The Fate Of Brexit Hangs In The Balance

Okay, very good morning. Hope everyone is well. It is Tuesday the 15th of October, uh, going to run you through the morning's headlines from an update on the trade war, Brexit, going to look at oil, and we're going to look at earnings from my perspective. Also going to look at Chinese inflation data overnight. But to kick things off, quick overview of just general market sentiment at the open this morning. Stock futures are trading on the front foot this morning. We are already testing the R1 in regards to the US indices in both the S&P and NASDAQ. The DAX though, outperforming the touch, already had a run-up to its R2 this morning. So after what was a fairly kind of benign finish on Wall Street. I mean, it was actually— I mean, the S&P only down marginally. Asian stocks not really giving away too much. If anything, a little bit of, I guess, positivity just fading late into the session yesterday about the, the kind of how long-lasting, or in fact how this Chinese deal will play out in the long run, that they broke in that partial deal at the weekend. Um, but this morning things a little bit more positive again. There is a bit of an update on Brexit which has meant that in that top chart the pound is outperforming a little bit. I'll get into those headlines in a moment. So gold down, uh, only slightly, about $2, just sub its pivot at the moment, having broke below that point in the futures earlier in the session. And the US 10-year slight positive on the session, but only a touch, about 3 ticks at the moment. And then WTI crude is still trading lower by about $0.40 this morning. So the cross-asset class mix, cross-asset class is a little bit mixed at the moment. Oil and gold down. I mean, the dollar is recovering a little bit at the moment. It's basically reversed its losses to flatten the Dixie, given some of the upward movements seen particularly in cable this morning. EURUSD though, and cable seeing a little bit of a divergence there. And definitely because sterling currency is underpinned by some fundamental developments on Brexit, which we'll discuss. But going straight into the headlines, this is quite an interesting chart I saw this morning. This is looking at the MSCI Asia Pacific Index daily move. And so just looking at the broader Asia-Pac region and looking at the percentage changes that generally we've been seeing in this index. And the point being is that the latest partial trade deal between the US and China in the last couple of days is being met with smaller or more shallow kind of reactions in the market. And I think it's almost like the— feels like we're in that boy that cried wolf kind of mentality where it's kind of like, okay, yeah, we have this short-term reprieve or relief in the markets, they kind of lift, but then it's like, well, okay, so they've committed to do what they've already been doing, which is purchase larger amounts of agricultural goods and then in kind the US delays tariffs that were going to be implemented today, but the December ones are still there as a looming threat. So all in all, is this really a partial deal, or is this more just a kicking the can down the road exercise? And it almost feels like we're back in that, that kind of continuous loop again. And I think that's largely reflected by the way that, that market participants now are reacting to this type of information. It's kind of having lesser bang for its buck in that respect. And it's kind of what I was trying to suggest yesterday, that I don't really see much more in it in terms of response, given the fact that ultimately there's still much to do on things like intellectual property theft and, and those looming tariffs in December. So with that being said, although Trump has been talking this up because obviously it looks good for him, It's almost as if then part of the backdoor discussions have been, well, Steven, as in the US Treasury Secretary Steven Mnuchin, you go out there and start just firing a couple shots over the barrel saying that, you know, there's a new round of tariffs set for December 15th for $156 billion of Chinese goods that will be triggered if Beijing failed to seal the limited deal tentatively struck by Trump last week. So it's kind of a bit of a warning sign there. From the US to say to China, because we've been here of course many times before, they kind of have a deal in principle but then it never really gets ratified. And so the US just kind of stamping down their foot to make sure that that does in fact happen at this point. So still much to play for I think with this trade situation, uh, but you know, as per that previous graph, I think any response in markets is becoming increasingly short-lived. And I do think that is a consideration if you're holding more kind of medium-term positions in the market. Moving over to Brexit, what is the situation at the moment? Well, Boris Johnson's Brexit deal on a knife