The Trading Week Ahead: 28th Oct - 1st Nov 2019

Okay, so very good morning. Hope everyone had a great weekend. Monday the 28th of October. So as per usual, look ahead not just for today but for the week as a whole. So as you can see to the side of me, a very busy calendar actually. It's an interesting week ahead. We've got different central bank decisions coming from, of course, the Federal Reserve, but we've got the Bank of Japan and the Bank of Canada. We've also got lots of corporate earnings. In fact, I think 156 more S&P 500 companies, including some big guns like Apple, Facebook, and Alphabet or Google. Lots of economic data as well of significance, culminating in US non-farm payrolls, and that's going to come on Friday. And then just to give you an early heads up, and the team here will be covering the US central bank decision live on our YouTube channel. So don't forget to subscribe to the channel if you're not already have done so, and click the bell icon to get notified when we do go live. Remember, straight up, just a reminder, the clocks changed in the UK at the weekend, but the American clocks have not yet changed. They don't do so until this coming weekend. And so there is a shortened time zone, 4 hours between London and New York, or 5 between London and Chicago at the moment. So for anyone in London, do remember then that major US economic data is going to come out an hour earlier than normal. That does mean all the respective opens, of course, an hour earlier than normal, and the Fed decision will be at 6, not 7 PM for this week. So do bear that in mind, don't get caught short. in a sticky situation, uh, by those timings. Uh, but before we go into the calendar line by line in more details and get you up to speed with some of the headlines, quick look at the charts this morning. And overall, relatively positive start to proceedings. Um, one thing you'll recognize here, equities up, T-notes down already about 9 ticks, having broken through the low print on Friday. So some relative risk on And just having a look here, this is the S&P 500, transitioning this to a daily chart so that I can encapsulate a couple of markups here that I've had from previous conversations. This is from what you can see from the kind of camera showing me at the moment on the left-hand side on your screen. This encapsulates then the EU referendum surprise result and Trump winning the election to where we are at the moment. So just actually kind come to, come to just say it now. Where— how much has the market rallied since Trump became president? Well, we're up 43%. So Donald Trump obviously getting the job done as far as he will be concerned. I would suggest tweets will be forthcoming later on today as we trade up here, a record territory once again. And you know, the kind of key area of price activity, of course, in the long term really this fluctuation of prices that we had. Remember, last— this time last year, we were in the midst of a quite severe correction in global markets on fears of policy tightening and escalating trade war. But take those two significant catalysts, and this morning what do we have? Partial trade deal and the Fed cutting rates this week. Absolute opposite of what was creating the meaningful sell-off that we had in that era. And so here we are once again up here in the right-hand corner testing the all-time highs seen in the summer and in September as well of this year. So obviously Sam will go through these charts from a much more practical kind of intraday point of view, but just to get it into perspective from a long term, uh, comes as well with earnings As I said, lots more earnings to come. But despite what you might have thought was a relative negative economic setup in terms of the outlook for the future, I was reading at the weekend, of all the companies that have reported, I think it's— we've had about 40% of the S&P now. 80% of those companies have exceeded expectations on the EPS. And so perhaps then more stronger than some were expecting. Expecting on that front. Otherwise, I'm going to leave it at that with the charts for the moment. I can see equity index futures already off to a solid start. One thing I wanted to mention, there's some pretty big potential M&A news this morning that's helping lift the luxury names across Europe. Comes after LVMH is looking at a potential takeover of the US firm Tiffany. That whole sector responding quite positive on the back of that. But let's jump into one of the main headlines that's, that's also helping assist sentiment this morning. It's this one: China says part of Phase 1 trade deal text is, quote, basically complete. So to give you a bit of an idea, these comments came out on Saturday. This followed high-level talks between the Trade and Treasury Secretaries of the US meeting with the Vice Premier on Friday Well, they spoke on the phone, I should say, and the comments came out Saturday saying then that parts of the text for the first phase of the trade deal are basically completed. The two sides reached a consensus in areas including standards used