The Trading Week Ahead: 30th Sep - 4th Oct 2019

Okay, very good morning to everyone. Hope you are well. Good to be back having had a week off the desk. So both Sam and I, uh, back on the briefing this morning, and good to be here. So it's 30th of September, last trading day of the month, which obviously brings about usually some interesting market movement potentially. Uh, as it's also marking quarter end as well. And we're going to talk a little bit about repercussion that could have also on the repo market, which is likely to be back in the headlines later when the US session gets underway. But usual routine, gonna look predominantly at not just today's session and some of the overnight and weekend press coverage, but also what's on the agenda for the week ahead to give you a bit of a sense for how the how the landscape looks like over the next 5 trading days. Particularly interesting, of course, because as I've been away and having been in America, obviously I'm aware, having seen a lot of the news out there about this push for impeachment of Donald Trump to do with the collusion talks and so on that's been happening with Joe Biden as well, and how all of this is playing up, of course, as we go into the 2020 run. So you're going to be expecting lots more of this type of political shenanigans both sides of the Atlantic this week, because obviously the other thing over the weekend, of course, was more, um, mudslinging at Boris Johnson, the UK Prime Minister, this time about squeezing not just one lady's thighs but two at the same time, uh, in a Trump-esque fashion almost. Him also saying that he wouldn't resign after he said he'd rather die in the ditch just a few weeks ago. So lots of political movement at the moment, of course, happening, um, on, as I said, both sides of the pond. So we can have a look at that. And this comes at an interesting time for UK economic data. We get the PMI sequence, so manufacturing, of course, from the UK will be interesting to see whether or not we have any type of degree of renewed front-loading ahead of what is the deadline, as it stands at least at the moment, irrespective of UK legislative law change on October 31st because of what some of the things that Johnson's been threatening, whether that materializes or not, definitely not expecting that to be to the same tune as what we saw at the beginning of the year when we saw a large Q1 activity ahead of the initial March deadline. Given now the oversupply or the inventory situation of most firms, I'd say any read, read through into that recurring again is probably limited. And of course, the service sector number, and we'll be looking out on Thursday alongside the European numbers as well, which is obviously going to be interesting. And then the party conference, of course, the Conservatives started yesterday. That's going to be going on Monday, Tuesday, and Wednesday, which will finish, of course, with the Prime Minister giving the kind of closing speech. But I guess you can expect further almost polarisation of UK politics with the usual hard language being used, of which Boris has been criticised over the last week or so of having continued down that route. But that's kind of his main— and particularly with Dominic Cummings, of course, advising him— the main route as he continues to gear up for this almost inevitable general election, whenever that might be in the coming weeks and months. So that's the kind of overall gist of things. I'm going to leave my look at the charts very brief because Sam can do that, all these charts removed of any technical analysis. I'll let him go with that in more detail. As far as sentiment is concerned for the market open, relatively muted. There was a little bit of a gap open in the overnight session, perhaps a little bit of relief as Trump officials played down reports of China investment limits, which were some of the headlines that were hitting in a negative sense for the trade talks at the end of last week. However, that hasn't really lasted too long, as we know there's probably going to be lots more twists in the, in the storyline for the trade talks as we go through the week. And so any gains that were seen have been relatively limited. US stock futures marginally positive, the European side a little bit negative in that sense. Uh, the DAX future here center left coming back down towards pivot to pretty much close the gap, um, back toward Friday's close in Eurex trading. Not forgetting as well there is a German holiday happening this week as well for Unification Day, uh, later on in the week. Otherwise elsewhere, WTI crude a little bit lower, perhaps some conciliatory tones being heard from Saudi Arabia at the weekend. An interview with Mohammed bin Salman basically suggesting that they do not want military confrontation with Iran. So oil's just backing off a little bit after having found some resistance overnight. The pivot level on the futures down $0.20. Gold kind of hugging the $1,500 level at the moment. Did see a momentary break lower as Europe came in, as we broke through the Asia-Pacific low level. However, we have recovered that since. Uh, trading down about $7 at the moment. So going back to the calendar, um, as I said, Sam will go over the charts in a moment. And so looking, uh, through some of the highlights here, you can see Monday kicking things off, Chinese manufacturing data. Now what did that look like overnight? Well, China's factory outlook sector improved in September, an uptick in new orders and infrastructure spending but with data still showing factories are contracting. So it's almost kind of one of those things where, uh, this PMI reading, obviously the 50 level, the sweet spot for manufacturing, whether in contraction or expansion territory, and still in, still in contraction, but