This Week In Markets: 18th - 22nd Oct 2021 (Incl. China GDP, UK Rates & Bitcoin ETF Updates)

Okay, very good morning. It's Monday the 18th of October. I hope everyone is doing well and had a great weekend. Um, usual routine, I'm gonna try and encapsulate some of the major headlines in the weekend's news, and then I'm going to look at some of the main events to be aware of for the week ahead to make sure you are thoroughly prepared if you're trading or you're a student getting ready for interviews and so on. For this week ahead. Before I begin, then remember to check out AmplifyMe.com. We've got our next public simulation event happening at the end of the month and registrations are filling up fast. So make sure you jump on there. You can book the registration or you can sign up for free and get access to our portal on the hub. You can get access to lots of different content and the community and stuff that I wouldn't necessarily put out to the public via YouTube and things like that. So yeah, check out AmplifyMe.com. But getting straight into things and having a look at the general sentiment for this morning, and it's a little bit negative overall. As I said, I'm going to try my best to focus on the news because there's quite a few different things to go through overall. But we've got a firmer dollar. The Dixie's trading up around 0.2%, so it's just weighing slightly on both major pairs. And top left, EURUSD and Cable both down around 25 to 30 pips respectively. The yellow metal sort Gold futures also just breaking down through that double bottom from what was the low on Friday and also the recommencement, the Asia-Pac session low overnight. So gold's down about $4.50 at the moment. Any further downward move from here would just be keeping an eye on that low that we saw going back to the 13th, which was last Wednesday. And then elsewhere, equity markets just looking a little bit heavy this morning, but very moderate. The Nasdaq futures down about 75 points at the moment this morning, having peaked at the initial high, seeing the recommencement of Globex trade overnight. Looking on the daily chart, very noticeable on the technicals. You can see that area that we're looking at, that rectangle here, the price point that's acted as resistance through some of the price action of the last couple of months, just working out this morning with that 50 DMA coinciding at around the same point at 15,169. And we've just had a bit of a decline after peaking at that price at the recommencement of electronic trade overnight. So, uh, an obstacle of short-term resistance if we're going to continue the directional trend higher is what we had last week. So similar case of what we're seeing in some of the other indices. The S&P, you can see here, just moderating off that continuous and sharp move higher that we saw through the back end of last week. And so just breaking through that inflection point, you can see from Friday's session to trade around 4449 this morning, down around 14 points. Otherwise elsewhere, yields are firmer this morning, and that means that the US 10-year is down around 8.5 ticks for the time being. Oil really quite unfazed for the moment, at least by strong— the strong dollar. And we have traded up as high as 83.73 in the overnight session. We've come off that a little bit. But still higher by around $1.10. On the weekly chart, you can see, as we've been looking at for the last fortnight from the technical levels, $84, um, quite a key level, as you can see here from these rectangles going back to some of the early November price action from 2014, and that low we had in November of 2012 being quite a clear definable target for this recent rally that we've had, which has been really quite sharp over the last several weeks. And so a bit of resistance around here to be felt. I would, I would suggest between the next 48 hours or so, if we can continue to push higher, I wouldn't be surprised to see some perhaps profit taking up around that 84 mark for the time being, just given that run-up that we've had. But look, let's get into some of the news. Going to talk about Bank of England, ECB, German politics, UK COVID, Chinese data, Bitcoin, which is in the futures market near 63,000, continues to rally at the moment. So Let's, let's delve straight into the Bank of England and look at some comments here out of the Bank of England Governor Andrew Bailey, who spoke over the weekend and moved to strengthen the case for raising interest rates. His, his actual comments were that the central bank will, quote, have to act to curb inflationary forces, and warning higher energy costs mean price pressures will linger. So he's done very little there to push back on this notion of very aggressive rates pricing for the timing being brought closer for an initial Bank of England rate hike. So, and, and changing the sequence up from what we're seeing from the likes of the Fed, who are looking to reduce obviously over the period ahead once we see the commencement of tapering at the end of the year. The Bank of England looking to jump straight in with, with rates is what the, the market's currently pricing. And in fact, traders are betting the Bank of England will start lifting rates in the final months of this year, and it will take its benchmark to 1% by the end of 2022. From the record low, of course, level that we're at at the moment of 0.1%. So we're particularly aggressively