Trump Saves Christmas

OK, very good morning to everyone. Hope you are well. And a very happy birthday to my brother. 40 today. I know you're thinning out a little bit, Matt, on top. And I will make you watch this. This is going out publicly. Anthony Cheung, yep, 40, can't believe it. But, you know, I've been in the markets with you for a long time. I know you're away from it now, but sorely missed, of course. But yeah, I'll catch you later on. Anyhow, enough of the shout out. One other thing I wanted to say before I get into the briefing was, you know, obviously traders like to make themselves feel better. So if you did have a bad day in the markets yesterday, I can assure you it's not as bad as Michael Hassenstab. I'm not sure if you've heard of that guy. He's quite a, quite a big hitter in the fixed income space as a fund manager. And if it makes you feel any better, he was heavily invested in Argentine debt. So you can see where this is going. So he basically, in one day, to start his week, lost $1.8 billion in one afternoon. So yeah, if that, if that lifts your spirits and makes you think, wow, it could be worse than, uh, Mr. Hassenstab, certainly is, uh, gonna be a real test of his confidence. But hey, that's what fund managers do. So getting into the actual briefing then, and let's have a look at a few different things here. First of all, we've got the main headline, which is the one that, of course, you guys saw and traded yesterday. And really, that dominates the market kind of setup this morning. I think definitely interested to hear what Sam has to say because I guess the severity of the reaction effect to this delay in tariffs that we heard yesterday from the Trump administration means that it definitely sets us up with some nice technical areas on any reversal or retest either way of the extremity of each side of those moves. So because within the actual updated new information, there's very little to really speak of. So interestingly though, talking to Sam this morning, you know, we both were always of the view that perhaps Trump had been, you know, a little bit too much too soon in terms of how quickly he rolled out these tariffs and escalated the issue. Our mindset being that he definitely needs to control the stock market valuation all the way up until the end of basically next year in 2020. And so not massively surprising, we don't feel, that he's had to do this. One thing that's been particularly interesting, of course, so he delayed until mid-December the 10% tariff on some Chinese-made products, specifically those all geared around the holiday shopping season. So toys, mobiles, laptops, these sorts of things. Trump said he delayed tariffs to spare the Christmas shopping season. So we were saying, just imagine if you saw a Trump tweet of him dressed as Santa Claus saying, "I just saved Christmas." I wouldn't put it past him. But actually, in all seriousness, I think that it's a very astute marketing move from the president because by actually putting that kind of spin on things, not only does he prolong this negotiation with China, which helps then give him ammunition to still have some maneuver to continue the dialogue, to get that needed lift, probably what he'll need in about 12 months' time when it gets into real election kind of, or reelection fever in the States. But in the interim period, one of the, you know, very— it would have been incredibly damaging if retailers, as what I was reading just the other day, just basically if these tariffs were to kick in at the beginning of September, it just isn't enough time for them to build up enough and replenish stock ahead of the important seasonal period that is Christmas. And if consumers don't have a good Christmas, that definitely is not going to reflect well on the administration. So by saying what he's saying, I think he kind of gets a win there from a public perception point of view, perhaps. But then he also achieves his main goal, which is having a more protracted, prolonged negotiation with China, which, which gives him then the ability to still manipulate the situation almost to keep the market where he wants it. So So yeah, a new development. And certainly this opens up the question Sam and I were talking about. Well, is this record high then? Again, do stocks now just continue to push on? I mean, I'll let Sam go into that in more detail. There's some technical areas that really we've got to navigate first. We've got the kind of the top, the upper bound of the price action of the last week. I mean, we've had some really big sizable shifts in US equities of late. You know, a 1 to 2% fluctuation day to day has become a little bit of a normality over the course of the last several trading sessions. Upside that 50 DMA is that red line here on my, my S&P futures chart that has acted as a pretty decent area of resistance. You can see on the 8th, the 9th, and yesterday. And so that's a key area that we'll be watching. But yeah, I mean, does this mean now we push on up? I mean, corporate earnings season is done. There's nothing really left to surprise on that front. This is still the, the US-China trade war, the biggest macro story in town. Italy has been delayed because basically Conte has not played ball with the fact that Salvini wanted the immediate snap election. Salvini's got to wait. So that again doesn't remove but delays any Italian risk coming back to the table. And then the other one is one about, you know, the economic slowdown, which we're going to see definitely still evident in the case of China and in the case of the eurozone. But what does that mean? Well, it just heightens again the prospect of the fact that we're probably more likely are not going to have more quantitative easing. More monetary stimulus. So yeah, it's going to be interesting to see now. But yeah, near-term key levels, I guess we got to break and then close above in order for that to, to materialize. But I'll let Sam look at that in more