by agricultural regulators. And so this did come after it looked like potentially— you remember when Vice President Mike Pence, I think it was what, Thursday going into Friday, made some fairly dubious comments about how China is dealing with the unrest unfolding in Hong Kong, and it almost felt like, here we go again, putting their foot in it just before these top-level talks. But in fact, they actually made some distinct progress, at least with this existing phase, and that's been met with a positive response in markets this morning because those comments came over the weekend when markets were closed. Um, sticking with the US theme, I did mention, um, the fact that the Fed are expected to cut rates today. Before I show you this graphic, let me just jump to this one. This is the federal funds rate futures according to the CME FedWatch tool, and the probability of a 25 basis point rate cut from the Fed stands at 94.1%. So it's not really a case of are they going to cut? Because they will cut. The Fed have never disappointed when the markets have been priced in at more than 50% plus, never mind 94.1%. There's also a couple of Fed speakers just before the blackout period last week which had opportunities to kind of reset the needle if they wanted to, and they chose not to. So our expectation is, as per everyone in the market barring 6%, is that they're going to cut. What we are looking out for is really— and this is this graphic which encapsulates here on the axis at the bottom, going back US interest rates from the late '80s to where we are looking forward until 2022. And the idea here is we've had what the Fed classify at the moment as a mid-cycle adjustment. The question mark is the last time that they did do that you've got to go back to the mid-'90s, late '90s. Is they, or are they, going to signal, as per the quote here, time for patience? And I actually think that that will be the case. We'll obviously get much more into the language and how they're going to telegraph that message. And of course, with every meeting now, Jerome Powell hosts a press conference, so very much that will be key for the forward guidance. Beyond the execution of the third in this current phase of rate cuts that we're expecting. So that'd be a big deal. And obviously the markets this morning already kind of responding to that. I think that's a lot of this is just pricing in for that, that fact. And I think markets have known for quite a while now that this was going to be the case. Does come though with big data coming. Uh, let me just bounce back to the, the actual calendar, just give you a couple of highlights. Nothing really too major coming out, US data today, but Tuesday you get US consumer confidence, pending home sales, and then on Wednesday you get ADP employment change, you get the advanced Q3 GDP number, and of course this is showing a slight weakening comparative to what we were seeing in the last quarter or so. Also PCE prices, real consumer spending, then you get the Fed decision Thursday, um, looking out for Chicago PMI, and then Friday you get the likes of non-farm payrolls with the usual focus on not just the headline reading but the average hourly earnings. And we also get ISM Manufacturing PMI, and then we get a couple of Fed speakers looking to come in post-blackout period to sweep up any misinterpretation of the announcement on Wednesday night. Fed's Williams, Clarida, and Quarles speaking as well to finish finish the session. So lots to come from a US perspective in terms of non-farm payrolls, where the consensus estimate for something relatively similar to what we saw last time, which was a headline change in non-farm payrolls of 136,000— that did miss expectations of 145,000 last time out. But as you can see, has shown just a very slight pattern of weakness in the top line job creation figure. Jumping then to something else, obviously the main narrative in the UK, not that it's moving sterling a great deal this morning. I'd say EURUSD and cable and the major pairs more influenced by a slightly weakening dollar, which has just backed off some of its overnight Asia-Pacific highs, moving into slight negative territory. So running into a bit of resistance near-term, the euro pivot and in cable at the R1 and what would have been Friday morning's high, looks like, in terms of the future setup. But having a look then, what is the latest status with Brexit? Well, today is going to be Boris Johnson, as you can see depicted here. He's going to be bringing forward his motion to call for a snap general election on the 12th of December. And this comes as we await then confirmation of the European Union, who have been considering the length of time to grant the UK as an extension in regards to fixing and sorting out the process forward for Brexit. Now, talks among EU diplomats in Brussels where the option of a 3-month Brexit extension from the end of this month exit date may be approved. According to Politico over the weekend, the French are ready to drop now their opposition to the plan. If you remember, it was Macron, as we