services slowed slightly but still expanding. Um, more positively though, if you start looking at these on a, on a graphic where you can see the manufacturing is the white line, non-manufacturing the blue line, obviously the outlier much firmer New export orders is the purple line and the orange line is new orders. And so you can see here, importantly, a little bit of a bottoming out of sorts. And again, this hence the reason why Bloomberg leading with the headline about a positive outlook, having got over that trough that we saw as the trade wars continue to be the main significant weighing factor on the local economy there. Going back then, the other things are we've got this afternoon the US Chicago PMI. That obviously will be key. If you actually look at the US data set throughout this week, you've got Chicago PMI today, you've got ISM Manufacturing on Tuesday, you've got US ADP on Wednesday, Factory Orders and ISM Non-Manufacturing Thursday, and all of this obviously culminating in Non-Farm Payrolls on Friday. So Very interesting week, of course, for US data. The activity data in particular is one which we've been watching quite closely because that has been the weaker kind of side of things as far as US economy is concerned relative to how the consumer has been performing. And then obviously the jobs data has been declining over the last couple of months. And I think when I looked last night, the, the numbers expected around 1.45 for the headline change in non-farm payrolls and and subsequently why the Fed have been in this mid-cycle adjustment, having executed now 2 rate hikes off that initial peak that we had. So yeah, going to be an interesting week for that, overlaid of course by further focus on the US political side and the pressure that Trump's been under and so on with the latest move for impeachment. Of which I must say, I'm quite surprised. I mean, I wasn't looking at markets too intently last week, obviously having been away, but I understand the market did react quite negatively, at least in the short term, to when that news came out, but I'm still absolutely confident that there's no way Trump will get impeached. I don't know why people get so fanatical about this idea of a Trump impeachment. The fact that it's come now, I think timing-wise, is completely not surprising at all, and I'd expect more things like this to materialize as we go through the next 12-18 months. As we go into that 2020 election. But the fact that you would have to have quite a large amount— I think it's 20 Republicans basically cross the floor and vote with the Democrats in order to get him impeached— it's just not gonna happen. So I don't know why people get so, so surprised by it in that sense. If anything, it's just a better opportunity to get in a lower pullback, at least in a medium-term perspective. The one thing actually I think that it— I actually think an impeachment of Donald Trump in the way that it's come about at the moment, I think actually is a positive for Trump. If you actually look at the opinion polls, Trump is as popular as ever since he came in as US president. And if anything, I think this regalvanizes his base by criticizing Trump. It gives him more firepower to to just talk ever more kind of explicitly about the usual things that he does. So I actually think it's almost counterintuitive of the Democrats going down this route, but that's just my view. Um, moving on to the headlines then, and we can circle back onto the calendar at the end. Some of the other things then I've mentioned already is this Trump officials playing down these reports which circulated at the end of last week, which obviously put a bit of a negative finish to things. Now, just to recap, we heard last Friday Bloomberg sources— I think it was citing Kudlow— are saying that options discussed have included forcing a delisting of Chinese companies from US exchanges, imposing limits on investments in Chinese markets by US government pension funds, and putting caps on the value of Chinese companies included in indexes managed by US firms. So again, it's like another dimension, if you like, or evolution of the trade talks. And what's happened is the usual way of which these trade talk stories tend to develop. You get the initial source comments, which damages market sentiment short term, but then it gets managed effectively by the administration to ensure that any fallout is limited. And so it's almost been unwound to a certain degree. And this all, of course, coming ahead of quite key top-level talks over the coming weeks between the two nations. So the Treasury denied the China delisting plans at this time at least. But of course, as always, you know, no smoke without fire. I firmly believe that the administration would have drip-fed this in just to let the Chinese know what they're thinking, as kind of wagging the stick for the trade talks that of course are ongoing. Separately, on the, on the US side, Reuters exclusive at the weekend was suggesting that the NASDAQ are cracking down on initial public offerings of small Chinese companies by tightening restrictions and slowing down their approval according to regulatory filings, corporate executives, investment bankers. So again, further other ways of which they're just looking to put the pressure on the talks which are coming up in the, in the coming weeks. Trump to intensify on the impeachment inquiry. Trump remaining defiant. So we've already discussed this, so we'll move on from that point. This was one of the other things to be aware of specifically for today. I would say this is kind of dropped off the, the priority list, if you like, of potential short-term catalysts that could cause negative almost sentiment and volatility increase for intraday markets. That's because the, the way of which