MPs fail to find a Brexit alternative for a second time

Okay, very good morning. Anthony here, Tuesday the 2nd of April. I hope everyone is well. I thought I would kick things off immediately and start with a graphic that was tweeted by Sam yesterday on Twitter. So just to remind you, you definitely should follow this guy right here. He puts out lots of decent technical charts of things he's looking at. And one thing he was looking at yesterday, which was issued in our weekly strategy report, was of course this idea of the technical setup and some of the, the kind of fundamental narratives that are happening at the moment and how this could be supportive of further gains in US indices. To make this a bit bigger so you can see it, because essentially what happened yesterday was interesting. What we had was quite a bout turn in sentiment, really initiated from Chinese data overnight. Kind of just to get you up to speed, we had the manufacturing PMI from China showing a significant recovery and actually moving back into expansionary territory counteracting multi-month declines that we were seeing in those readings. That was then followed by the US. Although Europe was, is particularly weak, the US actually exceeded expectations in their respective ISM manufacturing PMI as well. So actually then, this helping equities from a fundamental perspective, the trade war situation seemingly still moving in the right direction, at least for now, is adding some decent fundamental catalysts for further upside or to support that move. This in the wake of the fact that last week obviously a lot of people were getting somewhat obsessed, obsessed by the inversion in certain parts of the yield curve. But if anything, yields have started rising yesterday just given some of the, uh, the positive news in which we had. So to make that chart make a bit more sense, let me just make it a bit bigger here so you can see what we're looking at in the S&P 500. So this is a daily continuation, and this obviously is encapsulating a couple of different things. If I make it a bit bigger, you can see the bigger picture here. So this is what we've been looking at for a while, and obviously this is that big Q4 sell-off that we've had, and this, you know, equally powerful recovery that's come in regards to many different things. Obviously, the Fed becoming dovish, the Chinese authorities, whether the central bank or the government, deploying various different tools to support the economy. OPEC cutting production, OPEC+ by 1.2 million barrels per day, helping that recover. And then the trade war side of things, as I said, moving in a positive direction. These just a few of the bigger macro catalysts to cultivate this turnaround. But the interesting thing here is One thing we were looking at last week, Sam and I, was that we, you know, this trend line of that kind of triple peak, if you like, of the price movement when we tried to recover on those 3 occasions during that October, November, December sell-off, you know, we hit that perfectly to the tick last week. I think this was last Monday, and then since that point, you know, we've continued to accelerate to the upside. As to where we are at the moment, which is yesterday's session helping us close above quite a key technical level here. 2865 is an area we've been watching for a while because not only to where we were, we retested, found some resistance last week, but that kind of rectangle there defining previous resistance and support. I think that's an important area, and we closed above there, uh, and we trade still above there about 2 points this morning. So could be quite an interesting area now, turn support. But the other point here is obviously other bullish signals from a technical indicator point of view is this golden cross. And obviously people playing catch-up now to Sam of what he was saying at the weekend in regards to the fact that just keeping an eye on the, the shorter daily moving averages crossing over the 200, which in simple terms would be indicative that short-term momentum is picking up over the longer time frame, which would be a bullish signal for prices. And hence Sam putting out his calls, which he, to be fair, has stuck to for, um, the last couple of months. I think he called it down, you know, a decent few, uh, 150 points lower than where we are today. But he's still very much of the mindset that the next biggest resistance levels where we are really at the moment is the challenge. And then the next up at 2900, the last two big ones before, you know, do we push up to then, uh, the all-time high. So yeah, very interesting yesterday. Of course, um, yeah, this is what he was saying here. The all-time high obviously would be a push-up through these levels here, which we've managed to do yesterday. The next logical target then being the psychological handle, which would bring us into some of that price action going back into the, the era of the sell-off. So September, October last year, all the way up to all-time highs, 2945, that