Next Biden Stimulus Package Seen Between $3-4trl

Okay, very good morning. It is Tuesday, 23rd of March. Hope you're doing well. Wanted to kick off the briefing with the S&P 500 on the daily continuation charts because today is March 23rd, of course, and that did mark the low that we printed in 2020 in the S&P 500, and the over 80% recovery that we saw over the last 12-month period. I mean, even when you look at it on this perspective, um, it was only a short while ago we were close to testing up at around 4,000. One would think that most likely at some point this year, sooner or later, we will breach that 4,000. But quite an incredible journey we've obviously been on over the last 12 months. But yeah, quite interesting. It's a year ago now since we, we hit that eventual low, and Yesterday actually we did see equities, um, push higher in the US. The NASDAQ was a bit of a leader and a few things going on there that I'd like to discuss. I'm going to talk predominantly about the news in this briefing. So as far as the technical kind of setup of the charts is concerned, I'll leave that to the guys on Discord channel when they get underway for the community later. But just having a look at a few things then. This is a chart, if you like, showing showing the change in US Treasury 10-year yields. And what we're looking at here is the first decline yesterday than what we've had in quite some time. Now, I must stress that Bloomberg being a bit cheeky here, and the data is not quite comparable because we've only had one trading day of the week so far, whereas this is bookmarking the fact that yields have moved higher for several weeks, in fact 7 in total, as you can see here. And that's what's led to then the kind of knock-on effects that's had consequently elsewhere, whether that be at the time a little bit of dollar appreciation, or whether it would be the kind of push towards them rotating out of growth into value in an equity perspective and so on. So perhaps that came as a little bit of a light reprieve for equity markets, particularly tech, and the Nasdaq outperformed, finished up there around 1.7%. Respectively, the Dow finished up only around a third, with the S&P up about 0.7%. The one thing though that I think definitely has brought this back a little bit— and first of all, just wanted to finish off with just, just a brief technical look at the, the 10-year here, which it really reflects then that weakening yield from yesterday, and again somewhat at the open this morning. A key technical level here that we are flirting with at the moment is 131.23 here in the US 10-year. And as you can see, that was an area of support back on the 5th, the kind of first and mid, um, weeks of this month, and then has also acted as some resistance yesterday morning at the European open. So definitely worth keeping an eye on there. Technically, if we can break above, then we'd be looking at targeting up around 128, which was the highs that we printed back on the 18th, but then the range high from there beyond would be up around the 132.0405 level. Could be quite interesting if we're going to see then a focus on yields and reaction effect that that can have on equities, for example. But as I was going to say, one of the things that, that is definitely coming into focus a little bit, um, is that of the COVID situation and this idea of a potential, uh, kind of slightly generic phrasing, but a third wave, and, and definitely emanating out of mainland Europe. And, you know, we've talked about this a number of times in the briefings last week, but we've seen further stringent lockdowns put into place in several key regions in the likes of France, Italy, now Germany have rolled that over through Easter as well from yesterday. And, you know, this is just having a look at daily new confirmed COVID-19 cases per million, looking at France here, and perhaps we could put it in a bit of perspective to encapsulate Q4 of last year to see where we are at the moment. And you can see here the French numbers have been rising. We've had quite a sharp pop more recently, but have been consistently rising from the base where we were towards early December of last year. If we look at Italy, same case. And then Germany also has been picking up as well of late over the last consecutive few, few weeks. So That again, and a lot of UK ministers already coming out, and I guess the Johnson crew looking to use it as validity for their lockdown roadmap strategy and not going too fast too soon because of the risks that might emerge from then what's happening in mainland Europe. But the other thing as well is that I was reading last night about the US, and, you know, aside from the well-documented rise in mainland Europe, new cases of COVID-19 in the US actually rose 5 um, rose 5% to more than 394,000 last week. That's the first increase, and the reason why I'm saying this is the first increase we've had after declining COVID rates for 9 straight weeks. Uh, you know, as you'll probably know from when I've been delivering these briefings, the COVID situation in America has been going very well. A combination of COVID case declining overlaid with rapid acceleration of vaccines being deployed. But actually, we're getting a little bit of the opposite now. So COVID cases have bumped up a little bit, breaking that 9-week consecutive trend. That was according to Reuters' analysis of state, county, and CDC data. And the Biden administration actually came out yesterday and said it is concerned that Johnson Johnson may miss its vaccine target as the full tranche of vaccines the company committed to delivering in the US in February may not actually be ready until April. So while the US has been moving up to record numbers of, of people being administered for the vaccine, you know, is that going to slow at the point of when cases are now starting to re-accelerate again to a certain degree? Um, one thing at the moment, at least daily average vaccination— vaccinations are a record in America. 