Trump Agriculture Chief Sees China Spared New Tariffs

Okay, very good morning to everyone. Tuesday the 10th of December. I hope you're doing well. I'm gonna quickly switch straight to the charts and have a look at things and how we're set up this morning. Seeing a little bit of downside pressure, uh, just coming into some of the equity index futures, seemingly led by the DAX. Not that there's been anything fundamental to act as a bit of catalyst in terms of the news. But as you can see here, we have broken through the kind of range low that was holding up some of the price action towards the latter part of last week. On Thursday and Friday, we did bounce it around those levels, uh, at 13,048. Breakthrough that though, and the respective S1 on the daily pivots has pushed us down to around the S2 now, which also resides around the 13,000 level. For the DAX. Just below there, we've also got the low of the morning of the 4th, so midweek last week, to keep an eye on as well. But as far as I can see, as I said, not too much in the way of fresh fundamental news. I would say more of a bit of a range break of that, exacerbated by going through the cash equity open, futures volume just picking up as we've just gone through 8 AM here in London, seeping through a little bit into the US index futures. Which reside pretty flat at the moment overall, um, in terms of the NASDAQ and the S&P, as you can see here. But coming back down to around— and to keep an eye on the range low that we had at really the wrapping up of the US session last night in the futures market, that would be at around 31.25 in the S&P. Given some of those moves, just a very mild bid tone observed in the US 10-year here in the bottom right. Just having a test at its late Asia Pacific high. I've also got, just going back to yesterday's price action, the US afternoon session high, which would be just around these types of levels, with the R1 sat just about 2 ticks above that. And then gold similarly just moving a little bit higher, but again nothing massive for the moment. Currency markets, EURUSD is pretty quiet. The DXY is pretty flat. If anything, a little bit of sterling movement this morning. Had— well, it's had a brief look below the range from yesterday afternoon's low that was seen around the 31.40 area, as you can see here. And that just accentuated a little bit of price movement. However, it has settled at around that level for now. A few things to talk about there. A bit of a PR blooper by Boris in regards to the NHS last night on an ITV interview. You've also got a latest ICM poll which has seen his lead, the Conservative Party, narrow to 6, which is a bit of reversal from some of the re-widening we had seen some, some of the weekend opinion polls. But we'll have a look at that in a second. Okay, going into the news, Sam is back, so you're gonna get your full technical look around the charts as well after I wrap up the kind of main headlines in play. And this is one of the main ones to talk about because of course, aside from the obvious, which is the central bank rate decisions from the Fed and ECB, the UK general election, we do have on Sunday the looming potential tariffs of just shy of $160 billion worth of US tariffs on Chinese goods. However, there was a comment said from last night from the agriculture chief of of the US, a chap called Sonny Perdue, who basically has talked the prospects of those tariffs being implemented down. We've also had the Chinese finance ministry say at the end of last week, just to put it into context, that it was in the process of waiving retaliatory tariffs on imports of US pork and soy by domestic companies. Now, one of the things that has been in question here, whether or not they would in fact delay the implementation of this latest round of tariffs, was if there were signs from China of real concrete commitment to really step up their purchasing of these soft commodities. And so hence the reason why on Friday China were making those types of noises in order to avoid this situation looming this weekend. So if anything, I don't know how I feel about this. In reality, because just because this particular chap is talking about the idea that it's looking unlikely that the president will pull the trigger on these tariffs, you just don't know with Trump. And so I think you've still got to remain pretty vigilant. Obviously, Trump is still pretty active on Twitter at the moment, and so I continue to be monitoring that with great interest all the way up until the end of the week. Whilst markets are open. But yeah, at the moment, this headline taken on its own in isolation, you would say, is a bit of a more positive tip, or leaning towards not seeing an implementation of these tariffs on Sunday. But again, it's a situation in flux. One thing that I thought was quite interesting— I know this is a bit small to see on my screen if you're looking at it at the moment, but I did tweet it. So if you just go on my Twitter handle, you can access the a higher resolution graphic. But I often get some questions about what are the specific goods and to what volume is it traded between goods between the US and China. And this was just a nice graphic really encapsulating all of that, that top-line information. So if we were looking at imports, so total imports from China, telephones for cellular networks and other wireless networks, followed by automatic data processing processing machines, by far the top, going by way of China into the US. And then reversing that, exports would then be coming out of the US into China— airplanes and aircraft. And then of course, as we know, soybeans to the tune of around $12.5 billion US. But again, it can be quite useful to just be a little bit more clued up other than then just responding to news as you see it. If you just know the general balance of where the