This Week In Markets: 16th - 20th November 2020

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at Amplify Trading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin.

All right, very good morning, hope everyone had a fantastic weekend. It's Monday the 16th of November, just going to have a look around the markets, not only just a review of what's happened over the weekend and news to be aware of, but also an outlook for the week ahead from a fundamental point of view. So I'm not going to spend too much time looking at the charts directly. I'll save that for the guys on the livestream on Amplify Live. But just to give you a general overview of sentiment at the European market open and equity index futures up quite sharply again in the overnight session. A combination really underpinned by a few different things. Obviously, a lot of people still looking out for further vaccine updates, which we're going to talk about in a moment. We've also had Joe Biden's team talking about the fact they want to avert any type of national US-wide shutdown. And there's been some news overnight out of Asia about the largest regional free trade agreement that we've pretty much ever seen. So equity index futures higher, Asia indices following suit. So just having a look around the markets here, and I just want to start with the, the NASDAQ first of all, actually, because just looking on a, on a technical perspective, not only have we broken out of what was kind of the top end of a range of which we were trading in the futures last Thursday going into the overnight Friday session, so a kind of gap up breakout above that in the recommencement of trade. No kind of stacker was stuck around that point during the Asia-Pacific session, drifted perhaps just slightly lower down to the bottom end of that, that band of price activity as UK and Europe have come back in. But interestingly, I've just got a Fib retracement on from the initial spike high that we had on the Pfizer. This was following on from around the timings of when the market was just before the Pfizer news was breaking, which was this volatility here. So just prior to that, the start really this time last week, um, from down to the low that we hit the day after the Pfizer news on that kind of very short-term rotational play that was touted for hurting the, the tech stocks at the time. Although a lot of that's been kind of taken back, that's given us a framework then for up and around the 618 on the retracement which is pretty much to the tick of what's just restricted some of this price activity on this recovery here. You can see on 3 occasions. And so that's the S&P, uh, the NASDAQ 100. Just going to have a look at the S&P as well. If I just move this back in. So for the S&P, got to put it on the daily really to look in context. Um, there's the big Pfizer jump you can see just here on the left-hand side, but on daily That was that huge extension on that wick when that vaccine news came out last week. And, and here we are again now, managing to open up on the daily chart quite a significant technical level. We found some resistance back at the end of last week on Friday at the previous all-time high, which was seen in around the 3586, 3587 type area. We opened above that and we've just pushed on. And so That initial Pfizer blip high was seen at 3668. We're currently trading up around 29, 28 points at the moment at 3610. So firmly through 3600 once again for the S&P. Um, quick look in the other asset classes then. T-notes are pretty flat overall. Oil just been grinding up to the top end of what was a bit of a range of restrictive price action that we saw towards the back end of last week, uh, around 4080, but has moved higher in the overnight Asia-Pacific session just with some of the stuff I've just been talking about from a fundamental perspective in play. The currency markets then, in step, the dollar weakening overnight, and we were down about 0.2% in the dollar index. So both major pairs are elevated, um, in EURUSD 16 and Cable 30 pips. Cable seeing a bit of a rejection from, um, technically an area of resistance that we saw. This would have been Wednesday going into Thursday overnight session. You've also got overlaying that the R1 on the daily pivot levels in the futures, and the market just rejected it up and around those highs and drifting back down now as European players come back into the market. We'll talk about a few things on Brexit. Boris Johnson also self-isolating after being exposed, according to the track and trace system, to someone with COVID-19. Perhaps a bit of a hindrance to what otherwise has been quite a shake-up in government, with Cummings obviously being asked to leave rather than see through his, his, uh, his kind of term through to the end of the year, was what was originally planned. Elsewhere, gold just giving up some of the overnight gains here more recently, just as the dollar has come off its lowest level. Um, but relatively, just looking at it at the moment, gonna look for an area of kind of a support zone really at around $82 to $85. Uh, this was the previous kind of areas we were looking at the end of last week. We've obviously broken above there on Friday, and now that might provide a bit of a platform to help support the price if we continue to pull back. But we're back to flat in gold futures essentially now. Just coming up to 7 AM here in London. All right, let's get stuck into the news then. I really want to give you