detail. Otherwise, the other charts, again, pretty, pretty neutral open. Euro-dollar looks more technical than anything, a little, little push above its the high point that we had in the overnight Asia-Pacific range. Gold not really doing too much. Pivot just contained by— excuse me, cable just contained by pivot. But again, not really much in a way. It's pretty sideways action in the Asia-Pacific region. Brexit headlines, there's a couple I can update you, but it's just a rerun of yesterday in the fact that really none of it's game-changing and certainly not enough to make you want to trade the pound for any reason. It's more just political updates, just drip feeding in. And then with oil, you can see at the bottom here, obviously exploded higher on the back of the removal of the tail risk of the immediacy of the tariffs kicking in. Oil getting a big kind of shot in the arm on the demand side, but then it's just drifted lower. We'll have a review of the API data that did come out last night, but all in all, it didn't really move prices. We've just kind of gravitated towards that, that pivot level as well. Down $0.73, but I'd only just see that purely as just a bit of profit taking off the spike from yesterday, more than anything related to an oil headline. So quick run through the headlines themselves. So obviously this is the Chinese one, and they are set to reconvene and start holding talks again. So continues to be a situation to be monitored. But I think, you know, you, you're aware of the latest status quo on this issue for the moment. This did come out overnight though, which was some Chinese data. The weakest industrial output since 2002, and retail sales growth slumped. Investment was below forecast. This is what these numbers in China overnight look like from a graphic point of view, encapsulating the last 5 years. Or so. And you can see after we had this kind of anomaly of a little short-term spike in the previous reading, we're now back down, resuming the, the continuation of the trend, which has been all 3 data points have been decreasing. So none of this is really new, hence the reason the markets are not reacting. We're, we're very much accustomed to the fact now that the Chinese economy is slowing down. The point being is, is to at what point do Chinese authorities, whether from the state or the central bank, start to look to take further action, i.e., the most common one being a further cut to the RRR rate, perhaps 8 of which they've conducted since the beginning of 2018. Do they look to facilitate more liquidity programs? Do they— more fiscal spending and so on? So it's more to do now with the fact that I think now the yuan seemingly has stabilized, that kind of ship for the moment has almost sailed. The market sensitivity to the fixes is almost now being again bedded in. I think importantly as well, more medium-long term, the, the kind of the sensitivity specifically to a breach of 7 has now been We've crossed that hurdle, which is a positive step for China. It does mean that it can allow natural forces to take place, let its currency weaken a little bit to help kind of offset or mitigate some of these, these more economic issues that they're being confronted with at the moment. So yeah, China update on data. Bottom line, it's not great. It continues the situation of a further slowdown. However, the point is, is that we're already really aware of this. So it's not— now it's about just keeping an eye out. What did China do in order to counteract it is important. This morning, the other thing we've had is German growth data. Now let me just remind and refresh your memory. This was German ZEW yesterday, lowest reading since December of 2011. Again, this isn't particularly surprising, but the expectation was for a pretty similar reading to July. The bottom end of the most pessimistic estimate on the street was -40, and it came in at -44.1. So it was an outlier, very negative in that sense. And this is the Economist and analysts perception of what they think about the German economy going forward. Let me just read out a couple of things that they're highlighting. They're obviously looking at the recent escalation in the trade war between U.S. and China, the risk of competitive devaluations— remember, particularly important for an export-based nation like Germany— the increased likelihood of a no-deal Brexit, another also key consideration as well. And it's just putting more downside pressure and likely to put a further strain on German exports, industrial production. So hence the reason why there's growing pessimism here. And if we look at a 5-year, obviously it's the lowest number in 5 years. If we look at 10 years, we're getting right down to the episode of the low that we saw right in the midst of the European sovereign crisis. So what does that mean going forward? Well, yeah, this is one of the things. I mean, this is analysts, but IFO has similarly been weakening as well. And that's really the more important one because that's a reflection of German firms. And as their risk appetite diminishes, then growth has got to slow. And we've had that this morning. We had the flash German Q2 GDP and it, and it came in, um, the number was -0.1%. Now importantly, and the reason why the market really hasn't moved is that markets were expecting this. So from a symbolic nature, yes, we are now negative, but all of these other indicators have been pointing towards that to be the likely outcome. So it's not a surprise. But if we start looking at German growth overall, you know, this is— well, let me just bring— actually, I don't have the actual German growth chart up at the moment. But the point is, is that we have been— we have flirted with around this territory before. We've recovered, but now we're back here again. And so the kind of pressure is mounting, if you like. And importantly, we're going to get the eurozone GDP number later on this morning, of which we'll have a look at in a second. Other