trade war is really fought out on a trade-by-trade basis. Generally speaking, the rule of thumb, the bigger the import-exports, the more influential it will be to the debate, and therefore the more easier you'll be able to pick through what is actually relevant when it comes to potential market-moving information on the trade war. So again, if you did need to look at that, you can find it on my my Twitter account. Did have some Chinese data overnight following on from the somewhat disappointing trade data we had and we were talking about this time yesterday in terms of exports and the impact that's having on the domestic economy. We've had the latest inflation updates and a little bit, I mean, not great reading for inflationary conditions because CPI is spiking and PPI is declining, which isn't exactly the best sign for their economy. However, none of this is particularly new, I would say, and so I don't really see it as too much of a factor. Uh, to give you the top-level summary here, China's consumer inflation climbed to a near 8-year peak in November. Pork prices doubling, but factory gate prices remain in the red. Uh, CPI in November came in up 2 or 4.5% on the year. It's the fastest pace it's risen since January of 2012, driven mostly, of course, by, as we know, the African swine flu. Core inflation, though, importantly, has remained pretty much unchanged, largely subdued comparative to then if you were to include particularly that food component. So, X-ing that out, other than the impact of pork prices specifically, inflationary conditions are relatively steady at the moment. Hence the reason why then the markets and the central bank of China feel relatively calm about not making any type of irrational decisions about tweaking policy to counteract what's happening. Um, PPI, seen as a key indicator of corporate profitability, was down 1.4% on-year, falling for the 5th month in a row. So it does go to show the continued pressure being felt in manufacturing activity. Activity at the moment. One thing to be aware of is with this CPI elevated number, we can expect that to continue for the foreseeable future because we have the Lunar New Year holiday. So the Chinese New Year happens at the end of January in 2020, and that is the peak consumption period for pork as a, as a particular product. And so therefore, given the lack of available supply because of the uh, the disease that spread across the nation, then we can expect then that number to remain particularly high for the time being. So all in all, just a bit of an update. It continues the pattern of which it has been showing for the last couple of months, but I don't think it really has much translation into market prices and strategies for the intraday today. Moving over, let's talk about the UK general election, obviously looming. Countdown is on. We've only got about another 2 days now until the polling booths open. And a couple things to be aware of. One thing is, not sure if you caught it, but there was an ITV interview with Boris Johnson yesterday where the journalist kind of whipped out his phone whilst he was talking to the PM, and it was showing a picture of a sick 4-year-old child lying on the floor of, I think it was a Leeds hospital. Because of the shortage of beds given the state of the NHS and its funding. The PM, I guess, could have done a better job of handling that situation. He basically just tried to ignore it and talk over the journalist. Then he eventually, due to the journalist's persistence, grabbed the phone and put it in his pocket. Not the savviest response that you ever would have seen from a senior politician. I don't think it's going to be detrimental to opinion polls or anything of that nature, but, uh, anything can happen. Two more days to play for really in this campaigning period. Uh, and if there's any mud to be slung at this point to alter very late game, then it's all going to come out of the woodwork in the coming days. But this is a sort of thing of which, of course, Boris has been absolutely, and his team trying to keep him far away from. You'll remember when Trump was in town for the NATO meeting, Boris was really just keeping a bit of a low profile, and he's done a pretty good job so far of not putting a foot wrong. Um, Sam and I were talking this morning, given previous historical political events that we've monitored, we'd say really it's, it's gone without any great real shocks so far, or real calamities on either side of the political spectrum. But as I say, 2 days is a long time in the political world. One thing to be aware of though is this: there has been a latest poll issued overnight by ICM, commissioned by Reuters, and the Conservative Party has seen its lead over the opposition Labour Party narrow to 6 points. Now, the 6-point lead is narrower than the range of between 8 to 15 points of all of the polls published between Saturday and early Monday. So capturing those released at the weekend, you remember the pound was a little bit resurgent as we reopened trade for this week, given the fact that it looked like Boris kind of re-established a fairly commanding low double-digit lead. However, this latest one has shown only a 6-point gap, which puts us back at one of the most narrowest gaps that we've seen, uh, since all of the opinion polls have begun. The most— one of the most important opinion polls is yet to come, and that is, uh, this is the YouGov website, and the bit I'm trying to show you here is this is when they released on the 27th of November the YouGov MRP poll. If you remember, that was when we had quite an aggressive gap up in the British pound at the recommencement of trade on, on the, the session 2 weeks ago on the Monday, and that was because it showed a pretty commanding and sizable Tory majority of the tune of just shy of 70%. But the latest new data from