The Trading Week Ahead: 11th - 15th Nov 2019

Very good morning to you, Monday the 11th of November. Hope everyone had a fantastic weekend. Usual drill for this morning, Monday, we're going to talk about the calendar. As you can see to the side of me, what are the main events for the week ahead? Where are the potential fundamental catalysts that could create some direction for markets? Because there's certainly quite a few things coming out. One thing not to forget is actually Veteran Days holiday in the US, so US markets are closed today. So do take that under consideration in terms of your view and your strategies for this session in particular, likely to be pretty quiet as we get through into later into the afternoon European time. But just before I go into the calendar and the other things we're going to cover, because we're going to have a look at Trump, the US-China trade war, we're going to have a look at some Spanish election results, a UK outlook downgrade that came late last week, and then an update on the general election polls is what's on the agenda from my side. Before then, Sam comes on and looks through the charts more technically. But looking at the market open, how are things looking and shaping up? Well, not too much reaction overall. I mean, there are certainly some headlines, as I said, to go over. Also, without mentioning the violence continuing in Hong Kong, which has seen their local stock market fall at one point in excess of 3%. But the actual open, as far as the assets that we're looking at here, uh, across the kind of FX, commodity, and the fixed income markets, is, is pretty quiet actually. A little bit negative in the equity index futures. However, we're already pushing off the lowest levels. Uh, the DAX in the center left did have a brief test of its S2 before then just bouncing back Spanish banks a little softer. The squawk was just saying at the market open, as we've just gone through 8 o'clock and the cash open, just given the result of the, again, kind of hung parliament situation that's developing in Spain. So it's even got worse for the socialist leader than what it was in the first place. It's kind of backfired in a much a Theresa May-esque style, but Overall, gold pretty flat, Treasuries minor positive. So if anything, just very moderate risk off to the general asset class mix. And what I mean by that is equities and oil touch lower, T-notes and gold touch higher, kind of reflecting that, that point of view. The currency markets though, the Dixie is flat at the moment, so not really showing any, any way in much meaningful direction. As yet. So let's go over the headlines, then we'll kind of bring all this back into the calendar of what's to look out for. And the first thing I want to talk about is an update on where we are with the US-China trade talks. You'll remember last week we're touching all-time highs. There was this kind of, this positive pricing in of a partial trade deal, elevated even further by the idea of the US agreeing as per what the Chinese press was stating, of the rolling back of tariffs. Now, remember what we were saying at the end of last week? We were a little bit more pessimistic about the view of Donald Trump actually concluding that matter as to fulfilling the request of China, and that pretty much played out to be the case at the weekend. Trump spoke, and the president said that trade talks with China are moving on very nicely. And that leaders in Beijing wanted to do a deal much more than I do. Trump also described as incorrect reports about how much the US were ready to roll back tariffs on China. So I don't find any of this particularly surprising. As we've said before, I think Trump definitely wants to assert himself and make sure that he is in control of this negotiation process. He also wants to appease his domestic base by remaining quite firm firm on the issue. So even though there's no smoke without fire, and I do believe that inevitably in time tariffs will be either frozen or rolled back in order to keep the stock market where it needs to be this time next year for the election, for the moment I think Trump doesn't really need to do too much because if you think about it, he's already done the job. Stocks are at record highs and he's managed to fire away several tweets last week saying that exact same fact. So if anything, he's kind of achieved his point. So now he doesn't even need to do a deal, he just needs to prolong it and then do it later, buy himself a little bit more time in my mind. So that's the latest there. Trump is speaking on Tuesday, I think it's the New York Economic Club speech that the president gives on a yearly basis. That normally acts as a pretty decent platform for the president to say his latest thinking about a variety of different issues. Uh, but of course, that would be one, uh, that the market will remain particularly sensitive to. And I would say, despite all the economic, um, data that we'll look at on the calendar for the week ahead, it still remains one of the key catalysts for market sentiment and direction. So any updates that we get on the trade front need to be, uh, you need to remain vigilant for Otherwise, quick look around the globe, and as I briefly mentioned, China overnight— well, I should say more specifically Hong Kong— the Hang Seng Stock Index saw a significant dip. I'm sure you've probably seen the viral videos already this morning when you've come in, but two protesters shot at point-blank range by a police officer overnight. I believe one is dead. And it's one of the first times that the violence has kind of spilled out into the actual daytime rather than the usual nighttime protests. So continuation of violence, if almost escalating at the moment, has seen their stock market come under significant pressure. Hasn't really come into our market. And in a sense, the