OPEC+ Delay Meeting In Search Of A Deal

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at Amplify Trading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin. Okay, very good morning folks, hope you're doing well. It is of course the 1st of December and going to start off with talking about this graphic here, which is the MSCI looking at the world index and world equities. As far as the month of November is concerned, it was the biggest monthly gain since 1988. So as you can see here, so when we were talking about the, um, the, the rundown yesterday and what potentially could have played out was a degree of kind of profit taking into month end that kind of month end, even more so prevalent in quarter, year end, tends to lead to a degree of activity unrelated in a sense to actual individual news flow, more so to kind of book squaring, portfolio adjustments coming into the end of those aforementioned periods. And really, when we look at the markets this morning, we've had a real surge back to the upside following some of the downside that was seen yesterday. The S&P Dow closed down about 0.5% and 1% each respectively, minor outperformance in the Nasdaq, which was up about 0.1%. But I think, as I was kind of saying at the time, that any of that downside wasn't really on anything other than, I think, a little bit of closing out some of those positions. So as such, we're right back up there again. But just having a look and kind of recapping November, energy shares in the benchmark gauge gained more than 25% in November, the best month since April, while industrial and financial companies have also risen the most since 2009. On the flip side, some of the tech giants, although they've gained, they've only gained around 5.9% in November. Comparatively though, if we look at, um, the Russell 2000, that's around a third of the gain that's been seen in that more domestic-focused Index, which was up around 18%. So definitely started to see a little bit of a mild rotation, if you like, into things like value, more cyclical plays, as the vaccine news in particular has kind of brought about this idea of the economic recovery taking afoot going forward. Despite the lower close, as I mentioned, on Wall Street, we are quite firmly higher in the equity space, and that's being observed through the overnight Asia-Pacific session. Worth noting that we have had more factory activity data coming out of China overnight, this time the Caixin Manufacturing PMI. And in fact, it came in at a decade high. In fact, so it came in at 54.9, which is quite a bit above expectations of 53.5. So the, the selling has been particularly short-lived, and I think we can just have a look at some of these equity charts here for a moment just to give us a bit of perspective of yesterday's move and where we are at the moment. And technically, a couple of interesting things going on right now. So this is a look at the S&P 500 on that familiar chart that we've, we've kept looking at for a period of really the last month. And in the overnight session, really powerful. This is kind of the late trade on Wall Street. We actually managed to recover pretty much all of the initial opening losses on Wall Street by the time the closing bell was sounded. And then Asia just carried on, carried the baton, further buying materialized. And we've managed to then get above not just this descending trend line from the Pfizer early November pop, but also above the high now that was printed on the 29th, which was the commencement of overnight trade on Sunday night this week. So here then, I think you've got quite an interesting platform for price now, potentially for further push on up. And you've got the, the weekly opening high support horizontal line with that trend line, quite a nice area there of support. On the cap, for the overnight price activity has been around that R1, but obviously then if we continue to move up, whether that happens today or not, then the next kind of level would be up here of that Pfizer spike high we've seen at 36.68, and then we're right back up there kind of all-time high territory once again. So, uh, definitely shaping up there for potentially some quite interesting moves with, I'd say, a bias still to the upside. As far as the, um, the NASDAQ was concerned, that was the other one I wanted to look at, uh, on a daily continuation. And putting that here, as I said, I think that there's some room for upside here as well because generally it gets a little bit behavioral in the futures. Now we're only about 70 points off printing renewed all-time highs again. I'll just put my camera back on. So that was back in early September at 12,465, and now we're that close. Generally what I mean by behavioral is you, you very rarely do you get this close and not at least see a bit more of a closer test up at around those highs. So that in combination, I think, with the S&P above that trend line and um, kind of horizontal now. What was resistance turned support, I think gives a fairly nice platform potentially for equities to just continue to edge a little higher. Elsewhere, T-notes are very quiet. The dollar, which it continues to follow— actually, the dollar, that pattern I've mentioned a few times: trend lower, bit of a push short-term higher, trend lower. That's exactly what we're getting again this morning after going up and the dollar bouncing, uh, a fairly nice move yesterday. And that nice move led to a really nice opportunity. I know some of the, some of the traders got hold of— again, I just moved my camera for a moment— there was a rejection off— if I put it on the daily, this is looking at that 120 area, of which we know has been very important, symbolic, as