things to be aware of that we've had on the Brexit side We kind of know Bercow's stance. He said he will stop Johnson from closing Parliament to secure Brexit. His specific words, he was saying that he would refuse to allow the Prime Minister to close Parliament to secure Brexit. The one thing I feel strongly about is the House of Commons must have its way. So again, this is that whole idea about prorogation, but I think that's an incredibly low likelihood. Anyway. And then interestingly, you have this guy, Tom Watson. He has come out and talked about urging a Lib Lab collaboration, if you like. And this definitely is going to rile his leader, Jeremy Corbyn, because Corbyn obviously is not of that view. But Watson has almost been kind of lining himself up, it seems, for for definitely, he's always been a backer of the second referendum on a final deal. But if Corbyn was to go or be ushered aside, then definitely he would be one of the guys in the front running. And a Lib Dem-Labour collaboration is one of those things where, from a parliamentary arithmetic point of view, would give them this Remain alliance if you start channeling other votes from the Greens, Change UK, and all these other parties that could really stand up against someone like Boris Johnson's Conservative Party. So this is quite an interesting development, but again, not really a pound tradable thing, something to just be aware of. Calendar-wise for today, really highlights being— we've already had that German data in line with expectations, but again, negative growth in Germany of 0.1%. We've then got the UK CPI data coming out. CPI data, it's a tricky one really. It's definitely— cable is at these kind of the depths of the referendum at the moment and, and definitely warrants very close monitoring. Uh, a catalyst here or there, and definitely that lower bound level can get retested, that, that kind of double bottom that we had immediately after referendum. Now yesterday, obviously, the dollar got a real, uh, jolt on the back of some of the headlines that were coming out on the trade side from the US. That obviously going to, as a net default, pressure sterling. If the CPI number came out particularly low, then perhaps we could get down for another push. The level itself is about 80-odd pips away, so it's a fairly decent distance and, um, I don't think the CPI is going to be enough to get us down to that point today. But still, that lower bound level is the one to watch, and starting to consolidate around these lower bound levels. But CPI, could it be tradable? Well, sure, but I mean, the range today on the year-on-year is 1.7 to 2.1. So I think you've really got to be seeing inflation dramatically slowing. I mean, a 1.7 reading could perhaps be quite interesting. Kind of puts us back down to lower levels that we've seen really going back to the 2016, late 2016-17 era. But even then, the Bank of England's hands are tied at this point. There's nothing really they can do, not with the looming deadline of course with Brexit. So not sure how much this really makes a difference. Anything in line, of course, the expectation for Year-on-year CPI UK 1.9%, and I expect it to be close to around that today. So not really looking for too much action on the back of that. The other data point of the morning of interest is going to be the eurozone flash. Again, flash important because that's the first reading, uh, flash estimate for GDP in eurozone expected on a quarter-on-quarter basis to be at 0.3%. So we're actually looking for— or excuse me, 0.2. So to remain the same as it was in the prior reading. But just given the, the negative growth that we've got in Germany, obviously such a big economic contribution to the euro area, it'd be interesting to see how that number comes out. The actual range for the GDP on the quarter-on-quarter is 0.1 to 0.3%. Let's just have a look actually, if we did get a negative reading, when was the last time we had a zero print in eurozone growth. Let's have a look. So got to go back again. It was that same era, that, that kind of height of the eurozone sovereign crisis, when we were basically growing at a— we were flatlining and going minor negative to a tune of about 0.3% or so. Ever since then, I mean, I mean, think how tepid eurozone growth has been even then. So Yeah, negative print might be quite interesting if that was to happen in, in light of the fundamental shift that we've had on the trade war and that consequent dollar strength. Then some upside further moves in EURUSD could be, could be quite interesting. And then looking into the afternoon, the US session is pretty quiet. We've got import and export prices, then the oil inventory numbers. And with the oil inventory numbers, we've got to review then what happened in the APIs last night. Again, crude oil didn't really move on the back of the data because it was just so kind of sidetracked by the, by the big news that we had in yesterday's session. But as a recap, we had a crude build of 3.7 million. That was against expectations. Expectations were actually for a draw of 2.5— Cushing, a draw of 2.5 million, the biggest draw since June of last year. Gasoline, they haven't actually factored the number. I'm sure there was one, so we'll update you ahead of the DOE's. And distillates was a draw of 1.3 million. Um, that's it from me. So quickly, just to address Angela, just to answer your question, US banks— I think if you're referring to earnings, they're already done. Typically what happens is earnings season in America, the banks always kind nowadays kick off earnings season. So it's normally led with the, with exact names that you've just said— Bank of America, Wells Fargo, and Citi. Then you get the following week with the other kind of tier 1 US banks, and then the week after that is when you get then the 100-odd S&P type companies reporting. So they're all done. Okay, let's, let's hear what Sam's gonna say. Have a good day, guys. Thanks very much.