would be if tested. So yeah, that was the, the equity story. Otherwise, obviously, the, the thing a lot of people are talking about this morning, unfortunately you can't get away from this, it's the, the ongoing saga that is Brexit. So really two distinct phases of price movement you can see here in the sterling futures. Remember, futures obviously slightly different from the spot in the sense that it does close and reopen. So hence the reason why the vote came out, I think it was about 3 minutes past 10 PM last night, and you can see quite a distinct gap lower from trading around the 131.60 down to really the 131 handle. And then consolidation of that move overnight in the Asia-Pacific session. Then the early birds have come in in UK and Europe, and we broke the lower bound of that range and the handle. We've just remained heavy here, and so sterling is underperforming. This is pound weakness on the back of what's developing. I guess there's a sense here, as we'll discuss in a second, that the, the prospect of a no deal has to be priced in a little bit more. Not that that's the baseline scenario at this point, but I must say I am surprised by the reaction that we've had to what happened last night. If you read our strategy report yesterday, we were very much of the opinion that what happened last night was to be expected, in that Parliament would find no majority, because in our view, we've always said and what we're talking about in the briefing is that, you know, you give in simple terms, if you give Parliament, if you give MPs an opportunity for more time to potentially push towards their first preference, they're going to posture and leverage all the way up to the 11th hour before they then typically will fall in line. I still think that that's the case. So this idea that any deal is going to happen soon, I think is not the case. I think actually it's not going to be probably until next week because it's— remember, the deadline for Brexit now before technically we could crash out is next Friday. So as MPs, or thinking like an MP, I would say you've still got plenty of time. To try and, you know, just put the various push and pressure on the powers that be to try and get them to persuade to your first preference. The whole idea here is that you're likely to remain in this current status quo, which then brings about this similar argument between accepting Theresa May's deal on meaningful vote— what would be meaningful vote for or accepting the idea of a long extension. And if by that, then for what reason? So this was the actual votes last night, and the one obviously that we were recommending to watch most closely was that of the customs union, because in the first indicative votes, the customs union failed by 6 votes, and last night it failed by 3. Now that was the kind of most pressing one. However, when you start looking at the, the kind of arithmetic, although that sounds close, uh, quite interestingly, although this is kind of a Labour-led proposal, it did have, I think, 10 Labour politicians voting against it, going against their own party. So that goes some way to say what's going on there internally. The referendum on a deal, um, I know 280 to 292 looks close but in reality, when you start breaking down these numbers, that's not that close, as we'll see in a second. Common Market 2.0, the emergency break on no deal, obviously all falling very short of the margin. Here's actually what the FT have done, and it might make a bit of visual, um, sense then of what exactly happened. And as you can see here, those voting for a customs union As I said, very much a Labour-led agenda, so it's a predominantly red group. However, you can see there, there's a fairly significant portion of blues, Conservative members. So you can see here Nick Bowles, who I'm pretty sure I read this morning, having had his amendments fail, now has now resigned himself. So another kind of casualty, if you like, of pursuing what he thinks is the right path, and then a lot of people obviously patting him on the back for doing the right thing, then, then just standing aside now that he hasn't managed to get his way through, rather than support a deal that he doesn't agree with. Against, obviously, is this heavily conservative. But what's interesting here is that, look, this is my point about this customs union. There's 89 MPs that abstained. So in reality Remember, we were only 3 short here of what would have been, um, well, for a majority. And look, there's 3 Labour MPs there, David Lammy being one, 2 others here who, if they voted for their own party's proposal, well, then you would have had the numbers in your favor in that respect, or at least even with one more to tip over the balance. So with all this type of thing, again, there is definitely scope for the customs union deal to go through. It's the idea here of basically, you know, only when push comes to shove, I think you'll start to see this abstained number start to fall into one of the respective categories, of which will