were talking at the end of last week, who was looking to potentially speed up the timetable because he doesn't want this to drag out. It was believed at the time, as we said in the briefings, that it's unlikely that Macron would stick with that line because he said this before. Just a bit of political posturing, and now it appears that he's fallen back in line. So the most favoured seems to be still that European Union will delay up to 3 months. A draft proposal under consideration though by EU diplomats would delay that Brexit till the end of January 2020, with an option for the UK to leave earlier. So it's a slight tweak on the dates of that flex-tension idea that was doing the rounds last week. If they were to leave earlier, the dates being tabled now on November 30th so effectively an extra month or an extra 2 months, that being December 31st, the end of the calendar year. That's only contingent that both sides ratify the divorce deal in time, of course. Just so you're aware, in terms of any forthcoming headlines, EU diplomats are due to meet local time at 10:00, so 9:00 AM London time, in about 40 minutes or so to discuss the proposal. So do be mindful of looking out for any comments or tweets that come out over the next course of a few hours. Before then, Boris heads to Parliament later on this afternoon. I would imagine, given normal proceedings will be kicking off at around 2:30 onwards, so probably late afternoon. The baseline expectation here is that he does not and will not have enough votes to support his motion for an early general election. Why? Well, Jeremy Corbyn reiterated on Sunday that he would not support the government's bid for an early election on December 12th unless a no-deal Brexit is completely ruled out, and that's not going to happen as far as Boris's current stance. The other thing that you might have read at the weekend was that the Lib Dems and the SNP, the Scottish National Party, presented a proposal to secure an early election via an amendment to the fixed-term law, which could be passed by a simple majority. The two parties, both strongly of course in favor of staying in the EU, offered to back the bill, i.e., give Boris his request of an early election, but only if the date was set for the 9th of December, which would be 3 days before Johnson's preferred date. And that also, one interesting part there, particularly given the demographic kind of composition that it's generally younger people that would support this notion of revoking Brexit— that December 9th would then allow students— obviously that demographic key of 18 to 24— of being able to vote whilst they're still at university, which is likelihood where they're registered, rather than when they've left, which would be when Boris has tabled for December 12th. It could obviously have a meaningful shift on the end result if that was the case. The idea, though, is that already that Lib Dem and SNP proposal has been pushed back already by Labour. Without Labour, it's unlikely that that's going to go ahead either. So that's kind of where we're at, uh, at the moment with, with this. As I said, keep an eye out for any commentary out of Brussels on their draft proposal, and then you've got the House of Commons vote on an early election later on today. Moving on then, a couple of other headlines to be aware of. If you're looking at the FTSE 100, HSBC shares opening down about 3% this morning. This was the, the general takeaway: they posted a profit that missed analysts' expectations, they abandoned a key target for returns, and flagged a significant restructuring charge as it contends with the worsening global outlook. So HSBC shares down the open. And this was the other one that's probably going to get a lot of airplay if you're watching US televised financial channels later on when, when the Americans come in. That's because Louis Vuitton owner LVMH is to bid $14.5 billion for Tiffany. Would work out about $120 a share. And this is lifting all luxury names across the board. So Burberry getting a bit of a lift this morning. This morning, uh, and other names associated. Pandora also up about 2.5% this morning. Um, talking of earnings reports, here's the main companies reporting, just to give you a, a broad brush assessment of the top names to look out for if you're looking at index futures. There are 156 S&P companies reporting, 6 out of the 30 Dow components. So pre-market today, the main ones to look out for: AT&T. Aftermarket, you've got Alphabet. I also would be quite interested to just see, just given some of the recent focus with IPOs, what Beyond Meat earnings come out as, given they were such an awesome performance when they first started trading. However, they pulled back quite violently since that time. So from a sentiment point of view and recent IPOs, I'm particularly interested in Beyond Meat after the close today, and Pinterest also reports after the close on Thursday. The other bigger market cap names, pre-market Tuesday: Merck, Pfizer, General Motors. Aftermarket, the likes of Amgen and AMD. Pre-market Wednesday: