This Week In Markets: 25th - 29th January 2021

Okay, very good morning. It is Monday the 25th of January. Hope you're doing well. Hope you managed to brave the snow if you're based in the UK. Had a little sprinkling over the weekend, but all good. Ready to give you the latest kind of fundamental briefing for the, for the week ahead. Gonna encapsulate some of the main things that happened in the press over the weekend that you need to be aware of, and then look at the fundamental factors that are in focus this week in terms of the technical levels and trade setups intraday and for the week ahead. I'll let my teammates do that on the Amplify Live channel. Again, we've got the live stream going on throughout the entire day. I've also got the masterclass, the FOMC happening in the evening, so it'll all be covered in real time then. So remember to check out the link below for Amplify Live if you've not done so already. If you're watching this on YouTube, really appreciate it if you could like and subscribe to the channel. But look, let's get straight into it and talk about what's going on. And a little bit of risk-on appetite this morning, albeit particularly moderate, I would say. So stock index futures seen marginally higher, the Nasdaq having moved up generally speaking through the recommencement of trade overnight, just saw us technically break, break above an area of what was resistance that we had back at the end of last week on Friday that managed to hold price. So using that as a bit of a launch pad then to push higher through the early part of the Asia-Pac session. So the NASDAQ trading up about 100 points at the moment, DAX then following suit in sympathy, up about 83, S&P up 16.25 at the moment. As such then, gold prices down about $6.50, the 10-year pretty flat, uninteresting overnight, but down 2, and then consequently oil prices up about 27 cents, so marginally higher, trading at $52.54 at the moment. As far as the currency markets are concerned, I think too interesting, to be quite frank. Slight softness in the dollar, down about 1/10 as Europe comes in, and that means that EURUSD and Cable both slightly higher. Perhaps a little bit outperformance in Sterling, trading up 32 pips, uh, and above the 137 handle at the moment. But look, let's get straight into it, talk about some of the news flow then and what you need to be aware of for the week ahead. Starting off with this, this is still arguably one of the main kind of narratives driving financial markets at the moment, and that is now that we've had, um, the president-elect now being formally put into place. So Joe Biden now in the White House, what is then the timings and the size and scope of the coronavirus relief program he wants to push forward? Now, over the weekend, a few developments there to be aware of. So officials in his administration tried to, tried to head off some concerns that started to emerge amongst a select group of Republican senators about the size and the expense of his proposed $1.9 trillion new program. This, of course, comes after they'd only ratified and signed off that $900 billion just a few weeks ago. Uh, the push for coronavirus relief, there's kind of two things here to be aware of. Um, one is a little bit more practical, the fact that the second impeachment of Donald Trump obviously takes place. The trial begins on February 8th. Some Democrats have been quite upfront saying, look, let's try and get this bipartisan agreement through. You've got our backing to try and get the stimulus in before then. Because there's a timing issue where then it's going to conflict and draw, uh, probably unnecessary attention away from what the greater necessity is, which is to provide more relief for the people on, on Main Street in that respect. And then the second thing is that, you know, impeachment trials, they only go as to further fuel the kind of deepening divisions that exist overall, which ultimately then might have a knock-on domino effect then for the likelihood of the passage of certain elements of this, this latest relief bill. So a couple things to look out for there. It's still an important factor, of course, to be monitoring throughout the week. No set kind of dates or times to be aware of, but it's something that's going to be ongoing throughout the whole week in itself. Moving on then to COVID, what's the latest there? Well, there's a couple things to update you on. The UK's Health Minister Matt Hancock was speaking at the weekend. He warned the coronavirus vaccines may be less effective against the new variants of disease, such as those found in South Africa and Brazil, uh, and that stricter border controls are therefore justified. Um, so this is the latest kind of stats over the weekend. On Sunday, there's 77 cases found now in the UK of that South African variant, even though they had stopped transportation coming in from that particular country. So something to just keep an eye on, perhaps, in terms of how quickly that number starts to head north, and certainly perhaps catching a bit of attention given the fact that he said quite expressly that the vaccines may be less effective against the new variant in itself. On the other side then, there's a