2.5 million shots were given per day last week, and as of Sunday, 25% of the US population has now received at least one dose of the vaccine. So in a week, that's gone from 25 to 25% of the overall population. So that's still going ahead at speed, but there are a few emerging signs here that I think warrant monitoring fairly closely and being vigilant about And that is, we know what the situation is mainland Europe. We talked about on Monday a particular new potentially testing variant in the state of New York that might then not be as responsive in terms of the immunity that people might naturally have, having already contracted COVID, or if they'd already had the vaccine. And if that were the case, compounding with the fact that cases just nationally are rising as well at the moment, and then you get delays in some of the deliveries, as we've seen with, say, likes of AstraZeneca as well, in the actual drug availability, then definitely this could take a little bit of an emphasis away from this kind of runaway growth narrative and higher yields. This could impede that if we start to see the re-emergence of COVID-19 on a global level in the Western world. So, so definitely a couple things that I think that we need to be aware of. On a more positive note, this was an article that came out last night. Seeking to avoid escalation that could see exports in the US blocked from AstraZeneca's plant in the Netherlands, authorities have floated sharing the facility's output, according to diplomats familiar with the matter. And this is quite an important kind of olive branch, if you like. It's not yet official, It's kind of— this is what people close to these conversations are said to be thinking. But certainly this might take some of the heat out of the almost confrontation that hit its kind of head-on at the weekend between the UK and Europe. So something to just look out for any further updates as we go through the session. Overall though, before I get into some of the other stories, in terms of the overall tone across the charts, the dollar index is up marginally. So both major pairs down EURUSD 16, Cable 24 pips. Cable seen a bit of a bounce off the double bottom from yesterday's price action, quite a nice respect of that technically in the futures around 138.22. Otherwise equity index futures have moved a little lower here, the DAX is down about 45, NASDAQ, S&P futures moderately lower, T-notes moderately higher, then gold pretty flat at this point with oil down about 80 cents. Having respected still an area of resistance from last night around 6178, which was also Friday's kind of cap to price action. So despite the positive close we had on Wall Street, generally speaking, Asia a little less optimistic. China's CSI 300 index actually dipped below, uh, technically an important threshold of around 5000. So Chinese equities actually underperformed. Credit Suisse came out downgraded Chinese stocks to underweight, citing slower earnings growth and expensive valuations overnight. And one of the other movers as well was the Kiwi dollar, came after the New Zealand government said it will remove tax incentives for investors to make speculation less lucrative and unlock more land to increase housing supply, to address the housing kind of crisis at the moment there as well, which was influencing their local currency. Otherwise, back, back into the stories. One of the main events that people are looking forward to today, of course, is the first day of the congressional hearing of Jerome Powell and Janet Yellen, kind of double team of the current and former Fed chair, and now Yellen, the current Treasury Secretary. And these comments have already come out, so very important to note that, that this is very typical. So ahead of these congressional hearings, it's a very kind of fixed formulaic process of when they speak to these politicians, typically to Congress, both chambers, so the House and the Senate. And those comments have already come out in their entirety. So when they speak later, we would not be expecting anything new. Also, given the fact that if it does go into any type of Q&A format with these politicians, both of these two characters are very well versed with the process and they're not going to make any mistakes. And so what did they say? Well, the recovery has progressed more quickly than generally expected and looks to be strengthening, Powell said in his prepared testimony to be delivered today to the House Financial Services Committee. He added, but the recovery is far from complete, so that the Fed will continue to provide the economy the support that it needs for as long as it takes. So it sounds very familiar. It's pretty much the copy-paste-repeat of what he said many times before, as what we heard most recently last week from the FOMC. Treasury Secretary Janet Yellen will