way I would look at this, if you're trading kind of Western American European products, is that I wouldn't anticipate this Chinese story, even though it's getting worse there domestically, to really impact our markets? Not unless China forcefully starts to make more meaningful developments with military occupation within Hong Kong, which I think is still highly unlikely at this point. Or what if one of the US administration, as per Mike Pence, the VP did 2 weeks ago, comes out and says something quite critical of the mainland Beijing about their dealing with the situation developing in Hong Kong, could that be a catalyst for the ongoing, what has been more positive trade talks, to break down once again if the US were to make an inappropriate comment on such a sensitive subject for the Chinese authorities? So they're the two things probably I'd look out for if this is going to move our markets in that respect. The other thing in Europe, so coming a bit closer to home, Spain held an election over the weekend and it came just only 6 months after they had a previous election. Now, why did the socialist leader call that? Well, his party in the previous election had gone from 85 to 123 seats. In the 100 or the 350-seat chamber that comprises of Spanish Parliament. Now, he thought that given the way things were going, that he could call another election on the premise that he could solidify a majority government because of the difficulties experiencing in trying to get a coordinated coalition. Now, Podemos, the anti-austerity party, was the party that's been propping up the Socialist Party, just given the number of seats within that chamber in Spanish Parliament. Together though, given the results that have come out so far, they've lost 11 seats between them on Sunday, leaving them now 21 short of a majority, meaning that they are going to have to team up with some of the kind of smaller fringe parties to get a working, uh, majority to run government. So again, as I said right at the beginning, it's kind of reminiscent of Theresa May where everything was looking so positive, it felt like a good strategic move to call a snap election, only for that to be the absolute worst decision and a big backfiring on the government. And it's now— they're in a weaker position than they've ever been in. Now the point being though, as I said, the way it works, much like any democracy, is that But because the Socialist Party and Pedro Sánchez has the most votes, he does get first rights of reserve, if you like, to try and form a government. The biggest winner of the election, and this is something of course that's been very reminiscent of European politics and the emergence of more right-leaning parties, the biggest winner on the night was a party called the Vox, which is a Spanish nationalist group. They've made the biggest headway. Most recently through these recent elections in Spain. So yeah, more difficulties, I would say, a more fragmented parliament. It means that this political impasse in Spain is likely to continue for the foreseeable future, and that is putting some of the domestic stocks in Spain, in the Spanish IBEX, under a bit of pressure this morning. But again, seemingly still a fairly isolated situation for Spain hasn't really seeped into general broader market sentiment at the moment. And I don't really anticipate that it would at this point because I think the Spanish political mess has been evident for some time and it's looking like it's going to be set to continue for the foreseeable future. Moving on, going to talk Brexit briefly. This was an interesting graphic that I shared at the weekend, not sure if you did see it. So just to quickly recap, this is a graphic of cable, pound-dollar, and it's looking at a latest Bloomberg survey of 12 participants, i.e., 12 different banks, and their view about where would the pound against the dollar be on the outcome of different election scenarios. So the first one, the top one, being a Tory majority, which is the baseline expectation. Remember, the broader market consensus is still that Boris will capture a majority government. Um, the poll then at the weekend suggesting that's a 40% probability, so it's by no means an outright expectation, it's just the highest of all the possible options. Now if a Tory majority were to happen, uh, the average estimate is then, bearing in mind the cable in terms of the futures this morning, so the spot not too far away from the price is trading around 128. A Tory majority, they say, would hit 134, i.e., then it gives Boris the greatest chance of being able to push through his deal in Parliament and get relevant backing to move into the implementation transitional phase of Brexit. A Tory coalition could be then still sterling positive, albeit only marginally. A Labour coalition the same but in reverse, and each one of those scenarios is seen at roughly circa 25 to 30% probability, a Labour coalition would be 127. And one of the thinkings here is that in a coalition, even though then that would lead to some positive developments potentially around a softer Brexit, what you're trying to do then is lessen the power of which Jeremy Corbyn would have which would be a Labour majority, the worst case for the pound, is what the banks think, even though it's the lowest probability, only 5% chance of happening. Just given the fact that we want to renationalise a lot of the companies, increase corporation tax, these kind of socialist-led policies, uh, huge monumental-sized government spending, which You know, if you actually think about it, Moody's at the end of last week lowered their UK credit outlook to negative on Brexit paralysis and has made policymaking less predictable. This comes as well as S&P and Fitch, they already have the UK country on negative watch. Also, there was comments about the fact that they're moving