This Week In Markets: 31st Aug - 3rd Sept 2021

Okay, a very good morning. It's Tuesday, 31st of August. Hope in the UK you had a great long weekend. Welcome back, and hopefully I can get you up to speed in as short a time as possible about what's been going on and how the charts look this morning, and also what's in store for the week ahead. So first off then, we're going to start with the close on Wall Street. Which, as you can see from this graphic here, the MSCI AC World Index monthly change is now on its best run of monthly gains since 2017 to 2018. As you can see here, comparable to where we are here to where we were back then. Actually, last night we saw the S&P close up 0.4% and the NASDAQ was up 0.9%. The Dow was slight laggard, but it— that meant that the S&P 500 notched its 12th all-time high this month. And the NASDAQ 100 rallied again as Apple shares have topped now $2.5 trillion in terms of their market cap. Here you can see the white line being Apple, the blue Microsoft, the purple Amazon, and the orange Amazon. So, um, Alphabet, excuse me, in purple, Amazon in orange. So Apple, the outperformer here, and having tapped on the door of $2.5 trillion market cap a couple times, managing to bust through that yesterday. What— why is all of this happening and why are US equities continuing to move to the upside? Well, if you remember when we left last week, we had the virtually delivered annual Jackson Hole Symposium where we heard from the Fed Chair Jerome Powell, and he marked steps towards dialing down the US central bank stimulus, i.e., getting closer towards the commencement of tapering, of course, but the idea being that he avoided any signals of a sudden withdrawal that risks obviously spooking markets. And if we actually look at things like the S&P 500, US index futures are higher this morning, And it does come after real breakout in price activity that's been seen really since Powell spoke. So if I was just to mark up this S&P chart with a few different things, this is when Powell spoke and the ensuing rally that we had on the back of that. This was yesterday on the open, predominantly in the first hour of trade on the NYSE. We've had a little bit of profit taking during the APAC session. The general tone there perhaps a little bit more negative there was some weak economic data coming out of China. There's a few more things— crackdown now on computer games in China, which actually weighed on the likes of Tencent. And since then, though, sentiment has just picked back up again as Europe has come in. Not forgetting then that UK were out of the market yesterday, but just European partners waking up and just seeing what happened on the close on Wall Street and just taking the more positive hand this morning, and we've already pushing higher. So on a daily chart then, we're looking at the S&P, you know, looking at this trend channel. We have broken out above what had been quite a key area. So if you go back here on the test multiple times going back through April, May, got fairly close to it through July as well, and then an exact retest in early August capping some of the price activity only around a week or so ago. And then busting out of that yesterday. And so we continue to see some clean air now on the upside of that upper trend line. And so session highs right on cue as we're delivering this briefing this morning. Elsewhere, the NASDAQ, as you'd imagine, it's almost even more pronounced. I mean, we had a real clear breakout at the open yesterday through the opening bell on the New York Stock Exchange. Obviously, the US business as usual yesterday, only a bank holiday in the UK. And then we kind of consolidated that move, faded a little bit in Asia, and we've broken out again into the European open here. This is looking on a much more higher time frame for the NASDAQ because I really wanted to give you a bit of perspective. This was looking at the previous all-time high, of course, back in September of 2020, and we've had the retest going back to February of this year, and that's where we are at the moment. So actually, the NASDAQ's got a little bit of a a technical obstacle. Be interested to see how it performs today, just given the magnitude of the rally yesterday. So again, on the daily, perhaps some resistance might be seen on that longer-term trend line, just to be aware of. Otherwise, this morning, the general sentiment— we have a weaker dollar. The DXY is down about 0.2%. So both major currency pairs, EURUSD and CAD, top left, are on the ascent this morning. CAD, in fact, in kind of short-term price activity of the last 3 weeks or so, just breaking out above quite a key area of what would have been technical resistance, and not seeing too much, um, push back through that level. And we are up trading to R2 this morning, which is also the 138 handle in the currency pair in the futures. Otherwise, oil flatlining at the moment, but obviously I get you up to speed with Hurricane Ida and the aftermath having hit the Louisiana coast over the weekend. Still a large portion of Gulf production being shut in there, and I've got a couple of numbers I can share with you on that front. Um, so before I delve into some of the macro