paint an optimistic picture for the US economy as it emerges from the coronavirus pandemic, telling lawmakers that she sees both growth and possibly full employment next year due to Biden's stimulus package as well. So nothing particularly new there either. Um, otherwise, a few other things I did want to talk about. Mainly the stimulus isn't over yet. You know, this is one of the counteracting forces, I guess, that the market will need to weigh up if the COVID situation gets worse. Don't forget, we've got another stimulus package coming out from Biden, and some of the numbers are starting to emerge yet. They haven't got anywhere near the level of kind of concrete detail, and much of this is that Joe Biden is to consider a plan from his top advisers to plough roughly $3 trillion in additional government spending into the US economy for investments in infrastructure, clean energy, and education, according to two people familiar with the matter reported by the FT last night. Biden's advisers are expected to present the president with more detailed proposals this week. No set time or day for that as yet, and no details have been finalized at this point. Separately, in the overnight session or late yesterday, Reuters came out with their own source report, and actually they said this one, that the Biden infrastructure and job spending could put— could hit $4 trillion. So at the moment we're talking at a range of $3 to $4 trillion overall package with no details at the moment, but these numbers are obviously very large. And so we've just got over this kind of $1.9 trillion and potentially we could get another $4 trillion thrown at the US economy. So herein lies the whole underpinning factor that if he did get something to that magnitude through, it's just another potent force to keep equity markets ticking over as we go into what is going to be an economic boom in, in, in some ways as we go through Q2, Q3, as what we've seen with the US Fed looking for 6.5% growth in the US by year end. So definitely that plays into that kind of Yule narrative as well, of course, because I don't think that the markets have really priced in all the full considered, uh, kind of factoring in of another $3 to $4 trillion worth of stimulus coming into the system beyond what's already in at this point in time. Um, just before I move on to the other key section, if you are watching this on YouTube Don't forget to like and subscribe to the video. Really appreciate it if you could help the community online. Um, just moving on then, then to China and the US. Just wanted to mention, um, the kind of relations between these two countries. Um, for me, I talked about this with Piers on the podcast. Um, if you, if you haven't listened to the podcast, uh, we've had some thankfully really good feedback. Uh, it's basically an informal chat between myself and head of trading Piers Curran on a Friday. If you just search for Market Watch Amplify Live on Spotify or Apple, you better find it. But we talked a little bit about China, and that's because they had the first high-level key talks from the Biden administration with the Xi team in Alaska last week. And we've seen a couple of things then happen since then. So it was fairly acrimonious talks to kick off proceedings. And now what we have here is the US, EU, UK, and Canada have imposed sanctions on China over its treatment of Uyghur Muslims in a coordinated move that, that has been met by immediate retaliation from China's foreign ministry, imposing bans on 10 EU individuals and 4 entities. So quite quickly then, as the two kind of countries, particularly namely the US and China, kind of want to show a strong hand at the initial starting of this relationship, if you like, and negotiation period that will go on forward. Both are in quite a posturing stance at the moment, so it's at risk of escalating to that degree. Separately, what we've had here is that obviously North Korean kind of nuclear activity has started to pick up a little bit as well, certainly a world away from where we were from initially early in the Trump administration when he obviously brokered a deal, albeit incredibly short-lived, with Kim Jong-un at the time. And North Korean leader Kim Jong-un has stressed to China's Xi Jinping that the need to strengthen unity and cooperation between the two countries, according to North Korean state media KCNA. And, and this to me is highly political. Um, you know, if you followed our briefings through 2018, 2019, when North Korea was really a key issue for markets, and what you'll identify as quite a strategic pattern from China is their coordination and close relationship with North Korea when they're dealing as a proxy for the managing the relationship with the US on a geopolitical front, because the US find it incredibly hard to then contain North Korea and its rhetoric and its activities in the Far East, particularly with allied nations like South Korea and Japan, for example. And China is the key to really managing any hostilities on the Korean Peninsula. And China do kind of use that to their advantage and almost kind of weaponize North Korea in a certain way when, um, the dialogue with the US gets quite confrontational. And here we are again, Kim Jong-un I'm sure in a calculated move, making it quite vocally known that he wants to align himself with China at the point where the relationship's looking fairly fragile at the moment between