edge. Talks may continue after the Brussels summit according to the EU president. Now what we've got here is a timeline. Of course, was that a deal was supposed to have been brokered around now so that then it could kind of be discussed and finalized in the EU summit happening on Thursday and Friday. This all then coming before that legislation that passed in the UK a couple of weeks ago, that Boris must then write a letter to Brussels asking or requesting at least for a delay. Now what's being suggested both yesterday and by the presidency of the EU this morning is talking about, well, perhaps then we could have more discussions ongoing on the sidelines of this summit And as we heard yesterday, could there be another EU summit on the 29th and 30th of October, giving just 1 or 2 days left then to broker this potential deal? So that's kind of becoming more and more potential, uh, for a renewed kind of timeline in that respect. But the reason why the pound has kind of responded quite positively, albeit originally this morning, it's already come back a touch at the moment. But this was from Tony Connolly. If you don't follow Tony Connolly on Twitter and you are involved in any Brexit or UK-related trades, particularly related to Brexit developments, then you need to follow this guy. He is basically the RTE Europe editor and so very much informed with the negotiations that are going on. And he tweeted this morning that the UK will table fresh proposals to break the Brexit deadlock this morning, according to his sources. He said two well-placed sources have confirmed that UK negotiators will bring forward a new text when they meet European Commission negotiators in Brussels this morning. It follows a 90-minute meeting between Boris Johnson and DUP leader Arlene Foster and deputy leader Nigel Dodds in Downing Street last night. It's not clear yet if the proposals are a revised version of the dual customs scheme which the UK proposed following the breakthrough meeting between Leo Varadkar and Boris Johnson last week, or whether there's something much different. The development follows a downbeat assessment by the EU chiefs negotiators on Sunday over the dual customs idea. It goes on, but some of that positivity this morning just coming on the back of that. However, the pound is already pulling back a little bit, and as I can see, the dollar's really strengthening here at the moment. And partly that's probably due to EURUSD just coming under some pressure, breaking the overnight Asia-Pacific low, pushing down to its S1 at the moment. But one of the things here that I would say, and I know Sam is often saying this to you guys, is that how often have we been here before where there's a rumor that comes out about potential deal only to be refuted a few moments later, and then we get a reversal of the entire move. So again, when you get these source comments, the way I'd say to suggest this, if you're trading off news headlines intraday, is if it's a source comment, I would say history has shown me that you should be a little bit more proactive, a bit more prudent in terms of the, the time that you hold on to those trades. I.e., the timeline should be shorter. If it is someone more official like the EU President, the EU Commission, the Prime Minister's spokeswoman, something like that, then obviously that gives you a little bit more concrete evidence that this someone official saying something, so the move could be a little bit longer lasting. The source comments though, if you think about the way that accredited news agencies work, the fact that RT have broke this, Bloomberg or Reuters will be wanting to put out their kind of latest piece as well. And so it's not unsurprising to see conflicting headlines come out as newspapers are kind of jostling for position to maintain, uh, their relevance in a sense in terms of breaking news. So yeah, timelines, I think with any Brexit source comment, it's going to get a little bit more volatile over the coming days as we go into that summit. I think just, just act a little bit cautiously in the execution side of things and risk managing in that regard. Okay, moving on off Brexit and off China, uh, US earnings. There's, there's a few coming out today, and this is really, as I said, in the preview for the week on Monday, we kind of pick up pace now, and it's the big banks that are going to be coming out today. So a couple of things to point out here before we look at all the other companies coming out, and there's 5 things to watch as big banks kick off earnings season. So I'm going to run through those now and, and things that might make a bit more sense when you're picking through the numbers later on this morning. And one is cost cutting. Now we've seen this from a number of obviously large European banking institutions institutions like Commerzbank, Deutsche Bank, Credit Suisse, UBS, all these types of firms cutting back on their staff. One of the