away from more austerity and fiscal prudence because political parties, including the Conservatives but more radical under Labour, want to significantly increase government borrowing, which given the situation with the negative outlook politically emanating from Brexit and the uncertainties that that would have on its potential outcome, it wouldn't be surprising to see sovereign downgrades to the UK. And so hence the reason why a Corbyn-led majority would be the most negative The one thing I think that was quite interesting though, when you actually look at the access on the right-hand side of this graphic, the actual response to the general election here you can see is relatively small, I thought, bearing in mind cable's trading at 128. The worst case scenario they see trading at 123, the best case scenario they see trading at 134. So either way I would say that's way more tame than certainly we have seen on some of the other big political occasions. But obviously these are just forecasts, proof will be in the pudding, and we've still got a few weeks to go until we actually get the general election. One thing then with the general election, what's the current status with the opinion polls? And my overall summary would be that nothing is really changing at this point in time. The ruling Conservatives still still have a pretty decent lead. Um, so just running you through a couple of headlines, the Conservatives had 41% support compared to 29% for Labour in the opinion poll published on Saturday in the Observer. So that's down just 1% for the Tories, Labour up a touch. The Lib Dems are third at 15%. Um, the YouGov poll for the Sunday Times showed Conservatives at 39%, so that's unchanged from the prior week. Uh, the Conservatives maintained a 12 percentage point lead over Labour from last week according to the Deltapoll national opinion survey in The Mail. And the BMG survey for The Independent on Sunday put the Tories on 37, Labour 29, the Lib Dems on 16, Brexit Party on 9%. So all in all, despite a lot of the noises being made as they've been ramping up their kind of domestic policy pledges to try and create, I guess, public opinion to, to side with them for the election, is having very little to really move the needle as far as the polls are concerned for the time being. So all things, all things remain equal for, for now. Moving on, just want to talk about the calendar then, because as I've already mentioned, on Tuesday you're going to get President Trump talking at the the New York Economic Club. So again, it's going to be key for what does he say about not just domestic policy, but this broader ongoing trade war that's going on with China at the moment. But then there's another chap in this photo, and that is Mr. Jerome Powell. And it's a big week for Mr. Powell, but not just him, for a number of his Fed colleagues as well. Now on Wednesday, Fed Chair Powell addresses the Congressional Joint Economic Committee. And then he appears again on Thursday talking to House representatives. Now, this is where he'll give his kind of update on what's the current economic conditions, and he kind of gives further details as to why the Fed is doing what it's doing. And it's one of the first times he's spoken since the Fed opted to cut rates for the third time. We saw what, two weeks ago. So this will be the chance for politicians to really grill the Fed chair. So not expecting a great deal, but as you can see, yes, outside of those two events between Trump and Powell, there is a whole slew of Fed speakers. So today you've got Eric Rosengren, tomorrow Patrick Harker and Neel Kashkari, who will be an FOMC voter in 2020. And then Thursday you get a whole dump of speakers—Clarida, Evans, Daly, Williams, and Bullard all speaking. So for me Interesting. Again, if you know your central bank strategy, this is kind of the 101 of how someone like the US tend to operate. Given the potential significance and importance of the Powell speech on Wednesday, what the Fed often do is they litter in a whole group of speakers the day after as a kind of insurance policy, just in case the market misinterprets what Powell says. Powell can't afford to come out and recorrect that stance himself because that would diminish his credibility. So instead, to get ahead of that, they just list a whole load of speeches just in case. Okay, let's go back to the calendar. What else is there today? As I mentioned originally, it is the Veterans Day holiday, so electronic trade will be open but on shortened hours, but the bond market is closed. In terms of the actual cash. And if I just quickly jump over to the calendar, um, I'll see if those guys on the Squawk can put together some kind of holiday schedule. I mean, on their calendar it says it's a non-market holiday, but I'm pretty sure I read this morning that the bond market is in fact closed. I assume then that the New York Stock Exchange is open as per usual, but it might well lead to lower trading volumes. Otherwise, moving forward beyond— well, before I do beyond today, we've got UK preliminary GDP coming out a bit later this morning. So just a quick look on the calendar, what is expected. So we'll just blow this up so you can see a bit more clearly. 