that of the US and China. So a bit of background precedence there is quite, quite important. The other thing here is I think, you know, this really is quite symbolic of, you know, a lot of reports quite to the contrary of kind of your natural assumption was that China actually perhaps might have preferred if Trump got a second term. And I know that sounds incredibly strange because here's a previous former president that enacted a sequence of, you know, multi-hundred billion dollar tariffs on, on a country that's a key trading partner. And why would China want Trump over Biden? Well, you know, this is exactly it. This latest move from Biden comes in a coordinated move Due to that, the Uyghur Muslims with the US, with the EU, UK, and Canada. And this comes after the so-called now, quote, Quad in the, in the Far East, which is more like Australia, India, and these other countries. And it's, you know, this unified Biden approach away from the more isolated protectionist US approach from Trump. Which really worries China because you're much stronger as a united front than you are as an individual country, even if you are the United States. And so very interesting. I do think, as Piers Nizer said, discussed in the podcast, that the China issue is one definitely that will continue to remain, I think, quite tense and will become a key contentious point for markets coming towards the end of the year into, into the beginning of next year. But check out the podcast for more on that. Taking a look at the calendar for today, um, we've already had the UK jobs data come out. I wouldn't say as much really too much to mention there. UK employment change minus 147,000 in January versus, um, it looks like expectations here on the print of minus 167,000. The unemployment rate, 5% against expectations of 5.2%. Um, I wouldn't read too much into that, to be quite honest. I mean, these data points are very dated. We're talking about employment data for the month of January. Also as well, furlough's been rolled over. That number's not particularly clean. And any bump up we've had in cable has been uniform matched by EURUSD. So it's more of a dollar pullback, I would to say. Greenback's still the key component, I would say, to reading a lot of these FX pairs for the moment. Otherwise then, for the rest of the calendar, what else have we got? Um, pretty quiet actually. Nothing really major coming out in UK European morning, and no major 12:30s really from the US. We've got the ECB gross PEP, so taking consideration redemptions to see then what truly was having breached that $20 billion in the update yesterday we had. So the ECB have stepped up their bond purchases, but what is the actual net amount of that when we take into consideration the redemptions, which we'll know later. And then in the afternoon, new home sales coming out to the US at 2 o'clock. You've got the weekly API for trees coming out later on in the evening, but it's speakers really that catches the eye because there's a lot of speakers today. Bank of England's Cunliffe and Bailey speaking at 9:55 and 11:50. I wouldn't be looking for anything really a great deal from, from these two irrespective of their seniority. And it's basically based on two points. One, the Bank of England meeting was just last week, and from a policy perspective, they're in the holding pattern for now on. There's no real new information that's occurred since then for them to make a different decision. And then two, the topic of discussion is payments and unlocking investments in a net-zero environment. So I don't think that they're really the platforms for these guys to really shake it up and say anything new. So I wouldn't see this as too much risk to any sterling position you might be considering if that's the case. Similar really for the Fed. You've got Fed's Bullard, Bostic, Barkin, Williams, Brainard, Bullard again. There's a lot of Fed speak today, and quite a few of these people are voters— Brainard, Williams, Barker, Bostic are all voters. And you'll remember, as Barkin and Bostic, which really initiated a little bit of a spook to markets with the idea of tapering, um, a few months ago, that ship has sailed. They've been pulled back into line, so to speak. But definitely worth keeping an eye out on these. But coinciding with Powell speaking at the congressional hearing with Janet Yellen, I wouldn't anticipate too much perhaps from these guys at this point. And again, we only had the FOMC just last Wednesday as well. All right, um, the final point to mention is you get the 2-year $60 billion auction coming out of the US, uh, 5 PM London time. This being the first of the 2s, 5s, and 7s, the latter one being the key one of course that people will be keeping a close eye on. That's not due till Thursday. If you're a non-fixed income trader, that still warrants watching the particularly the 7-year line later in the week. All right, that is it. So I wish you a good day ahead. And for those in the Amplify Live community, I'll see you in the Discord channel shortly. The guys will go over some of the technical charts in more detail. If you're watching this on YouTube, again, really appreciate it if you could subscribe to the channel, because I know there's a number of you who watch who aren't subscribed yet. So join in, ask questions. I always respond to people throughout the day, happy to do so, and have a good day ahead. Thanks very much.