priced for rate hikes in the UK despite the FX market comes to some degree disagreeing with some of the recent weakness we've had in sterling. To give you an idea, I'll talk about UK data a little bit more in a, in a moment when we look at the week ahead. But UK CPI will be a big release for UK rates and FX traders. That's coming out on Wednesday, still expected to be quite, quite high for the month of September. And to put into context, the MPC, the Monetary Policy Committee, will hold 2 more policy meetings before the end of the year. So timings-wise, 2 more times then for them to kind of clarify some of the situation. Sticking with the UK, the other thing that we have had is, is this. This is a look at the latest new coronavirus cases per day. And as you can say, see here, we've just moving above the highest levels that we were seeing kind of going into June, July time, looking at a rolling average here. And that puts us up to the highest levels that we're seeing since really the beginning of the year. So although this hasn't really drawn too much attention of late, the general direction of COVID cases over recent weeks has been moving in a more positive, declining fashion. But as you can see here in the UK, it's been moving gradually higher. And this has come really post the, the Freedom Day, perhaps not accelerating to the point immediately post that event, given mobility has been quite slow to normalize. But we are seeing an uptick, and actually the 45,140 new cases identified in the last 24-hour period is quite notable and worth keeping a half an eye on. Um, the Delta Plus strain includes something called the K417N mutation. So don't worry if you can't remember all of these, but generally speaking, it's a Delta Plus strain we're talking about rather than a vanilla Delta, Delta variant now. And that stoked some concerns because it's also harboured by the Beta variant that's associated with increased risk of reinfection. You'll remember Beta was the South African variant, which when looked on these kind of major characteristics was less transmissible but had an increased risk of, um, kind of reinfections. And it was the Delta plus strain fear was about you're kind of taking the Delta, very transmissible, with the higher reinfection rate of Beta, and that's when it can become particularly a challenge to control. Worth pointing though out that UK researchers did say in late June that there's no evidence yet to suggest additional mutations is more worrisome in, in the Delta Plus than the Delta strain. However, that was back in June, so we'll continue to keep our eyes peeled this week if there's any more updates on that, on that front. But moving elsewhere, back to central banking first, just to wrap up things. And ECB's Lagarde has come out. She said the current spike in inflation is unlikely to last. So very much slightly different to Bailey, and very much supporting the case for a transitory view on inflation, which is shared more broadly by most of the ECB. And she also vowed to continue aiding the euro area economy as the fallout from the pandemic lingers. Meanwhile, ECB's Knot said separately in a different article at the weekend that interest rates will start to edge up once central banks begin unwinding their most important stimulus programs in the first half of next year. In other news though, a few other things to be aware of. The FT had an exclusive last night, in fact, Essentially, 4 ECB Governing Council members have told the FT directly in an article that the bank is exploring raising its limit on purchases of EU-issued bonds in a move that would enhance its flexibility in asset buying schemes and boost the status of the bloc's groundbreaking joint debt program launched this year. They're expected to discuss the idea at 2 special council meetings starting in November. So a lot of this, in summary, to keep it simple, is to do with the Pandemic Emergency Purchase Program. So this top-up QE facility on top of their regular APP one, that's the one of which is expected to end by March of 2022. So they're talking about other mechanisms which— there's limitations on the amount of certain country bonds that they can buy, and hence they're the reason why this article is surfacing and these conversations are at the moment is to look at exploring raising the limit on purchases of EU-issued bonds so they don't hit a maximum cap. And it's really to smooth over the exit of the emergency purchase program. Um, remember last week there were ECB sources saying that the bank is studying a new bond buying program to prevent any market turmoil once those asset purchases on the emergency side start to wane off or finish indeed by March 2022. So the bank is expected to announce the next step for, for that bond buying program going into the end of the year. All right, sticking with Europe but away from central banks, quick look at politics. I don't think there's particularly something meaningful to trade on this week, but certainly something to be aware of for commentary you might read in the news. Germany's Green Party has entered formal talks with the center-left Social Democrats and pro-business Free Democrats about forming a three-way coalition government that would be akin to the traffic light coalition that people have talked about with the party colors. The formal coalition talks could start as soon as this week, according to reports. They aim to resolve