the Federal Reserve Bank of New York have gone about dealing with this liquidity squeeze in the money markets in America over the last kind of 3 to 4 weeks by just basically injecting large amounts of liquidity through short-term overnight kind of lending facilities or open market operations. But one thing to be aware of is the 2, 5, and 7-year Treasuries that were auctioned last week by the US government are settling today, and today of course marks the end of September and the quarter, which typically tends, tends to see spikes in these overnight money market rates. And so definitely you could see this draw a little bit of attention as we go into the afternoon. I think overall though, from an intraday trading point of view, I don't think the markets will be as spooked as we were, given the fact that again, I think the, the US Federal Reserve are going to be looking to add copious amounts more of enough liquidity to facilitate any disruption in the short term. But something to just be aware of, of course. In the oil market, I did mention that oil is a touch lower this morning, down only about 14 cents, relatively flat, trading just below the $56 handle and pivot in the futures market. But comments out of the Saudi Crown Prince MBS at the weekend, who said that Iran war would bring down the global economy. Oil to hit unimaginably high numbers if country was to go to war. I guess the reading between the lines of some of the text from the interview, the main point being is, is he generally looking to calm the situation, which of course have been tensions growing following the attack that we saw on those oil installations and infrastructure in Saudi Arabia from Iran about 2, 3 weeks ago. The fact that that was threatening to escalate seems to have died down a little bit at the moment, but we'll see how that plays out as we go through the week, of course. And then one headline from this morning I did see come out that we have shared on our Amplify Twitter feed, but continuation of changes kind of in opinion of how the DUP are positioning themselves in UK politics. Having heard that they could be open to some kind of compromise about how the government could deal with the Irish, the Republican Northern Irish border. However, they seemingly have hardened that stance once again. Their leader Arlene Foster warning the Tories she is not prepared to see border checks in the Irish Sea. So this would be another—

I'm not sure I understand.

It's gonna be another blow to Boris Johnson, who's already seen several over the last week on a variety of different fronts. So it certainly puts the pressure on him as he goes into this Tory Party conference. Usually this is a bit of a, a kind of a parade, if you like, for the existing government leader. However, this is quite the opposite. He goes into this very much so on the back foot. So it's gonna be interesting to see how this plays out. Is anything he's going to say really substantially though move the pound in an intraday respect? I would say unlikely. I would see him continuing down the usual rhetoric, and if anything, I would say that just continues to see cable consolidate around these lower levels. If I start just having a look at the chart briefly to see what the potential range could be as this conference goes on over the next 3 days or so. Let's just bring out the time frames a little bit. Well, let's go to a daily continuation. I mean, we've backed off already quite, quite considerably, 3 points or so off the initial highs that were seen, uh, only about 10 days ago. And so I don't really see— I mean, that's quite a decent technical level we're at at the moment already. So some consolidation around here. Any break lower, perhaps another push down to around the 122 handle. But I really don't see it doing too much more than that at this moment in time. Any calls of, you know, his resignation are likely to fall on deaf ears. I think there was a report in the— I can't remember— an online news agency talking about the Queen, apparently apparently has been looking into, is it, is it possible to fire Boris Johnson? But again, I think all of this is just the media having a bit of a fanfare at the moment just because it's good headlines to make. I don't see any real massive changes happening at this point in time. All right, finally back to the calendar to wrap things up, and then I'll hand you over to Sam. Um, the other major things then to have a lookout for are the RBA interest rate decision. I think the consensus still remains for, for rates to be at 1%, but on the balance, obviously a lot of these antipodean central banks leaning on the side of interest rate cuts. And so accompanying language will obviously be particularly important if they decide to hold rates. And then you've got the Chinese holiday throughout this week. I think it's celebrating the 70 years of the Communist Party. So the overnight trading conditions are likely to be fairly tame given that they will be out of the market. You've also got the German holiday as well for their unification day. That's happening on Tuesday, so that's tomorrow. So as I understand, the, the German markets will be closed. And then as I said, you've got the non-farm payroll reading will be the, the final kind of highlight to see off the week. You can access this calendar. Sam's going to sent it out in the weekly strategy. Also tweeted it for my account. You can see my handle below there on the image on the video screen now. But otherwise, I wish you a good week ahead. Sam and I will be on the briefings as per usual every morning. Any comments or any questions that you have regarding this session or the week ahead, feel free to leave a comment on the video. We will do our best to reply to everyone as and when we can. All right, thanks very much, guys.