far as the ECB are concerned about the strength of the local currency, and then the, the retest of that yesterday, and we came all the way back down to the point of back to that previous area of resistance of 1.1924. So quite a nice technical response to those levels. And looking on the, the execution from yesterday, and this was what some of the guys were trading, which was that 1.20 area and then running the market back down using then the previous closing price from last week and the reopening of trade, which was that nice area here, to take some of the position off and then letting it run down to eventually here. Not sure if anyone actually had the, the gumption to hold it all the way down into the, into the late US trading hours, but certainly managing to get hold of a really decent move of 50 pips plus there. That pre— the, the actual low that we hit which came really at around the time the US were leaving the market and into the early hours of Asia-Pacific trade, obviously coming in step with that initial high that was seen back at around the volatility from the Pfizer breaking news that we saw, uh, on the 9th. So yeah, really nice response there to the technical levels on the higher price point of that symbolically important 120, uh, as we know that the ECB are particularly mindful of from a strength of the single currency. For cable, it's a little bit more complicated for cable, purely because I think that there's a lot of misdirection with things like Brexit. There's a lot of political noise going on as well about Tory revolt, given the intensity of the, uh, economic disruptions to come from the latest, more stringent tiering system. So all in all, I'd say for me, cable's not that interesting. Um, until we get to the extremity of what is ultimately a range we've been trading for the last 3 or 4 days. And so fairly close to that at the moment, so shaping up like we could have a look at 134. And obviously the dollar is weakening this morning, it's down about 0.2%, it's softening up as we go into the European open. And the Dixie's got a little room to run until we get down to the lows that we've seen from um, yesterday. So we're trading around 91.70 in the Dixie future. The low yesterday was around 91.50. So that could see us retest up around that 134. So really it's the range high and lows, uh, that I'm watching. Because if you actually look at the price pattern, although we've had this trend line in play since, um, the kind of mid-part of November, and that was supporting price, and then it's been a good area of resistance for price, This recent price activity has been awfully choppy, very hard I think to really get a handle on. So better to play the overall broader range for that particular currency pair. I'm gonna talk about oil though, and the reason why I'm going to talk about oil is because there's been some breaking news. You might have seen me updating the, the Amplify live chat room last night and can't help myself but watch these things during, during the overnight hours because OPEC+ have delayed for 2 days their, their talk they were supposed to be having. They had the OPEC meeting yesterday. Of course, this follows on from the telephone calls they were having on Sunday, and this was all supposed to be a prelude then to the overall OPEC, OPEC+ ministerial meeting, which was supposed to be happening today. But they've delayed that by 2 days. So not going to be meeting now until Thursday to give more time, apparently, according to sources informed at Bloomberg, to strike a deal. Um, now talks are continuing by the phone. So one word of advice is I'd still expect quite a lot of hearsay, rumor-mongering, tweet action, um, from various different players. So keep an eye on your, your the kind of OPEC watchers on that space, because there's probably going to be more information that comes out. Obviously the tail risk, because the baseline assumption is still they strike a deal, the tail risk is that they don't. And any suggestions of that, price obviously could come off quite, quite rapidly given the incline that oil has seen of late in recent week or two. Overall though, I think the media have made quite a big deal about this. They've kind of said about how negative generally it is. It's countries like the UAE, for example, which in history have been a real supporter of Saudi strategy, somewhat breaking that relationship now with these latest developments. Them, some other countries as well that are said to be slightly more disgruntled with having to keep supply low. So countries like Iran, for example, because of the fact that ultimately that impedes their ability to generate money. For countries which are heavily geared, obviously, to income derived from the sale of crude oil. So they don't want it to last for longer. But the Saudi and Russia relationship, to me, that became fairly clear yesterday was it looks like they want to get a deal and they want to coordinate with each other in order to achieve that, that goal. So I actually take a slightly different approach, although the media has been quite downbeat about a fractious kind of OPEC+, no one's getting on, it's putting into jeopardy a deal. I actually think the opposite. The fact that that hasn't happened already and the fact that I think that they're continuing to talk and take on further consultations means to me there's a lot of political will at the top, at the power players like Saudi and Russia, to just pull the others in line. And they will. They always do. And I don't really think politically it's that unusual to see some of these more lower volume producing nations, albeit someone like Iran definitely is kind of right up there, to be leveraging their