few other things to be aware of. France is set to be, or set to go into lockdown within days, so mainland Europe, amid concerns of a new wave of infections driven by the UK variant. And citing people basically familiar with the matter, they've said Macron could announce the country's third lockdown coming on Wednesday night. So don't find that too surprising, to be, to be quite honest, and hence the reason why it's not really impacting the market right now. Still, at the moment, the, the ongoing nature of lockdown seems to be somewhat bedded into expectations at least for the time being, but we are expecting confirmation of that midweek coming from France. The other thing then is about the kind of rollout of the vaccines. This was something out of the FT at the weekend. AstraZeneca has warned EU countries to expect significant shortfalls in terms of the early deliveries of its vaccine. The EU is expecting 100 million doses of the jab by the first quarter of this year, but people with knowledge of the discussions has said that the company is unlikely to meet even half of that figure. This has caused quite a lot of backlash between various different EU nations against AstraZeneca, and of course comes in the context of a lot of people starting to scrutinize the relative slow vaccination rollout comparative to what we've seen in some of the other countries. And to help give you a bit of context on that, this is looking at a, a kind of list going in order of the number of doses administered per 100 people. So you can see in Israel, for example, it's nearly half of the, of the population at this point in time in terms of per 100 people, whereas then scaling it down, the UK is now at 10.21, US at 6.82. But you'll note then really in terms of the major European nations It's not until you get down to Spain that's one of the highest, and that's down at 2.51, again comparative to 10.2 in the UK. So that's one of the, I guess, things to keep an eye on. In combination with this, it's interesting to note that in total, the UK and the US have each spent about 7 times more upfront per capita on vaccine development, procurement, and production than that of the European bloc. And although market's not showing too much sensitivity to this at the moment, obviously the quicker they can get the control, or at least get the virus under control, get these vaccines administered as quickly as possible, that would then consequently lead to the inevitable reopening of the economy at some point in time. So at the moment, Europe is lagging a little bit, which could be something to just monitor going forward as well. Otherwise, sticking with the mainland, we're looking at Italy. Um, did see a bit of a continued elevation in yields that broke BTPs, Italian bonds, out of there, broke the downside of the range they've been trading at the end of last week on Friday. In fact, from Italy, we saw 10-year yields, right, um, go to 0.75%, and the spread against German bunds widened about 8 basis points, which is the widest that spread's been since about November of last year. So the latest over the weekend basically is that Conte is resisting pressure to resign. He's still trying to club together a formation of a new coalition. If he fails to recruit enough senators ahead of a vote which is penciled in for Wednesday or Thursday this week, um, to approve the annual report of the Justice Minister, then, then again, this will cause the next step of the process to come to fold and take us one step closer to snap elections, as much as most still see that as an unlikely prospect at this point in time. So, um, we're still tracking this in the background as well. Just very briefly on the oil front, uh, WTI crude not reacting too much to these headlines, but I think it's something to be aware of. Iraq plans to cut oil output in January, February to make up for its breaching of OPEC+ quota last year. This is per the demands that were placed upon them as part of the existing deal from some of the recent OPEC meetings that we've had. The aim is to pump 3.6 million barrels per day, which would in fact, as far as Iraq go, be the lowest in about 5, 5.5 years, in fact. And compares to around 3.85 million barrels per day that they would have been producing only back in December. Separately as well, worth noting for Libya, members of the Libyan paramilitary force responsible for safeguarding, uh, the oil ports ordered a halt to crude exports. So guards have ordered stoppages at Isayda, Hurghiga, and Ras Lanuf ports, the three largest of course in Libya, which is something to be aware of. They have said the reason, rationale for this is they're trying to press home salary demands at the moment. So something else to be aware of. Moving on then, let's have a look at the calendar, what's on the agenda for the, for the week ahead, because there, there is quite a few things you need to, to make note of. As far as today is concerned, you do have ECB's Christine Lagarde giving a keynote speech, 8:45 She's also speaking on the panel at 4:15. Now, one place where of course she is speaking is here, Davos. For those who are new to financial markets, this time of year it's always the World Economic Forum where all the