happen over the course of the next week or so. Going further forward, uh, here's some of the other votes. MPs voted on holding a public vote on any final deal. So obviously this is quite one of which the Conservatives would be strongly against, because this is basically against what Theresa May's and the Conservative current mandate is, which is the vote of Brexit has already happened. Now it's about delivering that vote, and you have to deliver that via, at least at this point, the four form of Theresa May's current deal. The only problem is, is there's large abstentions, or people abstaining because of the fact that they don't entirely agree with her deal, or they could be heavily of a Remain mindset and therefore still believe that actually the public should hold that final vote on the deal. The other side is the— quickly— is MPs voted on Common Market 2.0. 0, and then probably the least favorable one was revoking Article 50 to avoid a no deal. That failed quite miserably. So as you can see here, obviously the SNP now starting to have a strong presence because they don't want the risk of that no deal happening. And then you've got the obviously more remain-minded, so the Conservative members, you can pretty much start to get guess which ones these would have been in that respect that would be voting for that. Dominic Grieve, Justine Greening, and so on. So yeah, where do we go from here? So unfortunately the show's not over, it's just we're right in the middle of it at the moment. So next steps are Wednesday. So as we were discussing in the briefing, our thoughts that this would fail to find a majority, meaning that what happens is I believe Theresa May is holding further senior talks within her Conservative Party for a number of hours later on today. Lots of talk about— again, seems to be a rising chorus about is she going to trigger potentially a general election at this point to break the current impasse. So I'd keep an eye out on Twitter for sure if any of that type type of rumor-mongering starts to circulate. But then Wednesday we come back and we, we kind of do the whole thing all over again, uh, and we go through the usual kind of process. A good article here though in the BBC, and I will share this in your chat now, is when you scroll down it has the different options that are still potentials, but then it has these quite neat infographics which basically summarize— if I make this a bit bigger— it summarizes the the path. So for one, if we were to seek a new renegotiation, if the EU accepts that as a, as a path forward, Parliament vote on it, on a new deal, it's passed, renegotiated deal implemented. If we fail, the different options. And if you scroll through referendum options, what exactly is the process, how would that play out and then you go through, like we were discussing yesterday, if the government proposes a new election, two-thirds of MPs approve, then it goes ahead. If fewer, and then we go down the other options and so on. So yeah, a good article to get you up to speed of exactly what action leads to what particular path, which can be quite useful. So going back to the chart, in the meantime, I'll let Sam look over this more more technically, but at least from a fundamental point of view, what I would say is that ultimately I feel that the longer this goes on, there is an inevitable sense that people will need to lift the pricing in of a potential no deal, even though I still am firm of the belief that that will be avoided. It does need to be priced into probably a slightly higher extent than it is right now. And so as we go forward, if we finish this week in exactly the same position we're in today— so let's say Wednesday in the, in the third round of indicative votes still proves to be non-decisive— then I think we finish the week— obviously we have to take in any dollar movement consideration on the back of things like payrolls as well— but overall, from a Sterling-specific fundamentals, I think what markets major Wall Street banks are pricing in, which is kind of a, a 10%, 10 to 15% probability of a no deal. I think that starts to then need to start creeping up to more like 20%, low 20%, which from a price point of view does need to start reflecting in a bit of a pullback here, uh, in the sterling currency. So, but as I said, still the baseline view here is that I think there'll be a lack of progression this week and movement will start to happen next week because nothing sharpens politicians' minds than the looming cliff-edge deadline. And I'll still expect that to be the case. Okay, quick look at some other headlines. Uh, this was out from Goldman Sachs from overnight. They released a research report and they've basically said they see a big finish for Brexit and an opportunity for the pound. So similar to what I've just been saying, they are still firm of the belief that in the end, um, what's going to happen here is going to be a sterling positive outcome. That being then that everything other than a no deal essentially has positive