position a little bit to try and secure themselves some degree of a better deal. So countries like Iraq, for example, which has always had issues with compliance, maybe they can get some wiggle room. You know, every buck counts for those guys. So I don't think it's that unusual, and I think for a certain degree my view is not that unusual because if you actually look at the price of oil, it's not really reacted at all to this delay. And I think that that's just the general rationale that most people are thinking along the same kind of lines that I am. So Here we are in oil, and we were looking at this range, uh, yesterday. That range is still in play, that being defined by $44.74 and then $45.71 on the high. Um, on the daily pivots, the upside there just coinciding as well with the R1 around $45.77. So yeah, the meeting itself then isn't anticipated to happen now till Thursday. However, obviously, obviously, as I said, there's going to be more comments probably coming. Um, the greater risk to price reaction is still to the downside. So even if they do— if we get this kind of positivity emerge, it looks like Thursday's more formality, they're going to roll over by 3 months. Upside relief, I'd say, will be much more tame comparative to downside shock, given the lower probability of expectations and market positioning that the market is priced for a deal. So lack of one, you would see definitely a fairly rapid reversal in price if that was to materialize. So it's the way I'd be approaching it. All right, a few other things. Overnight we had the RBA interest rate decision, um, not really a great deal of reaction, um, to speak of. The Aussie has been climbing up since the overnight session, but generally in step with the more positive tone in Asia with that broader recovery I was talking about. Uh, the key manufacturing activity in China a decade high, and obviously an influential trade partner for Australia despite their ongoing political tensions at the moment. As far as the RBA is concerned, they keep their cash rate and 3-year yield target unchanged. They said positive vaccine news should support the global recovery. A couple of comments I think just to be mindful of that came out of the RBA Governor Philip Lowe. He said, given the outlook, the board is not expecting to increase the cash rate for at least 3 years. So again, that really important kind of timeline, which has kind of been fitting generally with market expectations about the Fed, and particularly now with the confirmation from Biden's nominees that Yellen's going to come in, that lower for longer mentality just kind of helps this equity market, uh, support, uh, be supported. Lowe went on to say that the board will keep the size of the bond purchase program under review, particularly in light of the evolving outlook for jobs and inflation. The board is prepared to do more if necessary. So again, that kind of cautious little tone on the end, going to keep rates low for an extended period, ready to do more if necessary, but the vaccine is a, is a positive for now. So that was from overnight. As I mentioned then, Janet Yellen— Janet Yellen is set to come back. And again, I do think that this is another reason why these equity markets like the NASDAQ should see a retest of these highs, just because it supports that notion of a more pragmatic kind of approach to policy, less definitely combative than what we saw under the administration. More aligned then for a strategic and more harmonious relationship between that of the Treasury's objectives of the government and supporting the economy, fitting more in step with Jerome Powell and the rest of the Federal Reserve. So former Federal Reserve Chair Janet Yellen is confirmed as the Treasury Secretary nominee. A couple of other names to, to just make you aware of that I think fit this collection of individuals, certainly around a similar kind of viewpoint. So Biden said he would nominate Wally Adeyemo as Yellen's deputy at the Treasury, who had been previously a deputy national security advisor under President Obama. And Biden has selected Cecilia Rouse as an economist who is the dean of Princeton School of Public and International Affairs as the chair of Council of Economic Advisers. She was a member of the council under Obama for through the period of 2009 to 2011. So these people have some experience under a previous Obama-led administration coming in with Yellen. Uh, definitely these would all be individuals that I would see as being supportive of this continuation, if you like, of being more aligned with supportive for market confidence born out of being fairly accommodative in nature. Jerome Powell is speaking today, of course, to politicians, but that, that speech is not due until later on. I think it's 3 o'clock when he actually kicks off his testimony, but his text has already come out, came out overnight. And so Powell is set to caution lawmakers that the US economy remains in damaged and uncertain state despite the progress that has been made with some of the recent vaccine news. So this is according to his testimony released ahead of his appearance before the Senate Banking Committee today. Powell reiterated the US central bank has committed to using full range of tools to help the recovery but declined to point to any specific future action. So, um, as I was explaining to some of our, uh, the guys on our training program at the moment You would kind of think that looking at a weekly calendar, that a testimony with the head of the Fed and also the Treasury Secretary, Steven Mnuchin, would be an important event. It only is really in regard to the recent deterioration in their relationship, as we know, recent weeks with