guys a kind of an update what's going on and what are the main things to look out for this week. And this was one of the, the first things was why is the market up this morning. Now one of the things I was looking at at the weekend was a lot of people anticipating what approach is Joe Biden and his administration when they come in going to take, particularly on the issue of COVID-19 and subsequently the impact that that could have on the economy. And what this article was basically suggesting is that two of the president-elect Joe Biden's coronavirus advisors said that they were in favor of targeted local measures to stem the pandemic as opposed to a nationwide US lockdown, which they saw as too blunt an approach. So remember, a lot of people were a bit apprehensive about Biden. He had said before, and remember when a lot of those televised debates were happening, about the fact that he would just lock down the entire country. As I said at the time, I always thought that that was very much a political statement, something which he wouldn't follow through with given the impact that that would have on the economy. And this is kind of what these press reports this morning are suggesting. But the market taking for sure, probably a degree of relief on the back of that, because as we know, any type of national-wide lockdown would have severe repercussions in terms of the economic recovery and would, would enhance that prospect of a double dip kind of recession idea. So that's, that's definitely one thing. The other side of things has been this coming out of Asia. So Asia-Pacific nations including China, Japan, South Korea are overnight basically have signed the world's largest regional free trade agreement encompassing nearly a third of the world's population and GDP. So a bit further context then. Supporters of the trade pact— it covers around 2.2 billion people with a combined GDP of over $26 trillion US— said it would bolster pandemic-weakened economies by reducing tariffs and strengthening supply chains. With common rules of origin and codifying new e-commerce rules. So yeah, quite, quite substantial news there coming out of Asia. And as mentioned, then that's another reason for why we've had quite a positive movement in markets across asset in the overnight session. Separately, overnight and as well over the weekend in China, some economic data— industrial production came out year on year at 6.9%. Expectations were for 6.5%. Their retail sales number, a touch soft, but overall still fairly consistent in that respect and picking up on prior readings. We talk quite positive though. There certainly is something which is more negative that needs to be monitored at this point, and it's something we talked about a lot last week, and that is the developing situation of, of COVID in America. So So at the moment, the market is kind of in this short-term state of positivity on the things I mentioned. But still, the biggest risk to this on a sentiment basis and therefore price is going to be the, the kind of rate of which then death counts start to rise in America as a byproduct of the increased number of cases that we've seen, and then ultimately what type of measures do get adopted by the US. So over the past week in the US, there have been an average of 145,712 cases per day. That's an increase of 80% from the average just 2 weeks ago. Case numbers— the case numbers up 80% comparative to 2 weeks ago. There's been more than 1,200 deaths reported as of Saturday at the weekend. Pushing the 7-day average to more than 1,120 a day. That's a 38% increase from 2 weeks ago. But remember that as we were talking about some of the science and mathematics being run last week, there's approximate 3-week lag between deaths then behind that of the case count. If the case count's still accelerating as it has been, well then we can anticipate then that this death rate is likely, and this bottom chart here, not only going to supersede where we were during the Sunbelt breakout in the summer, but it's going to get back up towards this initial first wave peak, which was in excess of 2,000 at the time. Other things then to be aware of on the COVID side globally, in terms of on the, on the East Coast, New York City schools will remain open on Monday. Remember, that was a bit of a talking point at the end of last week about if it got to a certain level, they'd close down, but it hasn't quite got there yet. And that's so positive tests of COVID-19 haven't risen above that threshold for closing down. New Jersey reported a record number of infections for a second straight day at the weekend, just over 4,500. Meanwhile, stepping across the pond and over into mainland Europe, Germany have said they must live with considerable restrictions against the spread of COVID-19 for at least 4 to 6 months, according to the economy minister. And Austria's government has ordered one of the strictest lockdowns in Europe. An around-the-clock curfew will apply from Tuesday, with people only allowed to leave their homes to buy groceries, travel to essential work, or provide urgent care. So the most strict that we've seen basically adopted then since the initial outbreak that we had back in, back in March. As far as the UK is concerned, the case numbers on Sunday around 25,000, relatively in line with the 7-day kind of average. However, they do tend to be undercounted at the weekend, so numbers still fairly high in the case of the UK. That being said, as