This Week In Markets: 22nd - 26th February 2021

Okay, very good morning, Monday, 22nd of February. Hope you had a fantastic weekend. If you haven't already done so, feel free to join our community on AmplifyLive.com. If you access a free trial, you can get full unlimited access to all of the portal content, including the live stream that goes on throughout the day with myself and the rest of the team. But looking ahead, to what's in store, not just for today but this week, and also summarizing some of the major things to be aware of from the weekend press. I'll kick it off with the overall sentiment at the market open this morning. Equity index futures a touch soft, but fairly moderate move. Yields again on the front foot. So US T-notes have come under a little bit of pressure, having seen a very marginal gap down overnight and just trended down in the US 10-year in Asia-Pacific trade. Um, so down 10 ticks. Um, elsewhere, gold up around $13 and back towards a fairly key, um, level of the course of the last, I'd say, 4 weeks of trade. So we've come up to have a brief look at $1,793, which was that area of support and resistance through the 16th, 17th of last week, which when we broke down, price got quite heavy there in the yellow metal. And that was also support areas back in the 4th and the 5th. So, and we've had a retest and rejection off that so far this morning, but worth keeping an eye on the upside levels. Otherwise, just sticking with metals briefly, copper has been seeing a pretty awesome run of late, initiated at the end of last week, continued in the overnight Asia-Pac session. The general sentiment around the progressiveness of the kind of global economic view about the future, because we've had some really stellar data in the US last week, uh, accelerated vaccination rollouts, COVID situations improving just generally in the likes of the US, for example, and more stimulus coming. So definitely copper here, you can see, has sprung higher in the last kind of two trading sessions. On a monthly, just to give it a bit of context, we haven't traded this high in copper prices in 9 years or so. And any breakout of here, which was where we're at at the moment. We've seen a bit of a short-term rejection— was also the 2008 May high. We'd be looking up at around this 2010-2011 high around $4.54 if we continue any higher. Um, otherwise crude oil is, is in a bit of a short-term range at the moment, defined by $60.29 at the high to $58.80 at the low. It's moved a little higher in Asia-Pacific trade We'll talk about some of the update on the weather conditions as we go through the news in a short while, as eyes continue to remain on that normalization of temps, if you like, in order to get facilities and infrastructure back underway. And then in the FX markets, the dollar is actually pretty flat this morning. So not too much to speak of. Near-term technicals, just quite interesting to see here, the dollar just bumping up a touch actually as I speak. And so Euro cable just having a test down at around what was the late, late US low in the futures here. 1.40 is the pivot as well, so an area of near-term support just being tested here in cable at the moment. You can see just trading a little heavy on the breakthrough there. Downside level here, if we remain this way directionally in cable, I'll be looking down at this level here as a target at 1.3982. The price Could well drift there and find support around that area technically. Likewise, it's definitely a greenback story. There's not a great deal new coming out of the UK. We'll talk about the lockdown roadmap in a moment, but not a great deal of market-moving information for the UK and Europe. So definitely driven by the, the US dollar for the time being. In the euro, just looking at this price pattern at the moment, it's been holding in some of the short-term price activity. And we're just having a test on that lower side at the moment. So quite interesting to see how we perform here. Key level on the downside, if we did start to break down lower, probably be looking around this 121.03.5 here, which encapsulates some of the price movement in the second half of last week. But overall, currencies not too busy. If anything, just a touch of dollar strength just coming in as I've started the briefing here, and a bit of continuation here of equity weakness to boot. But look, let's get stuck into some of the headlines and talk about a few different things. First off, I wanted to mention the COVID-19 situation in the States, and it continued to report declining new coronavirus cases, hospital admissions, and deaths at the weekend. So all of these main charts pointing— well, daily tests at the moment still to be tracked, they have dropped off quite a bit, and a lot of people saying that's because of the adverse weather conditions that have been experienced in the States, meaning that's just been difficult to conduct. But otherwise, cases, hospitalizations, and deaths here on the, the red going right have all continued to decline at a fairly rapid pace. And actually, just having a look at some of these numbers here and a few different charts, the US has now vaccinated over 60% of people aged 75 or above. And almost half of those aged 65 to 74, the two bars you can see on the right-hand side here. And obviously this is particularly important because this older demographic obviously is the most vulnerable to the disease. And if we start flipping this over to here, um, analysts suggest that we could then see, deriving from these numbers, COVID-19 deaths continue to plummet in the coming weeks. And the reason for that is as those aged 75 plus. So really, these two blue bars