remaining issues, including the selection of cabinet members The goal is to seal a deal on a coalition agreement between the three parties by Christmas. Yet to be seen whether that could be the case. I guess going off historical timings, I'd say that would probably be quite, quite early. But it's something to just be aware of as you go into the final quarter of the year. All right. Let's shift over to China because there certainly were some interesting things overnight, and that was Chinese data. GDP came in for Q3 year on year at 4.9%, below the expected 5.2% and a slowdown considerably from the previous 7.9%. You also had industrial production year on year for September, 3.1%, expected at 4.5%. And retail sales with the slight one standout going the opposite direction, actually year on year was at 4.4%, better than expected 3.3%. But overall weak GDP and IP. A couple of things and rationale behind why that is the case. Beijing's tighter restrictions, obviously we've been seeing on the property market following the fallout from Evergrande, has curbed construction activity, squeezed financing in the sector. On top of that, electricity shortages in September forced factories to curb output or completely shut, while we've had strict measures put in place to contain the kind of sporadic coronavirus outbreaks that we continue to see across different spots of different provinces in China. So all of this obviously weighing generally, and that's what's led to, as I mentioned with the charts this morning, a little bit of a negative open where we're seeing a bit of a pullback in global stock futures at the moment with generally negative Asia-Pac trade. Nothing substantial, just fairly moderate, but nonetheless just reacting to some of that data as well overnight. But in context of the run-up that we had obviously at the end of last week. So ideal for a bit of short-term profit taking. Um, despite all of this though, it's worth noting that China's benchmark 10-year yield, as you can see here, actually has risen to its highest in 3 months as hopes of monetary easing faded. And this is important because it's come after the central bank officials over the weekend have downplayed risks from inflation and China's Evergrande debt crisis. So one of the things here is about the general pattern of liquidity injections that they do, and a lot of people have been looking for them to keep the, the market flush of liquidity in addition to potential cuts to the reserve requirement ratio on the agenda. But also, economists at Goldman Sachs have said at the weekend that the PBOC, they believe, will not cut the RRR this year and instead might rely on open market operations, so those medium-term lending facilities, and more targeted tools instead to keep liquidity and supply and demand relatively stable. But the 10-year yield overnight jumping despite some of that weak data, as officials have said the inflation, Evergrande risks generally are more controllable, and thus then reducing the need for kind of more easing in various different forms. So yields a bit higher. And as I said, the US 10-year is down this morning around 7.5 ticks as well. Okay, elsewhere, Bitcoin, yeah, another rally seen really overnight to put us at the high levels that we were trading towards the end of last week. The, the Bitcoin futures trading above $62,500 this morning. And so the latest here is just lifting again the mid the ETF anticipation. So asset manager ProShares signaled it could launch that ETF as soon as today. So continue to just remain supported by those factors as we discussed last week. A quick look then at earnings, which I want to talk about. And if you, if you were to jump on my Twitter account, my handle's here as you can see. I share stuff generally throughout the day. But this is what I was just going to talk about briefly before I go into the economic calendar, which is US earnings. Earnings season obviously rolls on. We move over from the banks and big investment banks and so on that we had last week to more, more breadth of, say, other different companies, different sectors reporting. And in fact, there's 80— 8-0— S&P 500 companies reporting this week. That includes 8 of the 30 Dow Jones Industrial Average components. Just going through a couple of the highlights here. Monday generally quite quiet, and I'm really picking large-cap and more in-vogue names than anything. Tuesday pre-market: J&J, Halliburton, P&G. Aftermarket: Netflix, which will obviously draw a lot of attention. I did see some crazy stats that Squid Game actually has had— what is it, 130 million people have watched at least 2 minutes or more of that in in terms of watch times. And the actual value that that's created for Netflix is apparently set to be in around, uh, $900 million US. And I think an episode only costs something like $2.4 million each to make. So incredibly successful there. However, I think it has been bumped off the top of the charts though for the first time in a couple of weeks overnight. But back to earnings Wednesday, you've got Tesla aftermarket, of course, always will be one closely watched on the street. Thursday, pre-market AT&T, a couple of the airline firms, American Airlines, Southwest as well. Aftermarket, Snap, Intel. And then on Friday you've got lots of Amex, Chambordais, Honeywell as well. So that full table is available there on my Twitter account if you want to have a look in more