I mentioned, BoJo, uh, somewhat ironic, um, he's now self-isolating, uh, once again. Remember, he already had, um, contracted COVID-19 what would have been a few months ago now. But given his exposure to someone, he's now having to self-isolate, which comes at quite a pressing time for him politically, of course. Uh, quite significant restructuring in terms of some of his key strategic advisors given Cummings' exit that we saw at the end of last week. So it'd be interesting to see how that plays out as the week continues. Talking of then the, the virus, we've got to talk about the vaccine. And there's a couple of things I'm looking out for this week that I think could be important. And first off is going to be Moderna. They're likely to release their first interim results on their late-stage trials of its COVID-19 vaccine candidate. Experts have said Moderna's candidate, which uses a similar type of technology to Pfizer, will also likely to be or prove to be highly effective. The one thing I would say though is just given how markets have been moving of late and also it coming second to the initial surprise announcement and press statement coming out of Pfizer, I'd say that the Moderna update probably has largely been priced in at this point. Some other things to be aware of though is Johnson Johnson They're launching a UK trial of its experimental COVID-19 vaccine. It's the third experimental vaccine to enter late-stage trials in the UK, following the ones that have been done by US company Novavax and a joint one between University of Oxford and AstraZeneca. On Sunday as well, the French pharmaceutical Sanofi Aventis, their French chief came out and said that coronavirus vaccine developed by the company will not need to be supercooled, and a normal refrigerator would suffice, according to AFP News. So obviously that's quite an important point being explicitly made there by the Sanofi chief, given that's one of the biggest issues perhaps then to the logistics of the Pfizer shot, given it has to be stored in ultra cold, cold temperatures. Um, moving on then to other order of play, so Gotta talk about Brexit. We have obviously moved through what was supposed to have been a deadline, self-imposed somewhat, yesterday. There's obviously no deal as yet, so people looking further forward now as talks resume in Brussels today. Ministers— well, UK has hinted that Brexit talks could stretch out beyond this week, citing the environmental secretary. So they've already said going into a fresh new week that actually nothing might happen this week. And it comes after David Frost, the UK Brexit negotiator, has basically said that he was heading back to Brussels and the UK would not be changing its position in the coming talks. And obviously state aid and fisheries still the main stumbling blocks at the moment. I still stand by my view. I don't think they're going to get anything done this week. I don't in fact think they're going to get anything done for a number of weeks, not until we get down to around mid-December to late December when there is some of the final parliamentary EU gatherings happening. There was even an EU Parliament official over the weekend talking about— doesn't really see a deal happening until around that time, mid-December. So it's almost like the fact that they're saying that, if I was a part of the UK team, I'd be like, right, well, if they're willing to do that, let's take it all the way up to the end. I mean, this is just the general nature of negotiations. So, um, the exiting of Cummings I think does help. Certainly if I was thinking about the UK kind of strategy, I certainly would use that as a bit of leverage in these talks, saying that, you know, Dominic is gone now, so therefore, look, we can, we can, let's, let's start to move this forward a little bit. Good faith kind of talks on the back of getting rid of what is the chief architect of the overall idea of Brexit in the first place. I think that could be done as quite positive. I still think a deal will inevitably get done. It's just the fact that we need some kind of more definitive legal end date like the end of transition to really, I think, get this over the line. So I think you'll probably get some more updates as we go through the week, but again, I start this week as we started last week with pretty low expectations about the real outcome of how far these talks have progressed as soon as by Friday. Other thing I noticed in the weekend news, probably worth mention, is about OPEC. Ministers have focused on a postponement of 3 to 6 months according to delegates familiar with the talks who asked not to be identified. And that's in regards to eyeing a delaying— a delay in the supply boost which remember was supposed to come in in a staggered fashion. But with things like COVID-19 kind of picking up pretty much globally, uh, and then that going to result in various different lockdowns and restrictions, uh, the demand still looking pretty scant at the moment means that then this supply deal is probably just going to stay as it is for the time being with a further extension. Um, the reason why this is important, why I'm pointing it out, is the OPEC Plus, they'll be having an interim meeting on Tuesday to review the market. A final decision now on whether they're going to go for 3 to 6 months is not going to happen for a further 2 weeks. Then they meet right at the end of the month, essentially going to the 1st of December. Looking at