OPEC+ Delay Talks To Resolve Differences Ahead of Key Meeting

Alright, very good morning, and for any England supporters, I hope you're waking up hangover-free. So well done, very much so, to the boys last night beating Germany for the first time in a major championship since 1966, and it didn't even need penalties. And hasten to say that we all remember what happened back in 1966, but trying to rein in the expectations at the moment and not looking at the projected path to the final too much yet. But yeah, amazing to see that. And certainly, I think exactly what the nation has needed after what's been a very challenging year or so. So onwards and upwards there. And yeah, let's get straight into it and talk about what's going on in markets then this morning. And a few things for me to get you up to speed on. Generally, things still relatively quiet, a lot of continuation of relative trends, that meaning the equity markets continue to push to highs again last night. So if we're looking at the close, the Nasdaq was up about a third of 1%, seeing some moderate outperformance again against the major other indices like the S&P and Dow, which are basically unchanged. Nasdaq though continuing to kind of lead the charge. Otherwise, obviously from this afternoon, from a US data perspective, things start to pick up a little bit. And obviously the week ends with a bit of a crescendo in the release of the nonfarm payroll report. So we've got the likes of ADP, Chicago PMI this afternoon. You've got the eurozone HICP numbers as well coming out this morning at 10 AM. So quite a few things now to get our teeth into in what otherwise has been a relatively slow, slow slow start to the week. Also some updates, uh, overnight in Asia and some data. Um, so just quickly cover that before I really go into the charts in a bit more detail and what we're looking at this morning. Uh, and kicking things off then, we had Chinese manufacturing and non-manufacturing PMIs overnight. So these were the state-led ones from the National Bureau of Statistics. Uh, the manufacturing figure came in at 50.9 above the expected 50.8, so basically in line. On the non-manufacturing side, 53.5, a touch softer than expected 55.3. Supply chain problems are weighing on manufacturing with the recent computer chip, coal, and power supply shortages hitting output in some industries, is what the NBS said. The production sub-index and new order sub-index for vehicle manufacturing has now as such contracted for two straight consecutive months. The bright spot, however, in that data was the easing in price pressures. This has been a big focal point, of course, in China, where we've had a very large divergence between PPI and consumer-led inflation, as both input and output prices of manufacturers fell significantly, suggesting that the government's measures to increase supply of commodities to steady prices is slowly working. Remember, they gave that signal 2 weeks ago or so where they were going to unlock some of their strategic reserves of certain types of metals, in particular industrial metals, in order to ease some of those price pressures, which seemingly is having some effect at this point. So overall, I wouldn't really look to the Chinese data for too much guidance as towards the European session or the, the US session going forward, just more of a matter of fact that that came out overnight. As far as the open this morning, things are relatively quiet as we look kind of forward, but there's a couple of charts to have a look at. For one, I was just having a look technically in the stock indices at the S&P and the DAX this morning. This is the S&P 500, and this is looking on a 60-minute candlestick chart. And just looking at this trend channel moving on the way up that we've had really over the course of the last several sessions, and we're just coming up to Bit of a pullback from the overnight highs. You can see we really peaked yesterday afternoon. Don't forget yesterday afternoon, of course, shortly after we saw the top, that came after consumer confidence in the US obviously jumped to its highest level in nearly 1.5 years, came out considerably stronger than expected at 127.3 against 119. So continued labor market optimism was noted ahead of the reopening of the economy offsetting any concerns around high inflation at this point in time. Came back up towards the highs in the overnight Asia-Pac session, and we've just drifted as Europe has come in. Don't forget, European players were in the marketplace to have seen yesterday's all-time highs. So seeing a bit of profit taking, you know, it is the last trading day of the month, the quarter, semi-annually. So yeah, I don't see too much surprise here for a bit of a pullback Technically, just looking where we're at at the moment, it is fairly interesting. You've got the pivot here on the, the daily pivot levels, which coincides with the bottom end of this trend line on the trend channel, and also horizontally has been an area of previous resistance to the, um, all-time high back on the 28th, which has also acted as support to a degree as well, um, at the beginning of the week. So quite an interesting technical area here. A breakdown of that perhaps we could trade a little heavy, or is this just enough of that kind of profit-taking move and now that provides a bit of a floor given the triple kind of technical signals there, and then we just continue to respect this upward channel? Would be something I'd be keeping an eye on. Uh, in a similar fashion, slightly different technical setup, but just keeping an eye on downside levels in European indices. This is the DAX future, and again, looking on a 60-minute candlestick And the reason I'm looking at that is if we go back to, um, the decline that we saw, this was the Bullard-inspired kind of sell-off that we had back on the 18th, uh, post the hawkish tilt from the Fed, which