news, I do get asked quite often to also drop in any interesting equity news. And this is Zoom shares. Zoom had their earnings last night and they fell 12%, so they got slammed in aftermarket trade. And actually their numbers weren't actually too far from market consensus, but it's a little bit a case that they're just so amped up over investor psyche over this stock through obviously the pandemic era and how their shares generally of that, that, that reaction effect to working at home virtually, their share prices skyrocketed. So hard for them to keep that kind of momentum. And actually, although their sales forecast was a touch shy of Street estimates, To give you a bit of perspective, revenue increased by 54% year-on-year in the quarter, but don't forget it was up 191% last quarter. And for next quarter, Zoom is guiding to 31%. So, um, still pretty incredible numbers, but obviously quite severe moderation from what we had been seeing. And so a little bit of wind coming out of the sails, and they were down about 12.25% in aftermarket trade. The other one was Robinhood, obviously following its recent IPO. They actually closed down nearly 7% yesterday. They also fell an additional 1.3% in aftermarket trade. So, you know, we're talking about nearly a 10% loss over the course of the last 24 hours. A couple of things to be aware of there: they fell as the chairman Gary Gensler told Barron's yesterday that banning the controversial practice of payment for order flow is on the table. So more regulatory potential changes there on that front, um, that order flow being what's been linked to Citadel and so forth, Robinhood. And separately, CNBC reported PayPal is exploring ways to let users trade individual stocks, which obviously would be direct competition for the firm. So their share price feeling the pains from that announcement. Um, otherwise, flipping over back to the macro and talking about what happened in Asia, because despite the general positivity perhaps that can be seen around markets, the European Open, it's kind of really brushed aside any negative developments overnight. But to get you up to speed, there's been a few things to be aware of. For one, we have had the official Chinese manufacturing, non-manufacturing PMI numbers. The manufacturing number was 50.1, pretty much in line. Expectations were for 50.2, but their non-manufacturing, so their services, came in at 47.5. Quite a big miss on expectations of 52. And in fact, it's the first time in contraction below 50 in 16 months for the services number in China. Um, so China's businesses and broader economy still under a bit of pressure. This has been quite evident in recent Chinese data points. Um, factory activity expanding at a slower pace, service sector slumping, contraction. Why this isn't just an outright net complete negative is the fact that the further this slowdown becomes more evident, the more likely it is there's going to be near-term policy support in a variety of different forms to help prop up the market. Remember last week there was some talk doing the rounds about them potentially cutting the RRR, the reserve requirement ratio, again. Otherwise, the, the reasons why this moderation in data is happening in China is that momentum has weakened due to domestic COVID-19 outbreaks, high raw material prices, slowing exports, tighter measures to tame the hot property market. There's been a campaign from the government as well to reduce carbon emissions. So definitely a couple of things to be, to be aware of. Also, the latest crackdown— we've gone from everything from, as I said, property to education to technology, the eyes of the government now being turned to gaming. Um, so if you're an avid gamer and you're under the age of 18, well, good job you don't live in China because what they've enforced is their new rules forbid under-18s from playing video games for more than 3 hours a week. And that did weigh quite heavily on the shares of Tencent, the world's largest gaming firm by revenue. They were down over 3.5%. In overnight trade. And also elsewhere in the region, Japanese factory output dropped 1.5% in July from the prior month, according to official data, hit by a decline in production of autos, including passenger cars and small buses as well. Otherwise, quick jump geographically over to elsewhere and what we've had announced yesterday. The EU countries voted to to subject the US to fresh restrictions on non-essential travel amid the ongoing surge that we're seeing in new coronavirus cases in the US. And that's likely to deal a bit of a blow to the tourism industry, which obviously has been very badly impacted by the ongoing COVID situation and the struggle to really fully reopen as the global solution for a vaccine rollout still continues. Not hugely surprising news, I would say, given the COVID situation, particularly in America at the moment, which I'll update you with the numbers. But airline stocks, both sides of the pond, both European and US, were weighed upon yesterday. COVID-19 hospitalizations in the US have remained above 100,000 for a week, so consistently for a week, for the first time since January. Over the weekend, some some of the areas like