ramifications for the pound. Obviously, the longer the extension, the more stronger the response would be to the upside. Moving off Brexit though, let's have a look somewhere else and let's just take a look at crude oil because this is the headline this morning and it comes after what was a good jump in WTI crude yesterday. Now we've been talking about it for the last couple of days about there's quite a lot of bullish fundamentals in the market at the moment that would support further upside and, and yesterday putting in a decent performance of about 2.5% What's happened here is latest updates from data yesterday showed that OPEC crude production fell for a fourth month, month. Power blackouts in Venezuela further squeeze supplies, while US stockpiles probably declined by 900,000 barrels last week. This is for the run-up then into the, the inventory numbers we're going to get as well. So again, OPEC+ is resolved to continue these deep cuts The Venezuelan issues, the Iranian sanctions are all obviously coming in on the supply side in combination then with these positive demand fundamentals, which has been a bit of a bottoming out in fears of a global slowdown, at least in the short term, saved by the bounce in the manufacturing PMIs coming out of China and the US. So the other thing, of course, on the oil front, which I think was quite interesting, is this came out, um, on our weekly calendar. We had yesterday meetings that were taking place between the Iranian and the Russian oil ministry, and I just thought it was quite interesting that Iran has come out and said the OPEC+ pact will be easy to extend beyond June. Now, a couple things here to be aware of. Iran is exempt from the current OPEC deal, which means then that they can continue pumping. They've managed to get that exemption off OPEC because of the fact, um, that they are subject to sanctions from the US at the moment. The only thing, of course, is we know that those sanctions don't carry hardly any bite, 'cause it was more of a political ploy from Donald Trump to massage the domestic messaging about how he's dealing with the Middle East, because Iran is still being able to sell their oil to their main buyers people like China and India. Now what's quite interesting then is Iran is saying, yeah, that's sure, fine, you know, OPEC+ can extend their cutting deal to June as long as we remain exempt and as long as we can continue selling our crude. Because if you think about it, oil now is trading at a price point of north of $60, and we— this is the daily continuation of that chart. We know once oil goes above $60, Donald Trump starts to get a little bit, a little bit sweaty because he starts thinking this is going to be problematic now politically, particularly if we start to move north towards $75. He really starts to amp up the kind of rhetoric to try and get others to produce more oil. Now the problem is here is that he doesn't want want his own sanctions to bite, basically, because if he does, then you're putting a squeeze on the third-largest producing OPEC member, which is only going to create further supply constraints and push the price higher. So Trump's run himself into a bit of a tricky spot here because he cannot now change, in my mind, the strength of the sanctions when they come up for renewal shortly. He has to give them a bit of a free pass because it's only in that point then, then he can keep their supply levels high, because a reduction from them would be highly problematic and would probably put a further squeeze on supplies and put the price further to the upside. So yeah, really interesting at the moment, and I do feel still that there's room for further movement to the upside. The area I'm kind kind of viewing here as a near-term target is that the kind of the next fib retracement level, which you can see here from that Q4 big sell-off that we had, and that would take us back up to $63.59, which as you can see is the support low from the, the midsummer 18th of June low that we had looking back on the, the price on the charts. So yeah, interesting to see these developments, uh, and would continue to think that this directional play, uh, would continue at least for the moment. Other things to be aware of: the Aussie currency is trading weaker this morning. This is despite obviously the, the positive developments we had in China from yesterday, and that's because we have had an update from the RBA overnight. It was their interest rate decision. They kept rates on hold as expected, 1.5%. But I'll keep this short. They basically sounded relatively dovish in the accompanying comments, um, the governor noting that GDP is painting a softer economic picture than the jobs data. And so Aussie has weakened overnight on the back of that release. The other final thing to mention is about this, um, trade wars. This isn't just a conversation piece about the US and China. What's been very interesting reading this morning is about how the EU and the US trade talks face delay, and what European politicians