caused that gap down in the DAX future. You can see here in the center, um, going back then to some of the price action, we've had quite a nice inflection point here from 15,653 in the DAX future, and that's just about where we're trading at the moment. You can see that previous um, high on the 23rd and the 28th, and support area then on Monday and Tuesday of this week. So just keeping an eye on that at the moment. Again, this— any breakdown here, you've got the pivot just below, but then range-wise, not a great deal of support of more clarity until we get much lower down at 15515. So quite important areas here where, as per global indices, you know, I've been looking at them, the, the correlated moves across all of them in order to gauge then timings and momentums if there are any tests and breach of these downside levels. Otherwise, gold was another one I just quickly wanted to comment on because gold— I think I saw a stat this morning— it's on for one of its worst monthly performances that we've had in, in multiple years. And obviously a key component of that was the hawkish surprise that we had from the FOMC. And although the kind of centrists and the people that really matter, like Powell and Williams, continue to hold the line in terms of the rhetoric, there's obviously been an increasing chorus of hawkish speak from federal officials. Granted, they have been for more hawkish-minded members, but the two-rate-hike dot plot surprise that we had, the more sticky inflation kind of comments And obviously that has lifted the greenback of late. It's also helped yields remain a little bit more elevated in the wake of that. And gold has really suffered. And so quite key here, I've had marked up for, for a long time this kind of colored area here at around 1762. That's where the market found a bit of a turn going back into late November of last year, bounced very aggressively off it in February before the breakthrough. And then it acted as well as a nice area for price to react off going through April of this year. Bounced again off it in June, and yesterday we broke through that area and we're trading just below on the bottom side of it at the moment. And you can see here you've got that April low and the, the peak of price action in March, April. So for me, here around this 55 to 62 area is a key zone for gold, which if it continues to trade heavy, then as you can see, technically there's not a lot here to step in the way to see gold prices again roll over and perhaps move down more medium term to $1,717 type area, which would be obviously another fairly deep move of another $25, $30 on the current price from where we're trading at the moment. So definitely keen to see on the dailies where we finish, and obviously things like non-farm payrolls on Friday is going to be quite a key catalyst determining dollar fluctuation, which I'll be looking at to determine the, the kind of catalyst and lead off of potential gold movement. Um, all right, let's run through some of the other news stories then and get you up to speed on a few different things. Um, firstly, oil prices. Yeah, a lot of people are waiting now the OPEC meeting, but just to cover off one of the first things last night We had the API crude oil inventories, and of course this comes ahead of the DOE's this afternoon, regular time, 3:30 PM London time release. Didn't really see too much of an initial reaction to this, but it did see prices generally slowly climb in Asia-Pac trade, and WTI at the European open is trading up 39 cents at $73.36 last. And the reason they're here, because the API number came in and marked its sixth weekly drawdown in a row, and much more sizable than market expectations. So a drawdown of 8.153 million against expectations of 4.17. On the flip side though, gasoline was pretty bearish— sizable build against expectation of a draw, cushing a draw of 1.318 million. All in all though, probably the fairly tame response to that is because everyone's really awaiting OPEC, of course. And OPEC and its allies, as you can see here from the title of this article on Bloomberg, have delayed their preliminary talks between ministers by one day to allow countries more time to resolve their differences ahead of what's being seen as quite a crucial meeting for the cartel to make. And this is all according to two delegates. So the JMMC, the Joint Ministerial Monitoring Committee, which was due to meet today, that meeting, at least at this point in time, is going to be taking place on Thursday. Now, Russia— and this is quite key— Russia, who faces less budgetary pressure to sustain higher prices, they, I think, have come as no surprise, are kind of more advocates of wanting to, to pump more. So get a bit further loosening of this supply pact agreement, according to people familiar with their oil policy. Whereas Saudi Arabia's position is basically they're not aligned with Moscow. And so this isn't the first time this has happened. So it doesn't come as too much of a surprise, to be honest, because in December, a similar split between Riyadh and Moscow caused the group to delay talks by 2 days. So again, it could roll over until the end of the week. Um, ultimately though, even back then, they found a compromise agreeing on a modest production increase. Um, my belief is that Saudi cannot do this whole OPEC+ agreement without the Russians. They're going to have to make a concession to keep the Russians happy. So I think the Russians get a little bit more. This is just purely tactical. They'll cause a lot of headache. They'll disagree, disagree, disagree until they extract that concession out of Saudi. Pump another few hundred thousand. Thank you very much. We move on. The supply pact remains in place. The amount of, um, new supply coming to market doesn't shock the market. It's not enough to really impede then prices remaining generally where they are at the