Have a good Hi guys, hope we're all doing well, good weekend. I'll have a quick look over— we'll start off with stocks. As Anthony Cheung was saying at the beginning, obviously the last trading day of the month and quarter, so be interesting to see where we finish, well, the quarter itself. The S&P, you can see here on the future. Just bringing that into, into the chart now. You see, it's pretty much exactly where it opened, uh, the quarter. So whether we can get an up or down one may, uh, certainly be pivotal, pivotal going forward. And I saw a stat earlier about the S&P, um, the, the year before an election, it— October returns, uh, for the majority of the time positive. So October proving to be a good year, a good month the year before the election, except for 1987 where it was down 20-odd percent. I'm not sure we'll see something like that, but it's having a look closer to where we are trading now. And just gonna bring the pivots on to give us a bit of a bit more feel. You can see obviously we made that attempt at trying to make another high, and since then it has just drifted lower, I would, would start to, uh, to get a bit of a trend from that as a, as a guide. And this might be something, you know, later on or, or never at all, but just as a, a point of interest, if we can this, this week at all get back up to this trend line from the, uh, the high that we made on the 19th, uh, then this would be something, uh, I'd like the look of if it was to break through. And, and then really from a sentiment gauge as well, uh, I'd imagine we are— would be starting to to drift higher. However, you can see over the last few sessions we have been met with, uh, some decent pushes lower, certainly following the cash open. Here you can see this starting on the 20th, then the 24th, and again cash open on the 26th, and then again, um, from the 27th. So some decent pushes to the downside, uh, leaving us at the moment around 50 points off that all-time high. So some strong selling coming in into the, uh, the cash open. Is that all for now? Well, as long as we stay below that trend line, fine, I'd be bearish. But above that, I think we could see a decent, you know, attempt again at going higher. To the downside, you can see the low that we made on Friday. It's going to draw a line up on that and just drag this now above the, the camera. You can see the importance of it as a good line in the sand, the, the highs that we had back on the 30th. But remember this whole zone that we had that was just so, so important around 2946. We finally, finally got back down to there on Friday. I know certainly once we had broken up— and here we're looking at more at the beginning of September— it would have been a great opportunity had any of these days come back down to it. But the first retest of that level has been met with a 30-point bounce. So a really strong technical level, good line in the sand to to the downside if that was to hold. Um, well, it is holding, I guess. And, you know, really good level support. And that trend line to the upside as well would be my kind of lines in the sand for the week going forward. And of course, just bear in mind, as we were saying, it is the, uh, quarter end, uh, for this product— or market, I should say. In general, S&P pretty much flat. The Dow Jones is up, uh, a bit more, whereas the NASDAQ is slightly down. The last quarter, uh, that we were had down for the NASDAQ was, uh, Q4 last year, of course, where we entered bear market territory. But, uh, seems a long way away from that now. Uh, having a look over to the currencies, euro, um, I was having a look this morning just at the, the charts, obviously, as where Anthony saying we were off last week and just how good an opportunity this was here. The, the previous low of the, the 23rd came back, got the pivot, and it pretty much hit it to the tick. And we've drifted down since then, similar to the S&P in, in that this where the, the previous highs have been getting lower. Probably look to have a trend line on that as well just to see, can we go, can we get the third test of it at some point? But this is a guide going forward. As well. To, to the downside, obviously you can see we found a bit of support already this morning and just struggling to get through that. But I'm more interested in just a bit below there. On the futures, it's coming in at 109.86, give or take a couple of ticks. It's the low that we had back on, on Thursday. Good price action then on Friday morning and then to the afternoon as a good solid level of support. If we were to get below there then I like the idea of us seeing Friday's lows again, which you can see along with Thursday. We just couldn't confirm that breakthrough. Putting it onto that longer-term chart, you can see as well, if we were to get down to those levels, uh, it could get quite ugly again. Um, but the euro, as we just traded this morning, has found good support on that low. So keep an eye on that and that trend line as well. I would to say. A break above that trend, you know, while