things then to look out for in that regard is so-called efficiency ratios. Trading is another area of which gets closely followed, and some people suggesting that increased volatility during the month of August in the summer— obviously, as we're getting a lot of these breaking comments to do with trade wars and the topsy-turvy market moves that we were seeing— means that there's generally more action for the banks to facilitate trades and therefore making more profit on execution. However, on the downside, in the rates environment, JP Morgan City and Wells Fargo have already been warning investors that their net interest income— so that's money banks make from customers' loan payments minus what they pay depositors— would fall in the third quarter because interest rates have been declining. And again, this kind of margin squeeze, if you like, continues to be that case because of course we're expecting another rate cut, potentially two by the end of the year, which is going to put more pressure on that particular area of the banks in the lending environment. The one thing though that lower rates does mean for banks is obviously mortgages. And one area that low interest rates can help is the housing market. Mortgage Bankers Association, the MBA, that, that's the body that releases those weekly mortgage application figures. They estimated that 21% increase in originations in Q3 and a 58% jump in refinancing. So obviously given this renewed— now we're on that interest rate hike trajectory, but we're now having two and what is most likely to be a third interest rate cut. It's not a bad time to refinance. In that, that respect. Another area, the final two, is one is consumers, and US consumers can still be counted to help, if anything, some of the underlying numbers at the banks because spending is holding up amid a relatively healthy job market situation for the moment, and credit quality, according to the metrics we've been seeing through economic data, has remained relatively robust. So the consumer side is fine. However, looking at the investment banking division, that's a completely different ballgame. It's been the worst quarter in more than 2 years for the announcement of any mergers and acquisitions. And also we've had such a string of terrible IPO situations, particularly the last one being WeWork, but also others that we've had, like Uber had its difficulties at the beginning. Generally speaking then, it's led to a very difficult period for advisory fees in the investment banking divisions at a lot of these banks. So trading might be up, mortgages and consumer-related components might be quite positive, but the rate environment and investment banking fees are probably going to be particular weak spots. With that in mind, who is actually coming out today? So here's a full list. I know it's a bit small, so let me just zoom this in so we can get a bit more of a sense of what we're looking at. So these are in chronological order in London time, BST, New York time, obviously EDT. And so pre-market today we have the likes of UnitedHealth, BlackRock, Johnson Johnson, JP Morgan, Goldman Sachs, Citi, Wells Fargo, Charles Schwab. Aftermarket, much smaller firms. Um, looking at some of the numbers then, if I just zoom this out, I'll talk you through them. So the EPS for UnitedHealth is expected at $3.45, and their estimated quarterly revenues at $60.58 billion. They're due just before 11 AM London time, so they're the first one of major kind of market capitalization to come out this morning. Of the bigger banks, you're going to get JP Morgan at 12, Goldman's is 12:30, Citi's at 1. EPS expected at $2.51, $5, and $1.81 respectively. And then Johnson Johnson actually is the biggest pre-market company to report. They've got a market cap of just shy of $380 billion. They should be just before midday, 11:40 AM London time, 6:40 New York. Their EPS expected $2.44, revenues expected at $20.29 billion. So if anyone needs these numbers in a bit more detail, I do have more estimates here for their yearly outlook as well in terms of the current existing guidance with the Street's looking for. Just drop me a message in Trading Live and I'll be happy to ping those over to you. All right, moving on away from earnings, China and Brexit. I'm going to be looking at oil prices later on this evening because of course it's Tuesday, so looking out for the API inventories. Now WTI, I did mention, is down about 40 cents this this morning, trading close to the $53 handle. So a little bit of the wind coming out the sail of the positivity on the back of the partial trade deal between the US and China, just dampening things a touch. And then also expectations are for continuation of more inventory builds in terms of crude stockpiles on the weekly change in the US, and analysts see or anticipate a 5th weekly gain, that would be the longest consecutive gain of builds in stockpiles since February, going back to