here have represented about 60% of all COVID deaths, and 65 plus have represented about 80% of all deaths. So here goes the, the thinking that if you can target, like we've done here in the UK, which is the older, more vulnerable group, the kind of priority groups then that, that takes care in the US case by terms of death rates, 80% of all of the deaths that have happened so far in the history of COVID-19. And so here then we could continue to see some fairly, and would be very welcome, drop-off in this daily death rate if that can, can happen, of course. So some positive signs there, of course. And in the UK we've had similar as well. If actually, if I just quickly pop to my Twitter account, I was sharing some of these at the weekend. So just to quickly show you, a number of vaccinations now in the UK is kind of heading up to around 17 million. So we continue apace at this point on the, the targets for kind of late March, mid-April, ahead of the self-imposed end of April deadline for the next target of the priority groups to be hit. The number of infections continues to decrease, so on a 7-day rolling average, down over 20%. Deaths down nearly 30% over the same period if you were looking at the UK. So some, some, some positive signs there. Um, but what I would say is that positive signs on that front— and this isn't just an isolated thing, this is one of a number of positive catalysts at the moment— is what perhaps is making equities trade a little heavy, not just today but over the last couple of sessions. The equity markets struggle a little bit to continue to plow on to new all-time highs. And we are in the futures, you can see here if you're looking at the NASDAQ in the center chart, if you're looking at the S&P here, we're retesting lows that we were printing back kind of on Thursday of last week. So equity weakness here tends to then lend its hand to a bit of risk-off sentiment that could well support the greenback. If that does, then some technical levels here in the euro and sterling to watch on the, on the downside. Quick look then at some of the other news stories. Sticking with the, the kind of domino effect then of COVID and talking of the UK, this is what we're looking out for later on today. And it is the idea then that ahead of the UK lockdown roadmap, which we're going to get unveiled later today, a senior minister said last night that the UK government would take a cautious approach to easing the lockdown, with restrictions lifted every few weeks to judge the impact despite a significant acceleration of the COVID-19 vaccination program, as we just saw on some of those previous graphics. So the idea here being I'm going off data, not dates, which I guess is a bit of a reverse strategy from what they were doing at the beginning, which was putting out these, um, pretty aggressive timelines and pretty much failing to hit them nearly every single occasion. So As much as there's some internal Tory difficulties with Boris managing this strategy, it's probably the most prudent way to do it in order then that you're not falling short of expectations persistently. So slightly different approach. Aside from schools, most of the reopening though is not likely to be con— or is likely to be concentrated in April and May. 'Cause if you remember with those priority group listings we were looking at in the FT last week, all the priority groups are likely to have been done with their first dose by Easter, so kind of early April time. And so therefore most of their more significant reopening is probably gonna not be with us until at least another month or two at this rate in time. In terms of the timings for today, this is what the timings look like. The sign-off is with key ministers is said to have happened yesterday. It will go to a full cabinet today, Parliament to be informed at 3:30 this afternoon, and then a press conference will be held at 7 PM tonight, presumably with the Prime Minister on national TV. And that's coming from The Telegraph newspaper. How market-moving is this for cable? I don't actually think it's either outright initially positive or negative. The fact that we are— and, you know, the longevity and the strictness of the current UK lockdown has had an obvious impact on containing the virus to a certain degree, as we've just seen. We've seen positive developments in terms of case rates declining, subsequent pressure on, on the hospital infrastructure and deaths, which is all good. However, that does create further economic damage. But I would say that that's just a kind of afterthought. The more near-term driver of markets is still how quickly are these vaccines going, how, how quickly can we get the next priority group done, and can we start then seeing some more reopening around those timelines as we said in April and May. So I don't actually think the roadmap in itself is a particularly big deal today. I wouldn't be looking at it to be a real significant catalyst for sterling. If anything, I think it allows the market to have a fairly constructive view that's, if anything, supportive for pound about what the future looks like over the coming months. It's kind of the light at the end of the tunnel kind of idea. That in combination with the vaccines, I think, and ultimately for currency markets, a lot of it's going to be derived from the dollar reaction to Powell on Tuesday. But if Powell does toe the line, continues to push back against this kind of reflation yield worry and says that, look, we're going to remain accommodative and loose policy for the foreseeable future, well, if that keeps the greenback down, then I've got no reason to think that this, this pound won't remain supported