you have some decent resistance up at the high from Thursday along with the R1 and that previous low as well, I just bear in mind how we would get there. So if it does get that third test in the trend and a strong push higher, you know, it could be the cue not to necessarily look to go short unless we were to get higher up. And, you know, R2, uh, 1.1050 around this area does look quite promising. The pound as well, over the last few sessions, has been drifting lower and lower. And similar to the euro, in that we have— let me just put this onto a 60-minute— a similar situation where we are just coming up to potentially test an area where these trend lines could be. So similar with the euro, just keep an eye what happens around this trend line as well. You could argue the same to the downside. We're just starting to get squeezed from both directions a break either way could be, uh, relatively interesting. But the pound is having a decent push above the pivot this morning. Uh, next real key area, this trend line, and of course the highest from Friday afternoon around the R1 as well to keep an eye on. Putting this on a quarter chart, no surprise to see, uh, obviously a down month. We hit that famous 120 level to have a decent bounce and you You can see, uh, we're just struggling to confirm a push higher above, you know, this what was a key, key level of support, certainly on the quarter chart anyway. You can see, uh, we would need a very strong push to get us above there, which would be incredibly bullish technically. But below here, it wouldn't be surprising to see some further downside to come. And of course, the euro, you can see here, you know, trading on levels not seen since April 17 as well. So the dollar pair is under some pressure overall on the bigger, the bigger picture. Let's have a look over now intraday over at gold. And we will of course go over these charts longer term in the strategy that we, we send out. You can see a decent push lower that we had on, on the 25th, 5 days ago, and back, back towards that 1,500. And every time uh, at the beginning of the month we were just talking about the importance of— it was around 1492, I remember, give or take, uh, just that level. And you can see if I put this above the camera just how many times we've come here and found such strong support. Of course, this being the Fed, uh, low from the 18th, really strong push higher, and we're now coming back to test that whole level. The dollar is obviously strong, uh, you know, overall as well, which could lead to a bit more of a correction lower. Just putting this on that longer term chart now, and you can see the importance of that level. So if we were to get a confirmed break and close below 1492, might not be much stopping it towards back down to 1460. You can see a really strong previous level resistance before the break higher at the beginning of August. Just the whole level here, 1492, very, very key. Where would I be happy, uh, to, to get long? Where you can see the perhaps the importance of the high that we had, uh, back on the 24th was also this breakdown area, uh, around here. So 14— 1543, I should say, uh, pretty key. Are we now into a new range? But every time we come 1492, met by a good support, uh, just furthers the idea that a break of that could be decent push to the downside. Oil finally made that gap, filled the gap, didn't it, last week? Or, well, you can actually see here on, on Friday, took a while, of course, after the, the big push higher a couple of weekends ago, but we have now filled that. And, well, I mean, that's the, that's the key level, really, $55 to the downside. You can see the importance once we hit that on Friday, decent pushed lower. Just putting this now onto 60-minute, and you can see really struggling to get, uh, above after we broke through the low of the 24th. Uh, we just struggled to really confirm a push higher each time we've come there. It's almost the opposite of gold. A break above that, then fine, I wouldn't mind a, you know, a decent push towards $5,737. So basically the, the previous highs of, of the end of last week, really important. And of course, $55 to the downside. Those would be the key levels that I would be, uh, be focusing on more, uh, medium term and short term really as well. We'll go over these longer term, uh, in the, the strategy that we send out. Let's have a look over at European stocks for the last day of the, the quarter as well. Gap higher, almost filled the gaps. Keep an eye on that pivot. Relatively small range though, has to be said, uh, so far for for the, uh, the DAX. And worth just having a look here, let's see if we can get a bit of a trend line on as well, which will come in at the, the same price as the pivot as well. So certainly one I'd have marked up there for the DAX and European equities as well. Any questions, as usual, please, uh, do let us know. Strategy report be out around midday, so even any questions to that as well, please do let us know. Hope you have a good trading day and a great rest of the week.