the NASDAQ here just about finishing up for the week, dragged higher as well perhaps from the positive trade talks from Juncker and Trump. Coming on to that, you can see that's where we came in, uh, Thursday evening and pushed— uh, Wednesday evening pushed higher off those talks, albeit with ECB meeting yesterday, which was albeit uneventful but slightly, uh, dovish because no real change to the June meeting. Saw that move completely reversed, and we're now sitting on quite good support that we found back on Friday morning. The pound's only real mover Uh, was the May taking control comment. I tweeted at the time thinking it's a load of rubbish, really didn't understand the reaction, but the market did go higher. A bit of dollar strength yesterday coming in as well as people are, you know, going to price in this better than expected GDP number. And we have reversed that move almost down to, to the low of the week. Um, having a look at the ECB meeting, uh, yesterday was very uneventful. And, you know, people tweeting that it was one of the most boring meetings ever, at least top 5. We pushed higher initially at 1:30 only to come down as people debated what summer was and that, yeah, there was no real change from the June meeting, no talks about sort of progressing any further. And we, and we did drift lower, uh, into sort of the close as well. And the same time the dollar was strengthening, we pushed back above 94, got to sort of 94.5 on the dollar index. Um, that 95 still a bit away, away. Of course we could get there today, so something to look out for in towards the close. But close, but yeah, ECB meeting pretty uneventful, uh, yesterday. The DAX with the weaker euro You can see pushing higher, breaking out of the trend, uh, and continuing, uh, higher into the close and gapping higher this morning, but already had a go at filling that gap and is on the high of the day as we speak. The Bund, with the DAX pushing on, you can see did, uh, go higher post 130, albeit, um, with bonds, uh, sort of down this week on the idea of Bank of Japan, on the idea of better GDP numbers. We did then go lower into the sort of the close of the day. NASDAQ yesterday, you can see here, this is a 1-minute candle from just after 9 o'clock. So we did have the, the Amazon earnings as they came out. Quarterly profits hit $2 billion for a new record. Um, pretty eventful minute as you can see here. Literally, I'm— let me just move the camera so you can get the full of what happened in that minute. And this is just Amazon, so just NASDAQ. So Amazon was this on steroids. Price— earnings came out, a bit of a move lower, you can see, only to snap back instantaneously, push to a new high, and then come back to exactly where we were when the earnings came out. NASDAQ this morning has continued to push higher. Um, that gap fill is, is still in play, albeit seems to be going on forever. So you can see, worth keeping an eye on those lower points that we had, uh, pre-Facebook, uh, earnings on the futures here. Marks up quite nicely with the R1 today. Um, the main driver going forward is going to be the GDP number, however, at half one. And I would suggest being careful if trading at all this morning, uh, on the anticipation of those numbers coming out. Um, so only real stories from, from yesterday were ECB and Amazon in what has been a bit of a quiet week. Um, worth sort of mentioning, and I see, uh, Anthony can't keep himself off his Twitter even though he's on, on, uh, on daddy duties for the first sort of week. He, he retweeted that, uh, 'Once the Brexit negotiations are complete and the terms of Britain's exit from the EU have been agreed, do you think there should or should not be a referendum to accept or reject them?' So this is the first time that the proportion of voters who favor a second Brexit referendum has overtaken those who do not. So worth keeping a bit of an eye on this if it does escalate. You've had people such as Gary Lineker come out and, and be in favor of this. It's gathering a bit of momentum, but we are obviously coming into that period where I— after sort of a quiet week anyway, and you've got Theresa May about to go on her two holidays, it probably is going to be relatively quiet news front-wise for the next sort of couple of weeks. I wouldn't be expecting too much in terms of movement from the pound. I know we have the the Bank of England next week, which would probably be the main driver anyway. But Brexit-related talks I think would be on, on hold for a while in terms of sort of short, sharp, uh, movements, um, off of, off of that. Um, today all about the, the GDP number, uh, as mentioned. And, uh, you know, you haven't had to be in the markets 24 hours a day to, to understand and, uh, and be hearing that the idea is it's going to be a good number. So the word on the street is 