are very frightened of is because of the nature of how Donald Trump tends to react, is very aggressive in a backlash to any delay in confronting these bigger issues. What European Union governments are struggling to reach a consensus on is a mandate to begin trade talks with the US. And to keep a long story short, the reason for this is that because the US have pulled out of the Paris Climate Change Accord, that actually breaks the mandate for any European country to be able to open trade negotiations with. It falls short of the conditions of what must be met to be a trade partner of Europe. But obviously the US is so massive that Europe cannot afford not to be dealing with them from a trade perspective, particularly countries like Germany, which are heavily export-heavy, particularly the automotive sector, which has very much felt the brunt of threats of potential tariffs from the US. So what's happening at the moment, it's Macron that's proving, and France, that's the most resistant at the moment to to give the green light, given that they're the most focused on that particular accord within the treaty. So, yeah, quite important to watch, and certainly this not an ideal situation for the single market, which as an area in the eurozone has been suffering economically of late. So of all the positives we discussed, that is one of the more negative side of things. Okay, so Going to hand you over to Sam, um, just quickly to remind you of the calendar for today and what you have coming out. You've got UK Construction PMI. This is much lower tiered to the service one we're going to get later on in the week, so I won't be looking for too many reactions in the pound. I'd definitely be looking out for more Brexit-related updates. As I said, Theresa May is holding senior cabinet meetings throughout the morning, and this afternoon you've got US Durable Goods API inventories later on this afternoon. All right, have a good day and I'll see you in the chat room. Thanks very much.

Thanks, Ant. Uh, hope everyone had a good evening, enjoyed Arsenal winning, back to third in the league. North London is red, I hear you all, all saying. Just having a quick look over, we'll start with Best in PE considering that is, uh, at quite an interesting level, having broken above the, the high, uh, of the year. And obviously that low from the 8th of October, definitely worth now keeping an eye on, on that level as, uh, an area of support. So just tested that, uh, a sort of 2865, 2866 level, uh, this morning, albeit not much going on, uh, but finding support for now. So that as a, it's a sort of intraday area around that and the pivot, yesterday's morning high will be pretty key. If that holds, you've got to imagine we continue to sort of push on. And, and, uh, you know, if the high of yesterday goes, that could also be a decent opportunity to, to get long in this market. Probably worth as well having a trend line on from, well, in all the sort of the equity pairs— equity markets, sorry— uh, breaks. If this was to get squeezed in to then look for that push higher on. I don't see much staying in the way from further push. Oil as well, similar, uh, with that, that push to the, the high of the year. And yes, we're recovering a bit now. Probably again worth getting on the, the trend line here for this market just to wait patiently for, for the break either way, but preferring the break to, to the upside as this market has been trending quite clearly over the last few days to, to that level. Looking at other points for, for oil, I know Tim will come on later on to talk about what he's looking at, but the pivot looking quite key. And if we were, I know it'd be a considerable move to the downside, but I've also got marked up $60.93 on, on my charts for, for the futures. Currency-wise, I was just having a, you know, look this morning. And, um, view— I mean, I, I still believe euro-dollar is a short, so looking for a place to do that, you've got to eye up the 113 handle in the futures, which was the, the low of yesterday morning and around the pivot area. Uh, that would, however, be a significant push to the upside. If we have a look at the, um, the, the 240 chart, probably you know, not now far away from the low that we had back on— well, yeah, you can see that's tested that now, uh, in March. But I just, you know, with the calendar how it is, you know, not as busy as yesterday, uh, bigger things to come in the week, I wouldn't really want to get too aggressive in this market. I'd almost just sit and plan the trades. It might be euro I'm looking for Uh, yeah, a bit higher up, maybe the high of yesterday evening or the pivot is the sort of the ideal place to get short. I mean, if we can drift later on to get the top end of this, this trend channel, uh, that would be something I'd be interested in, you know. But 3 times holding on support on S1, so if we were to get a break of that, you know, sort of looking for price to, to come back and retest it as an area of resistance. So breakthrough here, retest. To