this period that we had here. So yeah, the supplied nature of what's happening at the moment, uh, definitely is weighing the diminishing kind of returns out of the trade deal. And then one thing I did see, actually, let me just quickly— I was reading this on the way in. If it'll pop up, but I did read that Saudi Arabia— well, let me just quickly pop onto here so I can bring it out. Saudi Aramco is now said to be pumping as much oil as before the tax last month. So you remember at the time we had this really aggressive— what was it, a $10 gap up on, on that recommencement of trades, um, after that drone strike that we had on those major facilities of Saudi Aramco. However, Aramco has said that it's now pumping as much as before the attacks. So again, the, the kind of speed of which they've managed to get things back online hasn't really taken that long. There were some fears that it could have taken multiple weeks, up to 2 months at the time, but obviously it's been a little bit quicker than that. So that's another kind of negative drag in that sense, that, that the Saudis have managed to get back online so quickly. Okay, off of oil, the other thing was I just wanted to have a quick peek at some Chinese data overnight. Factory deflation worsens, adding to global economic woes. CPI though accelerates to 3%, it's the fastest since 2013. A couple things then, it's no surprise to see a continued divergence between these two metrics, um, the Consumer Price Index, CPI, at 3% year over year, being the fastest increase in a couple of years, was driven predominantly by food prices climbing 11.2%, uh, and more than 69% jump that's been seen in pork prices, obviously due to the fever and subsequent slaughter of millions of pigs that have pushed up prices in China. Also, what some of these articles are suggesting, which makes sense, is that breeders are unlikely to rush to restock their herds in a meaningful way because there's still lingering fears of recontamination and catching the disease again, which obviously comes at a great expense because it takes a lot of time to— it's not like you can just switch on and suck up the oil out of the ground. Pigs need to be born, raised, reared and fed, and it's a long, arduous process that's quite expensive. And if they hold off on that, then all the more reason why a lot of people believe you're going to get a continuation then of this over time. The other thing is, if we're looking at medium-term perspective, don't forget in January you get the Lunar New Year holiday in China, and what we typically see there then is a front-loading in demand for goods and And certainly then, analysts at Nomura have said in a research note this morning that they say that CPI in China could rise close to 4% in January in order to reflect that kind of activity. The producer price inflation, they also go on to say, may fall even more due to weakening domestic demand, falling energy and raw material prices, and a value-added tax cut that became came effective in April this year. So all the more reason why it is important that China do look to broker some kind of partial deal, at least with the US. Obviously there's that threat December, so this is all going to rear its ugly head again in a few months' time, particularly going to that Christmas period, which will be interesting. But it shows, and as per Premier Li saying, warning of increasing downward pressures in the economy, all the more reason that they need take proactive action, uh, to mitigate that at the moment, which they continue to do. So, um, this was just a graphic to give you a bit of an idea, in a sense, about how outperforming food CPI is as a component at the moment that's really driving this divergence between the red and the black line. Okay, quickly then, it's wrapping up with the calendar. Uh, what have we got? So this morning we get the latest jobs update Remember, you've got the full kind of suite of UK data this week. Jobs data today, CPI tomorrow, retail sales Thursday, alongside all the Brexit drama, and also a whole host of Bank of England speakers, of which Mark Carney is making a parliamentary Treasury Committee testimony later on this morning. Now, that latter point is very rarely important, market-moving. Usually it's just him reiterating the current answers, but given he's the governor, maybe worth keeping half an ear on. That commences at 9:30 AM, just when all the jobs data will come out. Then we've got ZEW from Germany, be quite interesting to look at. Analysts are anticipating a further deterioration in just general forward-looking sentiment for the euro area, particularly under this uncertain cloud of the trade war situation developing, because even though there's a partial deal struck for China, what's going to happen with the single market in the euro area? And then later on this afternoon, you've got the New York Fed manufacturing figure— actually, the API. Just to update myself