This Week In Markets: 4th - 8th January 2021

Okay, a very good morning to you and a happy new year. Welcome to 2021. It is Monday the 4th of January. I'm Anthony Cheung, the head of market analysis here at Amplify Trading. I've had a few technical difficulties with setting up a new PC over the weekend, so don't worry, the normal video-led briefings will be resuming in due course. But I thought I'd just do a voice note to suffice for the time being. So just having a quick look at really summarizing the state of play as it is this morning at the European Open, with most people now returning after the, the Christmas New Year break. And then going to have a look as well, a couple of the themes for the week ahead, a couple of interesting things going on for sure. So first off then, looking at how things are trading this morning, we've got kind of an overall theme of mild optimism. I would kind of describe it over the latest vaccine developments, uh, and then the implications that that might have then for the ensuing economic recovery. So stock futures actually bumped up a little bit since I did my morning notes that I distributed in the Amplify Live chat. And so the DAX up now about 50, the NASDAQ up about 28, the S&P up about 10 points in the futures. A lot of this coming Obviously over that, that break period we had AstraZeneca. The UK is poised to issue its first shots of that Oxford-Astra drug, which is seen as a potential game changer just given, as we'll discuss in a moment, the ability to manufacture and distribute in a much more quicker and seamless fashion than perhaps the more complex technology that was adopted by the likes of Pfizer and BioNTech originally. So as the pace then hopefully starts to pick up of the inoculation kind of program. And that's what's creating some of the overall optimism, that as well being the fact that it is at cost and it's a lot cheaper, could be rolled out into other countries such as India giving it its approval, for example, over the, over the weekend. So stock futures marginally positive at the moment. That means then that dollar is continuing its weakening trend. Obviously a really defining trend of what really was the back end of 2020 on that lower for longer kind of mantra from the Fed. The DXY is trading at around 89.60 at the moment, down 3 tenths. So both major pairs higher, EURUSD and Cable trading up around 40 pips each respectively. Cable then, obviously Brexit was delivered, although still seemingly a lot to be, to be still defined, particularly on the side of services, which is obviously incredibly important for the UK. But for the moment, I guess the fact that the worst case was not realized in a no-deal disorderly exit, fairly smooth all being said, and definitely in fitting with our kind of expectation and call for the mid to late-deck conclusion of the, the agreement. So at the moment, in the futures, sterling in cable trading up around a 1.37 handle for the time being. Otherwise, elsewhere in the other asset classes, gold, a pretty decent move overnight, in fact, resuming trade. The, the idea then that there's still obviously COVID developments happening worldwide at the moment in terms of cases still still in a fairly precarious situation in some of the major areas that really matter for markets, like in the UK specifically with the new variant, case numbers still particularly high, and also in the US. But also the fact that, um, real yields, which is the difference between nominal benchmark bond yields and the rate of inflation, continues to decline. And so just making it more attractive then for gold. And technically as well We're now trading at around a 2-month high for gold. And, and really, again, from a technical perspective, I don't think there's too much in the way now of us retesting up at around the initial highs we had back in early November of last year, which would be around $1,960, trading around $1,928 this morning. And then WTI crude also higher. I'm going to talk a little bit about OPEC. They're having their meeting today. Remember, they've moved to a monthly format now. but WTI crude in the front month contract briefly touching, uh, up close proximity to $50, uh, and trading up around a dollar at around $49.50 at the moment. Consequently, T-notes then down around 6.5 ticks as well. But let's just have a quick look, starting off from a chronological order with mainland China's CSI 300 index. Of Shanghai and Shenzhen listed stocks. They're up just over a percent overnight. We had some of the manufacturing PMI data come out overnight in China, showed that factory output remained firmly in expansionary territory last month, even if China— or growth, excuse me— slowed slightly compared to November. The actual number was 53, so well above that 50 threshold but below expectations of 54.8. However, worth noting that China's 3 largest state-run telecom groups listed in Hong Kong, they did fall fairly substantially overnight after the NYSE began delisting the companies under that Trump administration ban on US investment in businesses allegedly linked to the country's military. So very, very much a local move, hasn't