YouGov's MRP poll was going to be published tonight at 10 PM, and so definitely this will be watched very closely. I would expect there to be a little bit of a knee-jerk reaction upon release of this information. The question is, is, has that I think it was 68-seat majority of which this calculated. Has it fluctuated? Has it got narrower or not, I guess, is what markets will be, will be looking at. And then that certainly could be something we'll be talking about and influencing market activity when we reopen in tomorrow's session. The final part I just wanted to, to comment on was this: as we're getting towards year-end, you do start to see quite a lot of banks putting out their calls for 2020. Just as a heads up, Piers and I will be doing our outlook for 2020 at some point next week. So before the kind of lockdown for Christmas, we'll put out our kind of view about what do we think about things like Brexit and Trump's election prospects, what do we think for end-year-end targets for the S&P and oil. So we'll go through all of that in a special kind of episode, if you like. So make sure you subscribe to the YouTube channel to catch that. But gold has been one thing I've heard a lot of banks commenting on of late, and this was one— this was talking about BlackRock, who've basically been talking up the prospects for gold. I did read Goldman's, and I think it was Barclays, both looking for $1,600 year-end target for 2020 in the yellow metal. So I was just having a look, and if we just quickly switch over the charts, you know, what does it look like to get to 1600? Well, just changing this chart to a monthly candlestick, so obviously this is much bigger, uh, longer time frames, but there's definitely some, some key levels really. We got up to— if we go back to September of this year, I mean, that was where we saw a really clear, clean break came in the summer of what was such a long-term significant level of resistance for gold. And you can see that here around that 1366, and then of course busting through that 1400. When we got through there, the kind of race was on. Then we went straight through 1500, and we got quite close to the top of that move towards 1600 before we saw a bit of an about-turn at around 1560. $1,260 in September, and then we've pulled back to where we are, and we kind of settled here at the moment at around that July high, which has pretty much provided the support in the price action in October, November, and where we are at the moment. So it's kind of make or break, I guess, a little bit for gold. There's obviously quite a few big things still to tackle, whether it's the ongoing trade war and US protectionism, central bank decision-making on the issue of further potential potential rate cuts or further expansion of quantitative easing and these other unconventional measures. These are all things in play, and of course the geopolitical situations as well, particularly in the Middle East, to monitor. But these guys seeing $1,600 would obviously put us back up at those highs of 2019. A breakthrough that— well, you've only got to go about another $40 and we're, we're right at $1,600. And you can see why the market kind of did respond of The reason it did it around that 59 is, I mean, it's quite a clear level when you start looking on these much higher time frames. Any breach above there and 1600, well, I mean, that's the overall bigger target. I mean, we've got to go all the way back to really the right in the depths of the financial crisis and the European sovereign crisis. So that took us up to the kind of 1800 territory at the time. Haven't seen really any other banks looking for that type of bullish scenario, but certainly they have looked that by the end of next year and in, in 2020, we could well be up at around the year-to-date high that we've printed this year, which doesn't seem that far off given where we're trading at the moment. It would be around $150 or so from the current price action. Um, having a quick look at the calendar for today And then let's see what Sam's got to say for the session ahead. You've got some UK GDP numbers coming out. I think, yes, to be monitored, but how much of a trigger point that will be for, for market movement, I'm not so sure, just given the, the implications of the, uh, the focus on politics overriding the economics at the moment. Uh, the GDP estimate, these are this month-on-month reading for October expected at 0.1, do have a range though of 0 to 0.2. I guess given the previous number was a negative 0.1, any further negatives, a breach of the lower bound of the range, could well be interesting, just showcasing the continued weakness in the British economy, perhaps a stronger degree than some might have imagined. You do also get alongside that the UK manufacturing industrial output numbers and the goods trade balance figures as well. It's a little bit of a drop of a number of UK economic indicators at half past 9. Uh, Germans' IOW economic sentiment, that comes out at 10 o'clock for the eurozone. Um, again, just given the fact that German data has been so disappointing, and that seems to be very much baked into kind of the, the perception at the moment of the current status of the economic conditions in Germany and the general sentiment looking forward, then I don't really expect too much here either, not unless it's spectacularly strong or weak. That'll be at 10 AM. And then from the US session, pretty quiet overall in terms of major economic data. The NFIB Small Business Optimism Index is not really a market mover. Then you've got the oil inventories if you're a crude trader at 9:30. Then if you're sticking around late, the FX, you've got the UGAP MRP model at 10 PM. Excuse me. Um, okay, that's it. I'm gonna hand you over to Sam, and I'll wish you a good day. I'll catch you in the chat room. Thanks very much, guys.