then get short. But for the other currency pairs, I mean, pound is what it is. I agree with Van in, in sort of, you know, a bit surprising to see how much the market plummeted with the headlines I was reading this morning. Um, but yeah, yeah, I mean, Brexit will obviously ultimately drive this market, so, you know, trade at your own risk. Aussie dollar is, um, near the lows, just making a new low of the day a few minutes ago. I think you gotta go with the flow here, prefer the short. Reasons perhaps to get long, well, I think as a sort of line in the sand, if we were to close considerably above 7100 in the S2, then you might see a bit of a retracement, but there's still some good shorts higher up just for today with the dovish RBA. I think unless there was as well maybe some really, really positive trade talk developments you're going to see this market, um, uh, have more, more conviction when, when, when sort of selling, when people going short. The yen pushed higher yesterday, uh, on the, on the weak retail sales number, to only then come back down as we had some stronger data into the back end of the session. And also equities pushing higher as well. Looking at this possibility to, to get short if we were to get similar type of retracement pivot. Looks quite interesting if we were to, to get back up there. We're in a bit of a range this morning between the sort of highs, which have acted as a good level of resistance, you can see marked up here, uh, and the, the low of the day as well. We probably have just broken, just as I've been speaking, a bit of a trendline false break on that. But you've got— I think again, preferring this market to have the dollar the stronger of the two, uh, for, for that. Let me look at gold before we'll have a quick look over the, the general picture for European equities as well. Um, it's, it's still coming lower, albeit we each of the last two trading days we had a decent push at the, well, the sort of the turn of the, uh, the sort of the midday hour to then come back down into the back end of the session. So I just be slightly aware of that. I think the R1 looks quite good should we get a similar reaction today. Uh, however, again, as some of these markets are, would be quite a decent move to get there. But I don't really fancy today chasing the market too much. I think there's better opportunities later in the week. And for, for these, uh, products that we've just gone through, the better opportunities seem a bit further away for for now. I know I talked about it in the, um, in the, the weekly strategy that we, we sent out, but a couple of opportunities. I think the— I'll just clear this up with the, the pivots, and I'm going to go draw Fibonacci from the, the low of last year. I do quite like the look of, uh, the long should we get down, uh, on the futures, uh, to to sort of test, uh, oh, I was gonna say that chart looks wrong there. Um, let me just modify this one second. Yeah, so if we were to get a bit of a retracement, uh, lower, looking at the, the 0.382 fib, also the, the lows of, of the 24th of January, I don't see why we can't get down there in the next sort of few days. However, we have found decent support around these lows. But I would like the, the idea that if we can get a test of around this area on the futures— that's coming in around sort of $1,272, $1,273, $1,274— to, to look for a place to get long. Uh, trend line from those lows of last year matching up quite nicely as well. So something to keep an eye on for gold. I mean, the way it can move, you know, wouldn't be too surprising if that did come in uh, today or tomorrow as well. Having a look at the, the general picture, equities, you know, just having a bit of a breather in the US. The DAX down to its low, however, did find support on that first test of that pivot. One to, to keep an eye on there as, uh, it, uh, just had a bit of a bounce on that open. Break below the pivot, I'd just be wary of getting too aggressively short. You've got the resistance that we had around midday yesterday before breaking through just below. So as a zone, pretty important one to, to keep an eye on for the DAX. And the retest of this trend channel comes in at pretty much the same level, or potentially the same level should that come in. So one to, to have marked up on the charts there. Euro, there you go, just having a quick break of that S1. So any retest of that, you could be looking to to sort of get short here. So you can see good support, good support, third, fourth test, get that breakthrough, that zone sort of breaking now. So be looking at this area as a level of resistance for a further push lower. The dollar, yes, just strengthening a touch, but as we know, the, the picture in the eurozone not too rosy for now. The pound is coming lower, so a bit of dollar strength coming in, so keep an eye on that as well. I hope you all all have a good trading day, and any questions, as usual, please do let me know. But if I don't speak to you, I hope you have a good day ahead.