really filtered in or dented the overall investor focus on the broader assets that we're looking at here. In mainland Europe, UK, and the US from what ultimately is about COVID vaccines. So let's talk about COVID a little bit, and talking about UK COVID firstly. So the UK is poised to give its first shots of a COVID-19 vaccine from AstraZeneca and Oxford University as of today. There was more than 50,000 new COVID cases for the 6th day running as of yesterday on Sunday, And the total number of deaths now in the UK has passed 75,000. Prime Minister Boris Johnson, he was talking yesterday. He did say that tougher lockdown restrictions were probably on the way as COVID-19 cases keep rising, but that schools were safe and children should continue to attend where permitted. So at the moment, this kind of is in fitting with similar to expectations of some of the trajectory that we were talking about particularly because we're still really yet to see the full effect of the slight loosening of restrictions that we've seen over that Christmas period. We've already seen quite a rapid acceleration continue at the moment, but it's likely that the situation is going to get worse before it gets better to that extent. In terms of the actual vaccine, more than 500,000 AstraZeneca Oxford doses will be available as of Monday. And they will be delivered at hospitals for the first few days. The UK is aiming to expand the number of vaccination sites to more than 1,000, with as many as 100 more hospitals and 180 general practitioner-led services coming online this week. So far, as a bit of context, more than a million people in Britain received injections of the Pfizer-BioNTech vaccine. So again, that has been fairly slow in terms of the rollout. That's pretty much been echoed elsewhere in the likes of the US as well, and hence the reason why the AstraZeneca drug, which is seen by far and away the largest pre-government kind of orders, if you like, worldwide, is really quite a substantial pickup perhaps in the acceleration globally, really, in the adoption of a vaccine. That again being just to recap, I know you guys are probably fully up to speed, but given the fact that the Astra vaccine is just cheaper, easier to transport and store, requiring only refrigerated temperatures rather than that deep freezing that's required at -70°C like the likes of Pfizer's, for example. Moving over to the US though, away from the UK, and again from a UK perspective Um, this sounds very negative in terms of the developing COVID situation, but importantly, investors are heavily weighted taking positivity out of the fact of the rolling out then and the speed of which it should accelerate in the vaccination program in the UK with the Astra Oxford drug, and also the kind of ongoing light relief. But I'd say this is much more smaller for factor right now that we averted a worst-case Brexit with getting a deal done at the 11th hour. And so at the moment we're trading at 1.37 handle in cable. As I said, that is quite an interesting area technically. If you're looking on the weekly charts and the futures, this was an area of kind of resistance and support back in what would have been September 2017, and support in February of 2018. So the first real kind of obstacle here technically before then, really one would anticipate we, we push up to 140 perhaps as soon as this week in the cable pair. Probably one of the things I'd look out for that could dent the speed of the rise in cable, because we're still of the view of persistent dollar weakness, would be a full-blown, very stringent national lockdown imparted into the UK. This has been called by the head of the opposition, Keir Starmer, over the weekend. It really depends on the development of the virus over the course of the next week or so when we really see the full effects of Christmas. The reason for that being then that it just means that the, the general economic activity is going to slow even further than perhaps it already has done under those more onerous conditions. But let's have a look at the US COVID. Anthony Fauci, name you're probably very familiar with at this point in time now, he He said the rollout of COVID-19 vaccines is picking up speed, could be fully on track within a week or so. Again, as context, in the past 72 hours, about 1.5 million vaccine doses have been administered. Well, that means about 500,000 per day. That's been substantial pickup in pace. In total now, there's been about 4.28 million doses that have been administered by the 2nd of January, according to Bloomberg's News vaccine tracker. So they're definitely not anywhere near the administration's targets, but we've already known that for some time that that was going to be missed. And again, the, the adoption of the AstraZeneca drug is probably going to be something that will be more significant. But at this point in time, definitely the UK are much further ahead on that particular vaccine. Looking at the New York State On Saturday, they passed 1 million COVID-19 cases, with more than one-third of the state's total cases were reported in December, as cold weather nudged people indoors, holidays