4.8. We've had Trump talk about it, we've had Kudlow talk about it, we've had all the newswires sort of pump it through. And we know Trump has, has a history about tweeting numbers before they come out. Goes all the way back, you know, this, this tweet here when I searched this morning from 2012 before he was even involved at all. Today's job report is not a good sign and we could be facing another recession. No real job growth. We need over 300,000 new jobs a month. So he's always had an interest. Um, we know recently, in recent times, this, you know, not too long ago, just a month, he had the tweet in the advance of the, the jobs data. He got the chart here of when his tweet was, around sort of 11 AM. The jobs numbers came out, uh, into the afternoon, uh, and the yield pushed higher. So obviously T-notes come under pressure. Dollar would have strengthened, uh, as well. So we know, uh, usually when he tweets this, it means it's going to be good. You know, we had not long ago— I could have got a few more tweets up— when he talked about, um, that we're going to have some great, uh, jobs, uh, news coming out. And it was the jobless earnings or the unemployment rate or whatever that was, a multi-year low. He's not going to be talking it up unless it's going to be a good number. I've literally put my neck on the line there and say it's going to be good, probably going to be near that 4.8. But you know, if I am wrong, if the, uh, the stories, the rumors are wrong, then you're going to get a decent reaction. The dollar has been strengthened over the last couple of days, bonds have been coming down in price, um, you'll get reversals of that. So that would be from a trading point of view, really the, the sort of the, the main thing you'd, you'd, uh, you'd want to see. What are the, uh, economists saying ahead of the GDP? Let me just bring that into picture here. So you've got Morgan Stanley, the 4.7s, Wells Fargo 4.7. So you can see they're all higher fours for the majority except Bloomberg Economics, we've got it down at 3.8%. So they're really putting, well, their necks on the line saying it's actually gonna be worse than expected. If we have a look at Trading Economics here of the last few readings, you can see the ceiling over, well, since Q2 2015 is, is 3.2%. You know, what does a 4-point 8, just under 5, uh, where does that put us? Back to 2014 levels. And really, that was a bit of an anomaly anyway. So while it is, you know, said that this isn't going to really be the start of things to come, it's not like the next quarter is going to be a similar figure. It, you know, it is great and it is the highest it has been for a while. It's going to be the mover today. I'd be careful in respect that it has half been priced in anyway. Um, but you know, if we have a look at the exact sort of range, you can see it is a big one. 2.5% to the low, 5% to the high. Be careful, but there's going to be opportunities if it is out of line. I would say the majority of a higher number is priced in. If we have a look at the euro just over the last sort of few trading days. You've had quite a bit going on. You've had the Trump comments from Thursday weakening the dollar. You had the, the trade talks, uh, you know, the positive news, so sort of unwinding of a bit of dollar strength there against the euro. You had the ECB. So you've had a bit of a topsy-turvy week, and we know, having looked at sort of the, the longer-term charts, that price is getting squeezed anyway. But, you know, all things considered, the dollar has been strengthening. I mentioned earlier in the week, um, you know, Trump's been trying to sort of talk down the dollar over the last sort of 7 days, 8 days. It maybe is in anticipation that this number is going to be so good and he's just trying to, you know, control things down a bit. Um, but if we were to get a strong number, um, 4.8, near that sort of high end, I think we could you know, get down to the— on a sort of a spike if it was to come out right now of the low of last week. Uh, you've got 1.16 on the futures, which is sort of the low point from the back end of last month. I think we could get a bit of a continuation down to there on a good number. I think anywhere really in line, i.e., 4.1%, I think we'll get the high of the week, um, by the end of sort of the, the trading session. You know, the good number is priced in. People have got their expectations, um, you know, to the, to the higher end of that range. Uh, so that's how I would be, be sort of focusing on that. Um, I just got a tweet here on Amazon's share price there, so you can see just in that minute after how it, you know, popped lower down to $1706 and then back to the higher $1894, all in the same minute. Just after 9 o'clock when those earnings come out. So yeah, pretty, pretty crazy to think of that price