9:30, the data coming out. So the 3-month and 3-month figure expected a 0.1 increase from the prior reading at 0.4%, year-on-year 0.9%. So not that I think this data is going to be particularly market moving, but obviously you're likely to hear lots of politicians talking about this given the fairly lackluster growth conditions, likely to give opposition parties plenty of ammunition to go at the government. Tuesday then, what have we got? Well, actually from the UK, not only do we get the preliminary GDP report for Monday, we get UK jobs data Tuesday. So that does include average earnings, employment change, claimant count rate, and unemployment rate. You then get UK CPI on Wednesday, and then you get UK retail sales, I think, is also coming out this week, yeah, on Thursday. So you get the full plethora of top-tier one economic data points out of the UK. Once again, if you are a sterling trader, I think just an overall consideration that still, given the political backdrop, unless those numbers are wildly out of line I'd be looking for them more to just kind of add to general market direction and to supplement that view fundamentally, rather than to be a real distinct catalyst of price movement in that respect. Moving on, Wednesday, what other things have you got? Well, there are some interesting US data points coming out as well this week. Wednesday you get US CPI data alongside, as I mentioned, Jerome Powell speaking at the Joint Economic Committee. Giving his testimony. You then get from the US as well on Friday US retail sales, Empire State Manufacturing, and Industrial Manufacturing Production. So from the major US data really and speaker events Wednesday, Thursday, Friday, that's really the key. So very much just given the market holiday as well today in the States, it's going to be a second half of the week where it's going to be more interesting. So again, be mindful of that. And the landscape of where the market volume and activity is likely to lie for the rest of this week beyond today. Uh, Chinese data, you've got, um, industrial production coming out of China, um, Wednesday night going into Thursday. Also jobs updates, so looking out for Aussie fluctuation overnight Wednesday night for any potential movement. And that's pretty much it. So some quite interesting things coming out Uh, of course you've also got European preliminary GDP coming out, the German one coming out on Thursday in particular, of interest to give a bit of a reference point of where we're at at the moment in terms of the severity of the downturn being experienced in the eurozone. So overall, quite a few things to keep an eye out for. So from a top level, as a reminder, looking out for any further updates on the trade side I think we're pretty much aware of the status at the moment. There seemingly is a deal in the offing. However, Trump just looking to kind of just dial back a little bit the market's maybe overtly optimistic expectations of when it will exactly get done. But the idea is it will get done. He's just kind of prolonging it to manage the situation in his favor, I would say. Then US major data, Fed speakers all coming from really Wednesday onward. UK data dropped throughout the week, and these are kind of the main things to look out for. Earnings season is all but pretty much done now, so there's nothing really to look out for on that regard. Okay, that's it for me. You can grab this calendar, just go on my Twitter account below, there's my handle. If you are watching this on YouTube, don't forget to subscribe to the channel as well for further updates throughout the week. But I'll hand you over to Sam. And he can talk you over the charts now in more detail. Thanks very much.

Hello everyone, good morning. Hope we've all had a good weekend, better than Arsenal's anyway. Have a quick look over the DAX to start things off, which is having a decent little push over the last half hour. Certainly from pushing low towards the S1, you can see a decent reaction from that area. If we draw a line actually getting through Thursday's low, and now we're back above the, the Asian session level of resistance, be interesting to see if we can confirm a break above that, which it's looking like we're giving it a good go. So equities in Europe anyway, nice little, nice little start to the week. I guess potentially later on, whether that be today or in the week, it's worth having this trend on here. You can see from Thursday to Friday to Friday evening, a decent, well-respected level of, of a trend line. And, and I've definitely had— look to have that on the, the high that we've making now, albeit choppy as well, is not a bad little line in the sand. Previous lows of Friday before a little false break, and it's acting as a bit of resistance now. So a couple resistance levels where we're trading now, the trend line to the upside as well, the lows Obviously, other than the low of the day, you're looking back down towards last week. And here I would say this is a key level, line in the sand for, for the buyers to hold this week if we are to remain elevated up at these levels. If that was to go, it wouldn't be the most surprising thing in the world to see a, a decent push lower in stocks after a really good day last Monday. You can see here from the weekend, big push, and That wasn't just in European stocks. Obviously we had that more so in, in the US, which, uh, here's the 4th, uh, where's the 4th? I'm up there. Yeah, that's what I'm saying, trying to see where the weekend began. A decent move higher there, and we're up at obviously these all-time highs. Uh, so like the, the DAX, worth getting on a potential trend line to see if that is to hold. And the low of the morning goes back to those highs that we had from the SIP Bit, bit tricky, I think, to predict where the S&P is going to go this week as trade talks are going to be that main driver. Unfortunately, starting to perhaps get a trend from those lows, didn't quite make it now, but just on the idea that we might start to get squeezed in from, from both directions is something that I'd be focusing on. Maybe waiting for that overall to break either way before getting a decent move as well. If we were to break to the downside, a couple key points I would have keeping an eye on: 3053, the high which was obviously that trend channel high from the 30th. We retested it on the first of the month, so that would be an important point. And of course, if we are to push higher today and break that trend