Yeah, hi guys, good to, good to be back. Let's have a quick look over the— we'll start off with the DAX, which, as I mentioned at the beginning, just technically breaking those lows that we had on Friday. A decent little pop down, and the level which is marked up there, 13,000, the low that we had had back on, uh, what was the 4th of this month. Definitely want to keep a watch on it. And as we know with the DAX, just because it moves at 8 one direction doesn't mean it's going to continue that way for the remainder of it, as we saw quite clearly going back here to the 2nd. But yeah, definitely keep an eye on that. The S1, 13,000, and the low of the, uh, the 4th, a push below there, then I think you'd, you'd like to be aware of just this area a bit below that. About 50 points or so below that low that we had on the 2nd and the 3rd. You can see, uh, the overall top part of that range that we broke out on the 2nd. The retest of those levels held up really well at the back end of last week. So decent push lower. Of course, with any retracement, keep an eye on those previous lows of the day that we did break through for some resistance. Resistance if it was to come up. But it does look like we're going to get a bit of a test of that €13,000 Euro Stoxx as well on its current low right now. And those levels to be aware of, I mean, for Euro Stoxx, really I'll be focusing more on 3646, the high that we had on the 3rd, a couple of lows on the 4th, the 5th as well. So a couple key levels coming up for Euro Stoxx there as well. And of course, that is to keep going lower, we might well see a a further push down in, in US stocks, which are just coming to test the low that we had from yesterday, 3131. Obviously a decent push through, you know, on Friday. Bit of a, a bit of a quieter day yesterday as expected. Non-farm payrolls on Friday. The Monday typically is always a quiet day. We've had this trend line which has been created from those, the, the top to the all-time high So definitely have that on should we get a push higher. I mean, for it to get there, you'd have to go through, uh, I would say 31.39 as well, which was some solid support yesterday before a push lower. So 31.31 to the downside, 39 to the upside, and then that trend line, uh, and the R1 as well, I would say is a definite point to have marked up below the, the low of yesterday, uh, quite a key level 31.21, but also would call it 29. So some important price action, uh, going back here to— what is this— end of October 26th, the high that we had Friday morning. Also the S1 in the mix there as well. So that's a pretty key point that I would have marked up, uh, on the S&P. And just having a look here now, I'm just gonna put this on 60-minute. I mean, it's quite steep, but you can see let's Let's have a look. Have we broken any significant trend lines? You can see yesterday, really, uh, it's going back to that late last night, got a bit choppy, but closing below that trend line could be relatively key for the S&P. So keep an eye on the DAX this morning to maybe give it a bit more direction, but quite a lot of support just below where we're trading, 3126. And yes, one that I'll be keeping a watch on there. Have a look over the euro Yes, well, last week I should say, came up to the top part of that range, had a couple of goes at trying to get above it. It couldn't. That certainly has held up very nicely. So if we are to get up there again, it would be the— well, a really, you know, another multiple test of that point. How much longer can it, can it hold? But for now, it is decent move low on Friday off the dollar strength. A bit of a retracement seen yesterday, so it'd be worth I'd say it'd be worth getting on a trend line from those lows to see if we can get a third test and maybe then get a bit of a breakdown of that. The R1 today is pretty much yesterday's high, was also some resistance that we saw back on the 6th, and the R2, uh, for today matches up quite well, a bit of support before the non-farm payroll number came out. So technically some nice resistance points to be aware of for the euro. That you would look to have on there. And certainly I'd be having this trendline as well, or potential trendline, if we are to come back lower. However, how much is going to happen before the Fed tomorrow and even Brexit— and Brexit, the general election on Thursday? I'd be patient with these, really let the market come to you before