the calendar then for this week, what have we got? And just going to give you a very broad summary. So as far as today is concerned, It's pretty quiet in terms of major economic data. You've got the US Empire Manufacturing number at 1:30. The one thing I would like to draw your attention to right from the beginning though is central bank speakers. You've got Christine Lagarde speaking today at 1 PM London time. You've got Lagarde speaks on Tuesday, she has a rest on Wednesday, she then speaks in European Parliament on Thursday, and then comes back at the European Banking Congress on Friday. Friday. So Christine Lagarde is speaking from the ECB president pretty much every day this week barring Wednesday. The Bank of England speakers really start to ramp up as well. So today you can see you've got Haskell. I've got a list here. So Haskell's on Monday, the Governor Bailey and Ramsden are speaking on Tuesday, and Chief Economist Andy Haldane is speaking on Wednesday. And then you've got some Fed speakers as well listed in amongst them, but no Jerome Powell, at least at this point. So quite a few central bank speakers to account for. I think with these speeches at this present point in time, no one's expecting anything kind of groundbreaking to come out here. And the stall is already kind of set for perhaps the ECB then to commit to a fairly sizable €500 billion increase to their, their PEPP program coming in December. The Bank of England meetings and the Fed meetings will are all so recent that there's no real reason for them to move the needle a great deal. But obviously these are the main people in markets who can really influence price. So it's definitely worth bearing in mind when you're going through and you're taking on any position, just the timings of these particular speeches. So Monday's pretty quiet overall. We then go into Tuesday, we get US retail sales figures. They are expected to show that month-on-month growth slowed in October. The headline's expected at +0.5%. The prior reading was 1.9%. And this comes ahead of the key holiday shopping season as the effects of fiscal stimulus fade and coronavirus pandemic continues to, to worsen at this point in time. It will include Amazon Prime Day numbers, so it'd be quite interesting to see how the overall number performs if you were to X that figure out, because obviously that is a particularly popular day for online retailing. But overall, I'm not sure how important really US retail sales are because quite frankly, this is October numbers and going forward now, people inherently forward-looking, things will deteriorate probably going into November, December, particularly given the COVID situation, as I said, and the lack of further fiscal stimulus as we've seen in the US. Moving on then, going through the rest of the week, you start to then see some UK data coming in. You've got UK CPI on Wednesday. You've also got UK retail sales, and it's coming out on Friday. Again, that retail sales figure in the UK is for October. I think that is pretty much redundant at this point because if you remember, the UK since has now gone into the latest state of nationwide restrictions due to COVID-19. So regardless of what this figure comes out with, it's going to get worse, probably most likely at this point in time given that fact. So in terms of inflation, pretty similar. I don't really see that as a market-moving event otherwise, or what classically would be a tier 1 piece of information. Going through then to Thursday, as I said, you've got Lagarde speaking again, even twice in one day at the beginning and afternoon. You've got some other things— your weekly jobless claims, Philly Fed business outlook, existing home sales coming out of the States. And then on Friday, as I said, you get the UK retail sales number, public finance data as well. So that— and that's it. So overall, data-wise, I'd say fairly quiet, but mainly because anything that is big, like retail sales in UK and US, a lot of that I think is, it is quite backward-looking by nature, giving its hard data, and the market a little bit more sensitive about trying to manage the ongoing kind of perception of the near-term outlook. With that being said then, any of these virus updates are going to be quite, quite key. Of course, the market is back up around these quite elevated levels. Joe Biden is, I believe, due to give a speech later on today with Kamala Harris. I think it's happening— I've seen conflicting reports, some saying 4:45 PM London time, some saying 6:45 PM London time. I did think when I initially heard that, that perhaps that could be quite an interesting speech given how is he going to— he plans to tackle the situation with COVID-19, because that's going to have implications of course, for the economic outlook. But seemingly that's already come out in regards to these two COVID advisors that he has who have said they want to go for a localized approach, which obviously has net— is a benefit in terms of how markets tend to react. So that, accompanied with the Asian news overnight with this new free trade agreement, has seen things off to a positive start. But obviously obviously some significant risks as discussed, uh, still on the table for the week ahead. All right, that is it. Gonna leave it at that. If anyone has any questions at all, obviously if you're watching this on YouTube, feel free to just leave a comment. Absolutely happy to help. But have a great week ahead. Thanks very much.