line, worth keeping an eye on the futures anyway at 3100, which will be the first time we ever test that point. Incredibly, having a look over to Currencies, uh, the pound obviously drifted lower last week. Still a nice looking trend from those recent highs that we've had, really nicely well respected. You can see from the beginning of the month, so something I would absolutely look to have on a break of that trend. Obviously just then being aware of all these highs here on the hourly chart that I'd be keeping a watch on. Lowering the time frame down as well, we had a uh, decent. There we go. It was well respected from those lows from Friday evening. So I keep this on from an intraday perspective. But the pound last week, it has to be said, was, you know, relatively quiet even though we had obviously a good move, uh, following the, uh, the rate decision. Each other day was, was pretty range-bound, not much going on. And unless we do get some serious developments, I wouldn't be looking to go too aggressive on this market and on today of all days, but this trend line to the downside and upside is something that I would have marked up. For the euro, similar in, in that push lower. I'm just going to put this on a 240. We sort of had the, the same thing that we've had all year. We have a trend line to the upside. Well, albeit it was relatively choppy on, on the break. You can see when— maybe if we have it this way, it looks a bit clearer. you have a decent recovery like we did from the 1st of October, it then breaks, and we can then have a look and start talking about maybe making a new low for the year. Well, that's the way it's gone this year anyway. The low that we've, uh, got in mind, I would say here, looking at the low of that 15th, almost reaching it today, a decent level of support to bear in mind. A break and close below there, uh, could well see a further leg down. To the upside, and looking more 15-minute Um, I'll just be keeping a watch on any of these retracement points, you know, the, the second test maybe of this 1.1060 level, which was the low of Thursday as well, as an area to keep an eye on. But you can see when we do, certainly over the last two trading days, when we break these lows, we're coming back to test them later on. So patience for the euro. I wouldn't be one to, to get up and chase. And potentially you've got to say later on if we break these two levels here, you know, coming back to retest that in a couple of days could be a decent little opportunity to keep an eye on there. I'm going to look over at gold, flirting near the, the high of the day, but, uh, just struggling to, to really break through. Nothing doing yet. We're still relatively early on in, in the day, of course, and expecting a relatively quiet one. Interesting levels, I have to say, maybe up towards that R1, 1460 89 looks pretty key, and then I probably would have on a trend line from those lows. But really looking here more so into the, the back end of the session before wanting to really get involved in it Monday morning. Obviously not expecting too much to happen. Looking at this on that longer term chart, let me just remove all the pivots, uh, let's put this on the daily chart, and you can see just where we're trading now, really key point. We did close below there though It has to be said. So on, you know, starting on a Sunday evening, 11 o'clock electronic trade, it looks relatively bearish on the fact that we have closed below this ultimately very key level. So can the bears take over? And is this now literally where we're trading a really, really good opportunity to get short? We'll have to wait and see. On the idea that it's a false break, if we close back above 1466, could then well become a level, uh, for, for the bulls to take over. Key level to the upside, be looking at these previous lows that we broke through on that magic 1482 level. If we're to hold where we are trading now, I don't see much stopping us, uh, but to— for us to get a move down to 1448. Uh, silver, you can see on that level where it, uh, came down to, to trade. Obviously I mentioned I got long near around this level. Obviously this has got to hold, really, you would say, for me to be ultra confident in it. Looking over at oil longer term, little grind over the last few weeks. Those areas of support still something to keep an eye on, just from the middle of the summer to then October as well. Up to where we're trading now has been so key last week. You can see the breakdown area here, looking middle of September before we finally pushed lower on the 24th. Didn't get a close above there. How significant is that going to be? Uh, also worth having a trend on from those lows, whether we can get down to test that at all this week or not, time will, will, uh, will tell. Next key level to the upside I'd say is $60. So here looking at that daily chart, $57.64, and obviously those highs from last week, very key and worth keeping an eye on. Looking on that intraday putting those pivots on for a bit more direction. You can see just how every time we come up to that area, we just cannot close above. So something to keep an eye on and a watch on, uh, going forward, uh, certainly, uh, as well. Maybe more intraday to get anywhere near that 58. We'd have to get through quite a key level which has acted as support, as you see on Friday, resistance in the early hours, 56.95, 5 percent away from the $57 handle, and we are starting to perhaps get a nice little trend forming here. So this is definitely something now, just having a spot of this that I keep an eye on. Ideally though, you want that volume in the afternoon to get a decent break of that. We'll get the strategy report out obviously closer to midday, but any questions before that, obviously please do let us know. I hope you all have a good trading day and even better week ahead.