action as it was going on. Going into the weekend, we'll come on to sort of the calendar as well for today in a moment. Going into the weekend and, and next week, what are sort of the main things to look out for? You've got the, the Bank of Japan meeting on the 30th and into the 31st, a 2-day meeting. In terms of where the, uh, dollar-yen goes, which has been coming down since, uh, those, those rumors, uh, last week, uh, they'll be interested to see how that, that pans out. Are they going to make the first sort of policy change for a couple of years or not is going to be the driver there. Um, as well, you've got the Fed meeting, you've got the Bank of England meeting as well. A couple of things to, to sort of bear in mind. Um, Bank of England obviously on the Thursday, the Fed on the Wednesday, so potential drivers for the market there. You've got a bit of data coming out as well, um, from, from Japan. So central bank meetings next week, you've got 3 sort of key ones to be aware of. Um, so you might, after the GDP, just get a bit of a quieter sort of couple of hours into into the weekend in anticipation that next week is going to be where it all sort of, uh, comes together. From then, having a look at the calendar for today, quiet morning on the data front, and it would really be beneficial to, to stay out unless comments or unless the momentum really picks up. Treat it almost as a non-farm payroll, uh, morning. I wouldn't be looking to trade too much at all. Going into half one UK time. Then 3 o'clock, you've got the University of Michigan sentiment final reading from July. Not expecting to see too much there. The low end and the high end of the range are so tight, and I'd expect us to stay in between. If not, you might get a slight reaction going forward. Earnings-wise, you still got a few to come out, but we've had the, the sort of the main, uh, drivers for, for equity markets in general already that have come out. Let's just have a quick look over at those again. You can see, obviously, will be— it remains to be seen what Amazon does today, but Facebook down 19% the next day, Netflix down 5.2%, Alphabet 3.7% up. But, and we'll come back on to just equities in general, and this is just from this week, it's another up week. It is another up week. You know, where can we look to finish this week? It's the highest we've been since February 1st. Yesterday, the highest close since the all-time high on the 29th of January, which is crazy to think. Um, I think as long as we sort of sustain above 2840, then we can look to sort of push on and continue higher. Um, Facebook didn't really continue its sell-off in the same sort of vigorous fashion. So that would be one to keep an eye on. Are we going to get the gap fill, um, in the NASDAQ and push, push higher? If this, if this, uh, GDP number does come out really, really good, you know, theoretically I think you're gonna have to say that equity should come down. But nothing's looking to stop them now. You think the, the whole issue of Facebook's massive miss, Netflix big miss, um, that we should be, you know, near the lower end of the week, but we aren't. Sentiment is continuing to the upside. Dow Jones, you can see as well the key technical level. We just had a little go at breaking there yesterday from the 12th of March resistance for the next key area, uh, the sort of the main pullback that we had at the end of February, 27th of February as well. Um, I'll come on the, the mic closer to GDP to look at the charts, how they're sort of, uh, trading then. But it'd be interesting to see from a perspective of where the dollar is trading, how close to 95, what bonds are doing. Are they near their high or low? Because obviously they'll be impacted from there as well. Gold prices, to sort of wrap this, this briefing up, we had a go yesterday at that sort of $1,235 area, um, on the futures. Or if you're looking at whatever market, the 12th December low. It was also the 13th of July low before we broke through. Really key level for this market, this technically, which has offered good support in previous times and now good resistance on 3 different days. Can we push above there today remains to be seen. I think if we get a close above there, that's good news for the gold bulls and we can continue to push higher. Bit of dollar strength, the only thing I would say just holding that back yesterday. So today you could well see a decent-sized move in that. You get a number above 5%, and I think we'll get the low of the year very quickly. Any questions, as usual, please do, do get them in the chat. I'll come on the mic, as mentioned, throughout the morning, but more importantly around half— well, just before half one for the GDP. But if I don't speak to you guys directly, I hope you'll have a great weekend and enjoy the rest of your trading day.