Hawaii, Kentucky, Oregon, Washington, um, all reported their highest number of hospitalized patients actually on record. However, on a slightly more positive footing, some of those other regions, uh, large populous regions like Florida and Texas, which had been seeing the bulk and contributing to that outbreak, uh, in America, have actually started to come off, uh, the highs in terms of, uh, hospitalized patients. Which is obviously a more positive factor. In other related news though, one thing that has come out overnight is in regards to Moderna's COVID vaccine. Latest reports suggesting in a study that their vaccine generated more than double the antibodies of a similar shot made by Pfizer and BioNTech. So just to be aware of. Otherwise, yeah, we've had this really quite devastating storm hit the Gulf of Mexico. What's the latest there? Hopefully you managed to catch some of my tweets before the reopening of electronic trade on Sunday night. But the latest is that ExxonMobil said there was no damage to its Hoover platform, which was evacuated as Ida approached Louisiana coast over the weekend. They said, the company, quote, we are returning crews to platforms and have begun the process of resuming normal operations. BP employees will remain evacuated and production will remain shut in until we have confirmation that our platforms are able to operate safely and pipeline companies have confirmed the operability of offshore pipelines. So give you some numbers first. So as of yesterday, 1.72 million barrels per day of Gulf crude oil production, or translates to 94.6% of the region's roughly 1.8 million barrels per day remains shut in at the moment. All in all, 288 platforms remain evacuated in the US Gulf. And what does that number mean? It means around 51.5% or so of the region's total, um, of platforms is currently still closed for the time being because of the weather. Um, so secondly, what does this all mean in terms of the timeline to get back to resumption of normal operations? Analysts have said that while it's too early to assess if any significant damage occurred to offshore platforms, offshore production historically tends to bounce back to pre-storm levels roughly 10 days after initial declines are observed. So just to give you a bit of a timeline perspective with that, uh, oil this morning, as far as we're trading, we're flat. So we had a bit of seesaw price action, um, we jumped up, we gapped up, uh, a fairly moderate amount, I would say. At the reopening of Globex trade on Sunday night. We then kind of drifted lower, and we're back up toward the upper bound now of those levels from, from yesterday. So trading at 6923 at the moment. Quick look at the calendar for today. This morning you've got the likes of the German unemployment change and rate coming up just ahead of 9 AM this morning. You then got the HICP flash year-on-year numbers coming out of the eurozone at 10 o'clock. So worth keeping an eye on that. You only expected to jump up to 2.7% from 2.2%. It's worth keeping on the euro and European-related assets. Um, no 1:30s out of the US. You've got Canadian GDP. You do get though this afternoon your Chicago PMI at 2:45 and US consumer confidence at 3 o'clock. The Chicago PMI, keeping an eye on supply chain disruptions, rising prices they're still very much in focus and like to see a slight moderation from what was previously last month in Chicago PMI, the second highest post-pandemic reading that we had seen. US consumer confidence due to moderate slightly from previous numbers. And then otherwise on the calendar, ECB's Lane speaking a bit later this afternoon at 1:30, some Italian supply coming out earlier this later on this morning. In terms of the week ahead, there's a couple of other things just to give you a very top-level summary. So we've got the OPEC+ meeting on Wednesday. I did see some information about that just come down a moment ago. So the JTC is meeting on Tuesday. The JMMC, which is the Joint Ministerial Monitoring Committee, they're meeting with— or not with, but on the same day as OPEC+. Ministerial meeting is happening tomorrow. What's the expectations? So a rollover of the 400,000 easing plan, a few countries to request changes to their baseline production, and Iran to discuss their return to market, which really does depend on the nuclear deal, is what the latest kind of informed sources are suggesting. Otherwise, this week you've got eurozone manufacturing PMIs tomorrow, so to accompany that OPEC+ meeting. And then you've also got the Caixin Manufacturing PMI data from China coming out as well overnight. And then we've got US non-farm payrolls, of course, coming out on Friday, which, following on from Powell, definitely is going to be a key component given the concentration of focus on the labor market in the US for the timing around tapering. So that is it. Um, it's quite a lot of information there, obviously, so feel free to check out my full morning note on my Twitter handle. As you can see there. If you're watching this on YouTube, don't forget to subscribe if you're not part of the community. Any questions at all, just feel free to leave a comment, and I will let you guys get on and have a great day ahead. Thanks.