looking to get too involved, of course, going into these key events. But yeah, certainly the R1 and the R2 would be levels that I would, uh, would have marked up as a key resistance point along with that trend line to the bottom. The pound, um, I mean, just looking at the last— was that 1, 2, 3 sessions? You would call it a bit of a new range really. And to be fair, you can make that 4 because if we go back to the, the price action on the 5th after breaking out the day before. You can see we've, we've been quite well respected with those highs. R1 there as well, a couple of goes trying to get above it yesterday around that level, around 31.75, just couldn't do so. The support point that we've got at the moment from the low of the day, well respected yesterday and then Friday evening as well, before S2 below that holds price up as well. So the pound, those would be the points I'll be keeping uh, an eye on. I actually this morning got out of, uh, all pound-related positions and all positions medium term, um, that I had left. And I think it's probably wise to, to take that approach as we do go into the key event. You can see obviously a decent push really starting from the beginning of December and trading up at levels we haven't seen for quite some time, not just against the dollar but of course the euro as well. Euro pound was trading down at levels, uh, that we had not seen since I think it was May 2017. Let's just remove that pivot there and make this chart a bit smaller. You can see, yeah, not far away from those lows now that we had back in April 2017, and a bit of support just below where we're trading from the 9th of May on that year as well. So the euro pound has been been drifting lower. Whether this would be the amazing time to get long Thursday will perhaps give more of a cue on that. But yeah, euro and pound, probably not too much in the way of big price action ahead of these events Wednesday, Thursday, but just something to be aware of there. Gold, obviously after Friday's push lower, would have scared a couple of the bulls, but we're still not below that low that we did have back on the— was it the— yeah, the 12th of November. However, we are just starting to perhaps look like we're gonna build up one of these trend lines from those lows. And you can see, you know, well, you know the way gold can move once they break, it really can push lower. So just be aware of that, as well as the fact that we are perhaps just looking to get in a new range over the last— well, yesterday and a bit of Friday session as well, with the R1 yesterday's high, and, and also was a bit of a low from Friday as well. And then the S1 trend line and 1, 2, 3 tests of that point as well, coming in around 1463. So that was where I'd be keeping an eye on for, for gold and potentially waiting for a break of that trend line to the downside. R1 technically looks pretty good, although you'd have to be keeping an eye on what stocks do as well. I can see Euro Stoxx just having another go at trying to push lower. Quick look over at oil, just having a look here. Definitely just with the fact that, uh, the low from Friday and Monday, you can see there those lows getting higher and those highs getting lower, just starting to get squeezed. We've arguably just made the top part of that penant there. You can see respected really well and having another test of that $59 as well and the high of the day. So keep a watch on that, I'd have to say, for, for oil, and maybe looking for a break as well, $59.02, and then suddenly you're looking towards the highs that we did have yesterday and Friday evening around $59.25 or so. A break of the, the bottom side and the pivot, uh, then you could be looking down towards 58.44, I would say you'd be likely to get some decent support. And then of course any parts of that lower part of that trend line that makes that pennant as well. A quick look over what the DAX is doing, it's having another go down at that S1 as well that we just tested, and the 13,000 just below. So that really is a, a key level to keep an eye on. If that goes, you've got to imagine that US equities are going to have a bit bit of an attempt down at— well, certainly S&P at that 3131 that we were talking about as well. Any questions, as usual, please do let us know. Of course, we'll be on the mic throughout the day, and I look forward to you guys joining us Wednesday evening and Thursday evening as well.