major heads of state, central bankers, influential people across the board, they all meet in Davos. However, this is all happening of course because because of COVID virtually, but we do have a number of key speakers. So just to run you through, Chinese President, as you can see here, Xi Jinping, is going to be speaking today. Macron will be speaking on Tuesday, giving a keynote speech, as will Angela Merkel, the German Chancellor. You've then got ECB's Christine Lagarde and Bank of England Governor Andrew Bailey are both speaking today. So quite front-loaded today. Just to repeat, you've got Lagarde, Bailey, ECB, Bank of England. You've also got President Xi, and then tomorrow Macron and Merkel. So how much do they normally say at these events? Well, it is a, I guess, an event which, which does draw quite a lot of eyeballs, let's say. So it could have the propensity to move markets because it's a decent, um, it has quite a lot of visibility, I guess, for market participants. How often though in the past has it been used to kind of pivot a new strategy or policy, kind of hint? So very rare, but nonetheless, when all of these kind of major influential people which markets are sensitive to are speaking, it's always worth paying note to the actual agenda. So I'll share the Davos schedule in the Amplify Live Discord room every morning going forward. Otherwise, for this morning, you've got the German IFO figure coming out a bit later. Then you've got a couple of ECB speakers in Chicago Fed National Activity Index later. Otherwise, moving on to Tuesday, you do get the latest jobs data coming out the UK. Bearing in mind though that unemployment rate is expected to remain steady at 5.1%. So at the moment, not counting things like the extension rollover or furlough of what we had in the UK. So still, it's a little bit misleading to look at it just on its top level figure going forward. Um, but then for the rest of that session, the US Conference Board's consumer confidence number, Richmond Fed manufacturing stats on Tuesday. Wednesday then, the main event being, and one of the main things for the week, is the FOMC. What can we expect from the FOMC? Well, it's the first meeting since a couple of things. We've of course seen now the, the Senate switch in Georgia, and that meaning then we've got a blue wave. So getting a bit of a temperature check for what does Powell, his colleagues see the impact of that being on their policy going forward, if any. We've also had quite a response in markets on the back of that in terms of yield movement. So any commentary on that? And we've also had a lot of back and forth about this idea, a notion of tapering, albeit after that first kind of came about about 2 weeks ago, it's gone very quiet since. They kind of put that to bed, that it's probably too early to be talking about that for the time being. They're kind of the key things to be looking out for. No actual monetary policy change, of course, expected this time round. I saw a good summary comment here from ING, who I think really hit the nail on the head, and it was that they expect the Fed will retain a cautiously optimistic tone at the press conference while seeking to downplay the prospects of any meaningful change in Fed policy anytime soon. As I said, I'm going to be covering— I'll do a full preview, I'll cover the full event live on Wednesday night on Amplify Live if you want to join us. Um, so beyond that, looking to Thursday, uh, you've got the German state CPIs and then the US Q4 advanced GDP figure, uh, at 1:30 on that day, alongside the weekly jobless change numbers as well, which we continue to track at this present point in time given their fairly elevated nature. And then Friday, it's all about then the GDP figures coming out of mainland Europe. You've also got the core PCE numbers coming out of the the US as well. The other thing that does definitely ramp up several gears, um, this week is earnings. There are 118, I believe, corporate earnings coming out the S&P 500 this week alone. That includes 13 of the 30 Dow components, almost half of the Dow's reporting. Uh, here are some of the highlights. So just to give you a bit of a flavor, uh, really Tuesday it starts to heat up a little bit. Pre-market, J&J GE, 3M, the kind of larger market cap names. Then after the close, Microsoft, AMD. Pre-market Wednesday, Boeing, AT&T. Aftermarket, it's probably the biggest evening. You've got Apple, Tesla, Facebook all coming on Wednesday. And for Apple, their expectations are for them that the successful iPhone 12 holiday sales are expected to drive their revenues over then $100 billion for the quarter for the first time in the company's corporate history. Then Thursday, pre-market McDonald's, aftermarket likes of Visa, and then Friday, Caterpillar, Eli Lilly, Chevron, Honeywell, just to name a few. So yeah, things get a lot more busy here. As I said, I'll do my best to share kind of individual previews in a bit more detail for some of the bigger market cap weighted firms. But that is it. So otherwise, feel free to drop me a comment if you've got any questions at all, and then hopefully I'll see you online live in Amplify Live. All right, have a good week. Take care.