General Electric. Aftermarket, the big tech guns then, Apple and Facebook. Pre-market Thursday: Altria, probably one of the main names with Kraft Heinz. And then on Friday you've got the oil majors ExxonMobil and Chevron all coming ahead of the opening bell. This was one of the other things just quickly wanted to share. I did tweet this, so it's available on my Twitter handle below here that you can see if you'd like to see it in more, more detail. I'm only sharing it because very rare really you get a news agency update there, Hawk dov kind of matrix. And this does come with the Bank of Japan interest rate decision, which we're going to get in the very early hours of Thursday. The Bank of Japan, uh, some outside expectations that they could cut rates further into negative territory, but the baseline is that they're set to lower its forecast for economic growth and inflation this year in a quarterly outlook report that will be released at the end of their policy meeting on Thursday. So we are expecting more dovish signals coming from them in their assessment about the forward-looking future. So that's, that's pretty much it from my side. In terms of European and UK earnings to be aware of, aside from HSBC, you've got BP on Tuesday. You've also got GlaxoSmithKline, Bayer, Volkswagen, Total— so some of the biggest European listed names on Wednesday. You've also got the French pharma Sanofi reporting on Thursday. So, yeah, lots to go at in the calendar from an economics point of view, from earnings point of view, from a rate decision point of view, and politics with Brexit front-loaded with the PM motion for an early election later this afternoon. We're looking for confirmation extension, but all looking but inevitable. That will roll on. I must mention that of course this Thursday is this symbolic technical expiration of Article 50, but I can tell you now there will not be no deal disorderly Brexit, as I've said all the way from the beginning. I've never thought that was going to happen, and we're likely to see that become reality with the can kicked again down the road going forward. All right, thank That is it from me for now. I wish you all a great week ahead. I'm going to hand you over to Sam and he can look over the charts from a technical perspective. Thanks very much.

Yeah, good morning guys. We'll have a quick look over the S&P to begin with, as of course you can see when I put this on the daily chart, we're going to see All-time highs have been reached yet again, an incredible market, uh, just to continue pushing up and up and up. And of course, with, uh, an interesting week ahead, certainly data-wise and Fed and so on, probably worth bringing on the, the trend channel again just to see if we were to have a positive week where that would come in. And, and here you're looking at what would be the fourth real big test of this point point going back to the all-time highs originally back in January last year, and then September, October before that, and then again beginning of the summer this year. If it was to come in this week, I mean, you're looking to come in around 3057-ish, give or take a couple of points on the futures. So one to bear in mind that if we do get up there Uh, just the reaction every time has been strong, uh, met with good selling, good profit taking. So I would absolutely have that, uh, marked up as well. All-time high that we've reached is only a small one because he had a good push on Friday evening as well. So looking at potential points to get back in, I mean, you can see just the importance of— if I draw this rectangular area around 30.15 on the pivots on the hour chart. You've got the highs from the 22nd, both morning and afternoon, the afternoon of the 24th, and could be a good area where it's— where people would be looking at to get in. However, that's 10 points away from where we're trading, and it's going to be— if we just have a quick flick back to the calendar, it's very likely to be a quiet one today. Day, as has the last, what, 3 Mondays. So I'm not expecting too much to really happen. If we come back to that area though, I'd expect a decent reaction either way to take place and could be a good area to get in for a long again. Whether we get down there or not remains to be seen. The DAX has already done a pretty much a full reversal from its push initially at the open. We're now pretty much back to where— down to where that is. Um, quite nice support. You can see from, uh, the, the lows on, on Friday was also the initial high from the 24th, and the high from the 17th not far away from that as well. Of course, at the higher levels we've seen for quite some time, so we're keeping a watch what happens if we were to get back down to, to any of these. The Friday evening low has acted as good support this morning, so obviously that's a pretty important level to, to have marked up. But up and down as quick as you like. Not too much, uh, in the way of movement as, uh, has happened in terms of actual direction. The DAX, uh, obviously we've just gone through there. Eurostox finding support