increasing social gatherings, residents generally tiring of restrictions. And, and herein lies one of the main challenges that likely to be faced in the, in the Western world as we go into what are typically the coldest seasonal months of the year in January and February. Okay, looking further forward, what else is there to look out for this week? Just kind of summarizing it into a couple of major, major points. Today, OPEC+ Alliance energy ministers are holding their monthly virtual gatherings. My understanding is their calls are going to take place at 14:00 GMT, so 2 PM London time this afternoon. And that's as to decide then as to whether or not they need to move their, their supply pact at this point in time. At a meeting on Sunday— so this is very typical of OPEC+, they tend to have these discussions before their more formal ones that take place later today— several countries including Saudi Arabia sounded cautious about raising output in February according to delegates. Russia has said OPEC+ which slashed their output last year, could add another 500,000 barrels a day next month, whereas the Saudis have publicly kept its view under wraps. So the idea being here is probably then they're not going to increase by a further 500,000 today, just given the fact that yes, there's positives with the whole vaccine coming, but that's still yet to be administered at this time. So there's the practicalities of obviously the distribution and the rollout of getting this out there, which is still yet to materialize. So at the moment, the impact of COVID-19, which is still generally worsening in most places around the world at the moment, is still probably likely to keep them somewhat apprehensive about the consistency of demand. And so therefore, I'd probably expect them to just roll over And that probably does the market, and hence the reason why, um, you know, not only this mild optimism on the vaccine, but this rolling over of not increasing their, their, their production rates is probably going to help just underpin and support oil prices for the time being. But we'll look out for confirmation later. Then on Tuesday, really interesting, um, event that we need to keep a close eye on: the state of Georgia in the US holds a runoff election for two US Senate seats, and that will decide control of the chamber. If the Republicans win one or both seats, they will retain their Senate majority, enabling them to block Biden's legislative goals. So this is quite key, obviously, because if they don't do that, then, and the Republicans are not able to maintain the Senate, which I'd say by a whisker is perhaps then where the, the general consensus lies, uh, the Democrats would in fact then control both chambers of Congress. Biden, the incoming president, uh, coming into the White House later on this month, could mean very radical, uh, changes then for markets' expectations around things like stimulus packages and the ability for the Democrats to pass more large-scale but other than trickle-down policies that Biden might have planned which otherwise might have been blocked by a fractured Congress. So definitely worth keeping an eye on that. Then you've got the FOMC minutes. They're going to come out on Wednesday. I'm not really sure how much impact that's going to have for markets, but nonetheless, we'll be keeping a fairly close eye on that. And then at the end of the week, it wraps up with the Nonfarm Payroll report. November data already indicated that employment market was losing some steam in the US. With 400— or 245,000 new jobs added, which was the fewest in 6 months. For December, the Street expectation is for a smaller 159,000 gain. Final footnote then is Bitcoin. I just want to mention it, and no more than just mention the price. It has traded around $34,000 now so continues to just edge ever higher. But overall then, my bottom line really to summarize everything I've spoken about is that right now COVID cases and vaccine distribution will remain the key focus for the time being. Everything else is a bit of a moot point, to be honest. So definitely keep an eye out for anything to do with, uh, the, the developments in terms of the acceleration of COVID cases, particularly with hospital capacities getting near to, to their max at the moment, in particular in the likes of the US, but also how that's going to play out in the UK. Subsequently then, what type of lockdown restrictions does this result in, in governments adopting? And then finally, how quickly do we start to see the empirical evidence of the way in which this new vaccine from Oxford and AstraZeneca gets administered does it meet its goals? Remember, every vaccine we've had so far from Pfizer and Moderna, they've pretty much slashed in half their initial rollout targets. And so I'd say there's a little yet to be, to be seen here to justify then this kind of runaway optimism for the time being as a medium-term consideration to be aware of. Okay, that is it. And so Hi, welcome back, uh, welcome to 2021. Uh, for those in the Amplify Live community, I'll see you on the live stream later. Okay, take care everyone, speak tomorrow.