detail. Otherwise, let's talk about the week ahead because there's certainly some, some interesting things to look out for. I'm going to going to look at it in geographic regions. So before I start looking at this Western-based calendar, a few things to be aware of overnight over in the Asia-Pacific region, starting with Japan, because we've already had the main bulk of the Chinese releases overnight. Japan is likely to be a focus as its general election campaign actually kicks off from today with a policy debate among party leaders seeking to stop what looks like an inevitable victory for the new Prime Minister Kishida. So keeping an eye out for any political pledges and ideas that come out in the coming days. Also, for Japanese export figures, they're coming out on Wednesday and should offer a latest gauge of how the global trade recovery is holding up amid some of these supply chain bottlenecks that we've been seeing, of course. And then inflation figures on Friday are likely to show the first price growth in Japan in 18 months and a much stronger upward trend, of course, fueled, as we're seeing globally at the moment, by energy prices. Separately, RBA, so the Reserve Bank of Australia, their Governor Philip Lowe speaks on Friday about central bank mandates amid talk of a possible review of the RBA's mandate. So that's happening on Friday. Otherwise, going to look at the US first and then we will look at the EU and the UK. So as far as the US is concerned, Monday, so today, later on this afternoon, we get the latest industrial production numbers. As you can see here, manufacturing, manufacturing production, cap utilization. So that'll be coming out this afternoon at 2:15 London time. Other than that, it's actually pretty quiet today to kick off the week. But do note, you do get Bank of England's Deputy Governor John Cunliffe speaking, talking on digital currencies. So might not say something explicit, but just given the context as I described about the rate environment and the pricing of UK rate hikes, And given his seniority, I'd be quite interested to see if Cundiff does say anything to, to address some of those concerns in markets at the moment. Otherwise, in the US, other things that we've got is housing data, building permits, housing starts coming out on Tuesday afternoon. On Wednesday in the US, you get the release of the latest Beige Book, and that will provide a snapshot of businesses across the country. And then on Thursday, you get your regular weekly jobless claims coming out of the States. Now, expected to come in at around the 300K mark after last week we saw that number below that kind of figure at 293, which did mark the lowest level since the pandemic hit the economy in the US in March of 2020. And then on Friday really is the main day for major data. And that's not just for the US, but as I'll come back to look at for, for Europe as well. And that's because US market manufacturing service PMI data due on Friday, as you can see down here, the forecasts generally suggesting the private sector activity continue to expand at a solid pace in October, supported by strong growth rates in the manufacturing and service sectors. You'll also notice down here as well, right at the very end, Fed Chairman Powell takes part in a policy panel discussion on Friday afternoon at 4 PM London time. But just jumping back to Friday, you do see here you also get the European Manufacturing Service PMI numbers on Friday morning. Germany and France will be in the spotlight, of course, with forecasts suggesting the bloc's manufacturing activity called to a 9-month low amid ongoing supply-related issues. And the service sector growth further retreated from a 15-year peak recorded in July. Otherwise, in terms of Europe, Euro area flash consumer confidence comes out on Thursday and final inflation readings. But these are final for September, come out on Wednesday as well. Otherwise, flipping over to the UK, some of the main things we're looking out for here, as you can see, is UK CPI. That would be out first thing, 7 AM Wednesday morning. That's going to be closely watched and likely to have kept to the fastest pace in almost 9 years. And in September, the consensus estimate is for year-on-year inflation to remain in the UK at 3.2%. And then on Friday out of the UK, 7 o'clock again, you get the latest retail sales report where stockpiling of fuel due to the pandemic over shortages may have boosted the overall reading. However, broader concerns about energy supplies and prices are expected to have weakened consumer confidence further, and that might well be reflected in the GfK consumer confidence number we'll get overnight going from Thursday to Friday as well. And that is it. So quite a lot I've talked about there, obviously. So hopefully that was useful. Any questions at all for me, feel free to just drop me a comment and a question. Happy to, to address those later on this afternoon. I do know there's a lot of students who've got assessment centers. I think JPMorgan's happening this week. I know there's some HireVue stuff happening as well at different banks. So definitely jump on AmplifyMe.com. I've got a couple of new careers advice type videos that are going to go on the hub in the coming days, and that might be particularly useful and helpful for you guys. So, all right, that is it. Let you guys get on with it. Have a good session ahead. And a great week as well.