at this point if we look at the week as a whole. But obviously that's contingent on Powell going that direction, of course. Um, okay, a few other things to, to get up to speed on just on the news perspective, then we'll look at the calendar. There's quite a few key events this week. This was an update on the vaccine side. Pfizer and BioNTech's COVID-19 vaccine appeared to stop the vast majority of recipients in Israel becoming infected, and this is providing then the first real-world indication that immunization will curb transmission of the coronavirus. Otherwise, a bit of attention on the Iranian situation now that we've had Biden come in. Iran's Deputy Foreign Minister has said US needs to remove its sanctions before talks can begin to revive the nuclear deal with world powers. Yeah, Iran, in terms of timings, has set a self-imposed deadline basically of tomorrow, Tuesday. And separately to this, so when I say that deadline, this is atomic inspectors will lose some access, a lot, unless there's some type of arrangement brokered. Now, we're not looking for a one-and-done deal to happen right now. The things I was reading in the press of the weekend was more about the idea that they can just kind of roll things over with the premise that both sides are willing to continue dialogue. And there's a lot of back and forth. The, you know, it's such a tricky relationship and geographic region to manage, particularly coming how that relationship was soured through the Trump administration, that it's going to take a lot of time here. So I don't think this is necessarily, uh, again, a good or bad immediate thing in an intraday environment for oil prices, but it's certainly something that warrants watching going forward. The other thing here was about Iran. They are set to attend the meeting of an OPEC+ advisory committee next month, according to a delegate who chose not to be identified. This isn't particularly unusual. Iran, some other countries are not actually part of the group that would normally be in these meetings, but they do often attend. But it does go some way to show that perhaps then Iran is gearing up for a bit of an increase to their oil supply. There are expectations that that's going to pick up, and by the year end, Iran was going to be pumping circa around a million more than they currently are at the moment. But again, this could all be comprised as part of this deal, the, the conversation between the US and Iran that will be happening not just this week but in the coming weeks and months. Otherwise, yeah, what's the weather conditions? Because this was a real driving point in the energy markets last week. I would say that a lot of that trade is kind of done, as it was last week when we sold off fairly persistently through Thursday into Friday session. We still remain relatively elevated, uh, trading at $59.73. I did hear of Goldman's over the weekend. They basically said that they're bullish with their forecasts and brought forward this estimate and now sees global oil demand to reach 100 million barrels per day by late July. So looking at things like the speed of the vaccination rollouts as to become ever more bullish on prices over the medium term. But this is one of the main things looking at the National Weather Service in America. Temperatures are beginning to, to moderate. And as you can see here, some of the key areas, particularly around Texas, seeing some of the warmer spots as well, allowing facilities and just general infrastructure to continue to thaw out. At the moment, there are some reports of refineries restarting operations, but there's others who, because of more lasting damage, it's still going to take a number of weeks to get back online. So Not too much visibility on this at the moment on a granular level, but I'll keep you guys updated on Amplify Live throughout the, the rest of the session. But as you can see this morning, I wouldn't say it's having too much of a broader impact on the price of oil for the time being. Um, and then let's look at the calendar then, because this is generally a calendar-driven, uh, week. There's a lot going on to be aware of, and I'm going to run through it in chronological order. So this morning Uh, you do get the German IFO number first thing on the docket. Economists are expecting a rebound from a 7-month low of 90.1, but only marginally up to around 90.5 here. Again, IFO, for any new traders, is a forward-looking soft sentiment-based survey asking companies on the ground in Germany about their expectations current conditions and what they— what their kind of outlook is over the next 6-month period. Given that Germany remains in one of the strictest lockdowns and having been rolled over several times in, in the major economic country in the eurozone, be interested to see how that, how that comes out. A soft number might only further fuel any recent weakness here we're seeing in euro on the back of the fact the dollar just picking up a little bit as well. As I said, uh, earlier, keeping an eye on that euro level. You can see it's just snapped through there, so trading a little bit heavy now. And as I said, I'm keeping an eye on around 1.2103.5 as a downside level. So definitely a dollar-driven move here rather than those other currencies, as I said. And you can see that target now, cable coming down through that pivot 1.40, finding some support around 1.3982 will be key. On a downside level there in cable, just while it's up, that would be the next area, 139.53, encapsulating the highs that we saw, uh, back on Monday last week, support on Thursday and Friday's price activity. Okay, back to the calendar then, uh, final things. So IFO today, but