Mnuchin requesting Powell turn off some of the underutilized kind of liquidity facilities, if if you like, that were put into place during the initial onset of the pandemic. So their relationship is, is quite interesting. The dynamic, I think, will be quite key to look at. But overall, these events tend to be non-market moving. Now, that's not always the case, of course, but generally, more often than not, it's just then Powell coming forward in front of then politicians to the different committee sects from the House or the Senate and so on, and just explaining the rationale of why he's done what he's done, what the situation, how he will deal with the future. But even with the latter, with forward guidance, he won't very rarely deviate from the script. So it's more of a political kind of showpiece than I'd say one that's a platform for Fed officials to really say anything of magnitude that can move markets. Just as a reference point for any of those not used to monitoring those events. I'm not going to really talk about too many earnings going forward, but I know a couple of the guys are invested in Zoom, so I thought only appropriate to give them their, their morning kind of breakfast shot of what exactly happened. Because after market last night, Zoom did fall about 8%. They managed to claw back some of that and they closed down about 5%. in after-market trade for Zoom. Uh, basically their fourth quarter revenue was above expectations. I believe their EPS was a solid beat, but its gross margins fell and some growth metrics slowed. Um, and that was what created the more negative reaction in their share price. So I do always find it quite interesting with these, uh, type of reactions. Um, I don't know who would think that Zoom could continue to kind of add new users and grow at the rapid rate of which it has over the last 9 months or so. Uh, I do think it's somewhat inevitable that the earnings will start to slow from what they had been, which is just obviously fantastic. Um, so it's almost like, uh, the bar set so high they're almost doomed to fail, but context is always key. A 5% downward move in their share price is, uh, is large but not massive comparative to the performance of the shares, obviously, over a period of the last year to date. I mean, if we look at year to date, they were trading back down at the beginning of the year at $70. They've come off 5%, which is what, moving from like $4.80 to $4 55, 60, uh, and they've gone from $70, they're still up at around $453 at the close yesterday. So obviously context is, is important here. Quick look at the calendar for today. What have we got? What's going on? Actually, it is a fairly busy day, not so much from, uh, the market final manufacturing PMIs, and for that reason they are final. So the UK, Eurozone, US numbers come out throughout the day. Again, I think just be aware that potentially not going to be that market impactful given that fact. But you do have the Eurozone HICP flash number coming out at 10 AM, expected at -0.3%, which would be unchanged from previous. So interesting metric, of course, just given the fact that we are anticipating any further increase to the PEP from the ECB when they meet, which is in few weeks' time. Um, then going into the afternoon, we get the ISM Manufacturing PMI, uh, which will of course be interesting to keep an eye on the employment, employment constituent as well, uh, as one of the main kind of pieces of the puzzle then for the, the payroll national report we'll get on Friday in NFP. Uh, and then you've got the API Oil Inventories later. So the OPEC meeting bumped, uh, not on the calendar now, but obviously comments still to be on the lookout for. Then from the speaker perspective, Powell kicks off at 3, but should just be a repeat of what we've already heard from the overnight text. You've then got Christine Lagarde speaking again, Fed's Brainard, who is a voter for now, and then new incoming voters for 2021. So definitely worth keeping an eye on what their latest take is. Fed's Daly and Evans speak later on this evening, London time. So yeah, that is it for the time being. So Overall, looking at the charts this morning, I think a little bit of a mental reset. I don't think really a great deal went on yesterday that was really fundamentally a pivot point for kind of market direction. I think yesterday was more just a consequence of the calendar. Now we're back into the first of the deck. It'll be interesting to see how, how equities can perform Overall, if we can break out from here, I'd want to be looking out— I mean, looking at the Dow here, we're already at a fairly significant area of resistance at 29,904. You can see the market has rejected that area in the overnight Asia-Pacific session. And if I was just to draw a horizontal line kind of here just to show you what I'm looking at, I'd want to see breaks of these areas. It's kind of here, so let me just color it just to make it crystal. So the Dow's got to get above here, and then for a further opening up of a push to the upside, the NASDAQ then could have a retest at the all-time high. And the S&P's got that, that nice floor of support around that trendline and the high that was seen at the reopening of trade on Sunday night. So definitely worth keeping an eye on that. And then also the dollar, which is paired about 50% of the overall gain that was seen yesterday, which has helped the recovery in some of those major FX pairs. Again, if we come up to 1.20, worth watching in the euro, and 1.34 in cable. And then on the lookout for any headlines, rumors coming out from the OPEC discussions. Okay guys, have a good day and I'll see you in Amplify live chat room. Thanks very much.