and to correct myself, we had the Columbus Day holiday, of course, yesterday in the US, so the API inventories will not be tonight, they'll be tomorrow, just as a reminder. Then Fed's Bullard, voter and a dissenter, as well as being one of the most dovish members of the Fed. He's speaking at 9:25 this morning. Might be worth keeping an eye out for to see whether or not he's backing not just one but potentially two cuts in towards year-end. And then you've got another Bank of England speaker a bit later on this afternoon. Um, that then— there is more Fed speakers. You got Bostic George and Daily all scheduled as well throughout this afternoon and this evening. And as I mentioned, you've got all those bank earnings coming— Citi, Goldman's, Wells Fargo. And then also to be aware of is Johnson Johnson, all coming out pre-market. Okay guys, that's it from me. I know quite a lot to take on board. I'd say though, in summary, Brexit headlines, just the market remains susceptible to still quite a lot of further developments. I'd expect more rumors, more tweets like that from Tony Connelly to come from other journalists throughout the day. So just be mindful of your, your execution of trades within that product if you are looking at it. I'd be realistic with the timeframe of holding any open position for, for too long a period. Then you've got the earnings to also consider for the rest of today, and then the trade war, I'd say, and not looking for too much spectacular to come out of that this, this morning. It's kind of more of an update than it is anything to be aware of for strategies today, I'd say. Okay, hand you over to Sam, and I wish you a good day. Thanks very much.

Yeah, hi guys, hope we're, we're doing well. Good to be, uh, back on first one of the week. It's having a quick look over. We'll start with euro, as that did come under a bit of pressure this morning, breaking through a bit of a trend line. You can see on there as well, you know very well that I do love a bit of a trend. And that break, you know, coincided with the false push above yesterday's high. We've seen a move down towards today's S1 and yesterday's low, so that's containing things for now. And I guess as well, just looking at, uh, the price action from yesterday, we're just let me just remove this trend because really you could argue it starts a bit lower down as well. And I was looking at this coming through, uh, from around here. Let me just move that up a bit so you can almost have the sort of the, the false push again from yesterday above this left shoulder, if you like, from the 10th. We obviously go through higher on, on the Friday and then break of this trend that we've now seen this morning as it, as it comes lower. Um, so looking at that, and of course now this trend line, as we can say, we can probably move that, uh, to be more accurate, just over the last session or so, that on a retest would come around the pivot. So, you know, if it wasn't because of the, the break of that, I wouldn't really fancy the pivot too much, but I'd certainly be interested to see what happens on a retest of that trend line. Other than that, really looking at the euro, obviously the highs from yesterday and today, and then the lows from Friday as well, which of course brings in some of those highs as well from, from the previous— well, the beginning of the month, from some of the previous weeks, uh, would be areas of support as well. So for, for me, for the euro, just looking at 3 levels really. Retested that trend, although it does come into choppy area. So I wouldn't— if going short, wouldn't be looking to hold for too long if it didn't, uh, really go straight away. And then up to those highs as well and, and the lows there, uh, to keep a watch on, on the charts. The pound at the moment, Boyd, but could, uh, could easily come lower as we all, all know, off just one headline or lack of development. Yesterday's, uh, low was obviously a great opportunity to have got in, 25.41. Also, if we just scoot to the left a bit, you can see was the— and it's above the camera— was the high of the 24th, um, which has offered a great level to, to get in again. And since then we have drifted higher from that low. Probably worth having on a trend line as well for the remainder of the day, as we have had 1, 2, 3 tests of it. Obviously that looking to come in just above the pivot. Also, if it was to happen now, the, the low of the day as well. So a bit of a guide maybe for Line in the Sand to say happy to stay long from a technical point of view as long as that trend line holds. The previous high of the day is just acted as support now. So given everything that's going on fundamentally, technically still going, you know, and acting quite well, uh, so 2660 uh, for a level support, the trend line as well, uh, to act as points to, to keep this market going to, to the upside. The high that we had last week, 2736, we almost reached that today, give