moment as demand continues to outweigh any new supply coming to the market, in my opinion. All right. Other things to be just mindful of overnight in Asia. There's been continuation of further lockdown measures implemented in Australia. The Aussie overall pretty flat overnight. Really a great deal to talk about, but just a continued update on this because Australian officials have extended the lockdown and social distancing measures to more of the country, that including large popular cities like Sydney, Perth, Darwin, Brisbane, so on. Um, elsewhere, some positive vaccine news, um, actually, and which is good, good obviously on a humanitarian level, and obviously it's good if you own Moderna shares because they hit all-time high yesterday. Following some of the news. And so just running you through this, so first off you had Russia's Sputnik V vaccine is around 90% effective against the highly contagious Delta variant. Moderna said its vaccines produce protective antibodies against the Delta variant. And Johnson Johnson vaccine has also reported robust immune response to all of the current variants at this point in time. So these are very welcome signs given the fact that obviously vaccines remaining effective as the mutations continue to unfold in the period ahead is going to be critical in terms of containing COVID and helping the global economy to continue to recover at this point in time. So, um, this is more, I would say, expected. It's more continuity. The vaccines have always been very rigorously tested in order to make sure they are still effective, particularly with new, more transmissible and immune evasive type mutations that are coming. And as long as they are, which is expected to be the case because that has remained that way so far, then we're all good to continue to have this fairly fixed, more optimistic view of an economic recovery at this point in time. Another thing I wanted to mention was this: we had some comments overnight from a Fed member who is a voting member called Fed's Waller. Um, and the Reuters headline says a 2022 rate hike is possible once MBS tapers first. Um, I guess this is just a word of warning really because the market hasn't really reacted to those comments. The main point I wanted to make was, um, for me this is a really misleading headline. I mean, you read the headline and you think, what, rate hike possible in 2022? Now There are obviously some officials going for that, but when you hear it termed like that, you can't help but feel that this is quite a hawkish comment. Waller tends to sit fairly centrist, maybe marginally leaning on the hawkish side, so it's a pretty punchy comment. But you then actually read his speech, and this is what he actually said. He actually said the unemployment rate would have to drop fairly substantially or inflation inflation would have to really continue at a very high rate before you would take seriously any rate hike in 2022. So that's a lot more measured than what this headline would suggest. So I just want people to be aware of— news agencies are in the business, yes, of reporting news, but obviously the more clicks that they can generate, well, the better it is for them, their activity, their kind of KPIs. And, you know, their, their subscription rates. So just got to be a little bit more intelligent and question these things from time to time. Um, Waller did suggest that there is a lot to decide regarding potential taper, and there is a wide range of views on timing, pace, and sequence. Well, he is in favor of tapering MBS over Treasuries and would like to see tapering before hiking rates. Again, none of that is surprising. I think the general consensus is MBS before Treasuries and definitely tapering before rates. So yeah, all in all, I think it's pretty understandable why the market hasn't reacted to this, but just wanted to, to go over that. In terms of the calendar for today, yeah, this morning is pretty quiet. We've had, um, the latest UK GDP figures come out. I'm just going to bring those to you now, just update my news feed. So they came in quarter-on-quarter -1.6%, the year-on-year for Q1 UK GDP -6.1%. 0.1%. That is zero surprise. This is very backward-looking, outdated data nowadays, and so zero reaction in markets as you would anticipate. Very much so looking forward to now the Q2 GDP numbers coming out in the near future. Otherwise, this morning is pretty quiet overall. You've got the German unemployment rate and change coming just ahead of 9 AM at 8:55, Eurozone HICP flash. Year-on-year reading expected at 1.9% against previous 2% range, 1.8 to 2.1. And then going into the afternoon, it certainly gets a bit more interesting then, where you've got things like US ADP national employment, often seen as the precursor to payrolls. Headline figure expected to moderate slightly back to 600 from the near million last time out. And then the Chicago PMI, um, set to do the same for the month of June. To fall down to 70, which is still a very robust number from the elevated 75.2 that we saw in May. Pending home sale or pending home index sales change coming out at 3 as well. Then you've got the DOE at 3:30. Speaker-wise, Bank of England's Haldane, you can pretty much write off now. He is now outgoing, pretty much last days. So what he says really doesn't matter. So if he does come out with something hawkish, could well just be a final departing gift from him being the outlying hawk on the board to just say sayonara to the MPC. So I don't think the market will take anything he says with any type of impact for underlying prices. And in defense, Bostic, who is a voter, is speaking later on at 1 PM. And that is it. So gonna let you guys get on with the day. And if you have any questions at all, feel free to leave a comment on the video if you're watching on YouTube, or otherwise I'll see you guys in the Amplify Live community. Thanks very much.