on the pivot, so we're keeping an eye on those previous lows back above there, and you'd be confident that this market could continue to, uh, drift higher. But again, not expecting too much here for these markets, but worth having this trendline on here in Eurostoxx as a bit of a guide going forward for the day and week. If you were to get another test, you know, a push lower could, uh, could be quite interesting. The pound, you can see if we put this on the 240, just up near where we're trading, it's, uh, let me just remove those lines. You can see the, the triple top, or whatever way you want to look at it, uh, from the pre- beginning of the 17th over to the 22nd, which couldn't get above a confirmed day really breaking above 130. So since then we have drifted lower. Trend line worth having on from the high of the 22nd to the 24th could potentially come in today along with the highs from yesterday and the R1 of— well, yesterday's and Friday as well. Quite a good area of support starting to form a base as well, and you can see see if we were to get through there, then it could sort of open the door up to a further move lower. Looking more intraday, just at that trend line and where that would come in, you'd imagine there would be at least a decent reaction either way because you have the Friday high, you have the R1 that we've already had a bit of a test of, and of course that trend line as well. So coming in on the futures around 128.80, uh, a few pips either way, certainly an area I would look to consider, uh, to have some sort of trade opportunity. Over the last couple of trading days, including this morning, we have just started to, to trend and, and get squeezed to the upside. So worth having this trend line on for a potential move lower. However, again, Monday, it's likely to be pretty quiet one. I wouldn't be rushing into trades either direction, to be honest. Now we'll do, uh, the longer term charts as as we go through, uh, into the sort of middle part of the day when we release the strategy. But I'm not expecting too much. Euro, you can see, has found resistance, albeit to just chop through a tiny bit on the low that we had on Friday. Uh, pretty decent level around there. I also like the R1 today should we get up there. Uh, whether we do or not remains to be seen. You've got the low here from the 23rd, some nice decent, uh, price action from Friday, and of course the R1 as well. So something just to keep an eye on. And the low that we had Friday, a decent level, uh, from the low of the 17th. And actually, each time we have had a leg lower in euro, you can see from the, the sort of last few days, we've always found some nice support technically as well. You see the low of the 23rd, also the 17th, the 24th, the high of the 16th, and like I said, Friday being the low of the 17th as well. So reacting quite nicely all around there as well. Quick look over at gold and oil to wrap it. You can see, uh, gold this morning relatively choppy in trying, trying to choose a direction. The, the low that we had back on Friday, nice sort of double bottom, so an area to keep an eye on should we get a push to the downside. The pivot and some of the breakdown area from Friday also acting quite well at 1510. We are just perhaps having a look at this trend line. It's worth having on, I would say, from Friday afternoon evening low to this Asian session low. And again, a nice little test just, uh, 15 minutes or so ago. So I keep a watch on that for a potential push down to 1503, uh, for gold to pivot a key level to the upside before we look at, well, 1513 and probably more importantly Let me just get that right, 1513.9 as well. Oil to wrap it, you can see relatively quiet this morning as expected. Decent push in commodities all round last week, obviously copper, silver, gold loving life and pushing higher. We're now— oh well, on Friday we touched 56.87, almost get to a 57 handle pivot, reacting as a bit of support this morning. But you will, of course, with these moves higher, have quite a lot of support in terms of where the buyers have taken over before that I'll be keeping a watch on. If we were to come back down to any of these levels, you'd expect a decent enough area to get long. I think for the commodity push, I think it's, you know, could continue to, to go higher. But just with the quiet nature of Monday, rather than getting too aggressive I'd look to be buying lower down, I would suggest, unless you were in the afternoon, right time of the day to get some decent pushes. And for example, for oil, that could well be if we were to have some sort of trend line appear like this, that you do get that kind of push like that to happen. But at the moment, relatively quiet, not much going on, um, across the board. Euro Stoxx and DAX is coming down a touch again, keeping an eye on Euro Stoxx on that pivot as it may just help the S&P drift lower as well after hitting that all-time high. Any questions, please, uh, do let us know. We'll get that strategy report out as well. But I hope you'll have a good trading day and good week ahead.