or take 10, 10 ticks or so. So that would obviously be the, the key resistance point to the upside to keep a, keep a watch on and have monitored. Uh, yesterday we saw pretty flat day, to be honest, across the forward for, for equities. We did come lower in the morning only to, you know, come back and then just hug that pivot for the remainder of the session. Pretty quiet, much similar to last Monday, I, I guess, with, you know, a lack of data to, to drive things. But however, we have pushed, pushed on, and just above where we're trading in stocks, are we keeping an eye on, on this whole level? I've also got the high from yesterday which we touched a couple of times, dropping that down to 15 and 5 minutes, you know, you can see those lows were just starting to get squeezed in perhaps. As long as we stay above that trend line, it might be that you are favoring a break to the upside. Below, uh, be looking for price to just drift back down, maybe focusing on what was quite a key resistance point this morning. You can see again tested a couple of times here on 15-minute at 29.74. For, uh, on the dot. 1, 2, 3, breakthrough. So I'll be keeping a watch on that, much like the pound as well. A couple of trends to keep an eye on from the lows of yesterday, uh, good sort of guides and lines in the sand above where we're trading now. If we can get, get to there, be keeping a watch on a bit of a breakdown area from Friday as well, 2987, before we're then looking at those highs from Friday as well. So A bit of a 5-point push wouldn't be too surprising above the, the break of that high trend line and previous high of the day as well, to keep an eye on for areas of support. Gold has been an interesting one, um, over the last sort of few weeks really. That— where's it gone? Here we go. That's, uh, 1492 level had offered a really good sort of guide multiple times as to what's the are going to happen. You can see here, just bringing that in, we get the breakthrough, offers good resistance before the ISM number comes out. And then we broke again, broke again last week to, to the downside, and quite a few good opportunities as we came back to test that before breaking through. And now back above it, and we'd almost reached that this morning. So I'd still have that marked on as a decent area of support and also the opportunity to get short should it break through. And then of course we, we'd be looking at some of the lows from yesterday as well. So 1492 in the futures, uh, give or take, you know, a few pips either way, is still certainly a level of interest that I would have on. Looking at it more intraday, above where we're trading, you can see we are trending lower from the high. Probably worth seeing if we can get anything on, on that relatively steep But just now, uh, within the last 7 minutes, you can see we've got the third test of that trend. So people are looking at it. I would have it on break above that. You could— you may be looking to, to get a push towards 1497. So not a massive move, but given the time of the day, it might be worth looking later on anyway. The high of the day almost reaching an interesting area from yesterday where we broke down into the afternoon around 1499, but of course 1500 as well. So another level of resistance to keep a watch on. And just above there, really, you can see going back to Friday as well, it's quite a big zone where the sellers have taken over a couple of times. So keeping an eye on this trend line resistance around 1500 to the top side, R1. You've got quite a nice bit of price action as well from Friday that you keep a watch on. Uh, below 1492 S1 lows of yesterday and then Friday's lows as well could come into the mix to keep a watch on as well. Just going back to stocks, obviously S&P near that high and worth keeping that trend line on. The fact that the DAX is just struggling to get above its R2, already a decent move, um, may halt its progress over in the States. So keep a watch on that as we just start to drift down and we are now below the high that we had on Friday as well. So a couple of attempts of trying to get through there, uh, just failing to do so for now. Looking at just a below where we're trading on the DAX, so keep a watch of course on what was the high overnight on Friday. We can see a decent reaction this morning once we have broken through, uh, so 12,514, uh, a level of support to keep watch on. Below there, obviously got those previous highs as well from yesterday and today. So again, the market's, you know, acting quite technically, obviously, with those, those biases to, to look to maybe wait for resistance to break or for levels of support to come back. Certainly yesterday was relatively slow, but I wouldn't be too surprised to see things start picking up from today as well. Any questions, as usual, please do let us know. Will be on the mic throughout the day, but hope you all have a good one and catch you all in the chat.