otherwise it's a very quiet calendar. Um, that then leads us to go go further into, um, well, don't forget this afternoon you do have ECB's Christine Lagarde speaking, uh, 1:45. What would I look out for Lagarde? Nothing really too much, to be honest. I think the ECB have been fairly open and transparent and spoken frequently. I don't think we would be expecting anything particularly new here from Lagarde, but nonetheless, 1:45 London time. Fed's Bowman, a voter, just half an hour before the close on Wall Street. As we go into Tuesday, we get the latest jobs data come out of the UK, HICP final numbers in eurozone, but these are again final, so unlikely to be too market moving. Um, US consumer confidence on Tuesday and the normal oil inventories and the API. The biggest thing though on Tuesday, and arguably for the week, is this one. For any of those new to markets, this is one of the major speeches that Powell will give during the year outside of the uniform 8 kind of normal rate-setting meetings during the course of a year. So he's going to be presenting this semiannual testimony. This does actually come alongside the latest semiannual monetary policy report as well. And given really the context, we've had really rising yields on the back of strong US data, COVID improvements, vaccination acceleration, progression in Biden's stimulus plan. Don't forget as well, there's another stimulus plan on the infrastructure side due to be, uh, talked about as well in the near term, beyond getting the current proposal of $1.9 trillion ratified in some shape or form. So there's definitely reason to constitute rising yields, and this has got people a little bit apprehensive about future rates of inflation as well, as we know. And so this is why we're so keen to hear from Powell this week. Personally, I see Powell largely reiterating the central bank's commitment to easy policy. Um, the difficulty he has that is any optimism, which he appears to a certain degree validated in showing in terms of his current view on things and what the future might look like, particularly on the COVID and vaccination front It needs to be tempered with a lot of caution because he definitely will not want to fuel the flames of this whole idea that the discussion may be looming that the Fed might start to taper on QE. I don't think he'll want to give that signal, not, not yet. So probably a reiteration of the idea that the virus is particularly uncertain in terms of future developments and so on might well be used in order to just play down a little bit any underlying moderate optimism he might, he might show. So as much as I, I think Powell will navigate this with probably minimal market disruption, it is the singular biggest event of the week, and it definitely carries the propensity to, to move things considerably if he doesn't do a good job of it. So definitely that's the one to watch, 3 o'clock on Tuesday. If you're gonna, you know, have a spot in your calendar, if you're swing trading or if you're looking at medium-term trades, then you definitely need to be aware of that, that event. That will probably dictate then a lot of the week's direction in terms of yields, equities, FX, commodities. The full cross-the-board macro view on things. He then does appear, I believe, the normal routine— the Senate Tuesday, House on a Wednesday. It's just a reiteration on the Wednesday, so Tuesday is the big one. Fixing some fixed income supply coming throughout the week as well in the US, just to be aware of. So let's just move on. HSBC also due to give a corporate update, which I tweeted a preview of on the Amplify Live Twitter account as well. When you get a second time to read. Going into then Wednesday, you get new home sales out of the US, pretty quiet in terms of UK and Europe. You've then got the oil inventory numbers in the afternoon. A number of Fed speakers though. This is not unusual. The day after Powell delivers a big keynote speech on policy, almost the kind of strategy from the Fed is to deploy a number of speakers after any big speech just in case it requires any realignment of market expectations if what he says is interpreted, if they feel, incorrectly. So as much as Powell is going to be coming out again at the House, you're going to have Brainard, Clarida, both speaking, both voters of some influence as well, was on the board. Clarida, the latter, speaking directly on the economy and monetary policy. Then going further into the week, on Thursday, um, you get the eurozone sentiment figures. Not really too much to worry about there. More for consideration is going to be, um, the second reading of US GDP, expected to be just over 4%. You've got durable goods, initial jobless claims as well coming out. And then going into Friday, well, a number of Fed speakers as well on Thursday. And then on Friday you get the quite generally UK European session, but the core PCE price index. So the Fed's preferred measure of inflation. And given the particular focus on that subject matter at the moment, that's going to be a key one to watch at the end of the week. And then you'll also get the Chicago PMI, the Michigan numbers, the final reading. So not, not too much to worry about there. So that, that is the week. So plenty going on. Um, do check out my Twitter handle. Um, I've published some full notes yesterday if you need to recap anything in greater detail. Otherwise, um, just let me know if you have any questions for the community on Amplify Live in a Discord room, or if you're watching this, um, delayed on YouTube, then just leave me a comment. I'll be happy to help. All right guys, have a good session and a good week ahead. Thanks very much.