Hi guys, good morning. Let's have a quick look over at stocks as we're just, just starting to tick down in the European market. Both Euro Stoxx and DAX is coming under a bit of pressure and that dragging down US as well. We'll have a quick look over the bigger picture here, just bring in that thicker 50-day moving average. We talked about this in the briefing yesterday, and it's worth just having on, uh, potentially for later on. We know it held up price action last week and again yesterday. I mean, to the tick, it looks like here. So definitely one to, to have up there. Above there, then you are really looking towards 61, 2961, previous all-time high, double top, breakthrough area support, and level of resistance once we broke through to the downside on the 2nd of August. So that's your big level, 50-day moving average, 2961. If that was to go, you think it's a formality to 3000, next resistance, and then of course the all-time high. Not long ago, probably a week ago to be fair, people were saying how this market is the end of the world and we're going back down, and Donald Trump Trump has saved Christmas and saved the bulls, it seems, for now. Looking more intraday, obviously this moving average now not the 50 DMA, so I'm just going to remove that. Key resistance is up where we, we traded yesterday, that previous high that we had from last week on the— well, beginning end of last week on, on the 8th, we hit yesterday. So to the downside, where would, uh, you'd be looking to get in as an area of support? Well, just before I do that, it's going to have a trend line from the high of yesterday. You can see already really nicely respected. However, we are just starting to, to break through some of these areas of support from today. That trend line as well, a bit choppy you would say, but worth keeping an eye. So really I'd say around the pivot, and also if I just bring this up, it makes it a bit of a bigger zone, but 2913 area of support from there, but also down to 0.08. So a bit of an area to be aware of if that's to hold. Should we come back down, I think we continue to push up. And if that was to break through, then certainly intraday you could look for it to start ticking lower. But it does seem with these comments from yesterday that we are— we've seen the the worst of it, which is what we were saying as we came in on the 6th, 8 days ago, how it was unlikely we were to breach those lows again. And so I think you would need some pretty negative comments, Trump to go back on his word, which obviously wouldn't be the first time he would do so. But all things considered, I would be prioritizing, uh, you know, best places to look to go long. I think a continuation here is not the, the worst option in the world. So breaks of those trends into the afternoon as the volume is higher. As we come through the morning, obviously keeping an eye on what European equities are doing to, to get that, um, to get that feel for things. The DAX is breaking the pivot now, which was also a pretty key level from a couple of days ago and overnight yesterday. So worth keeping a close watch on that. To the downside, I have marked up a this point here, 11,665, or 66 if you want to call it that. That's a pretty key level of support, so I'd have that, uh, marked up on the chart for European equities. If that was to also go, and maybe yesterday's high on Euro Stoxx as well, which I'm sure you guys are looking at, then US could also follow suit. But decent push yesterday. Uh, we'll have a quick look over the, uh, other markets now. Euro had a bit of a push higher, uh, this morning over the last hour or so, and really it remains the same as yesterday's briefing. That 112 where we finished the days is going to be important. We just can't quite close below there at the moment. A bit of a trend channel you can see here starting from— what's the date there— the 6th. Uh, really well respected. So it could be that you're, you're Preferring to look for this market to go to the upside. I wouldn't necessarily call it a trend channel, really more a trend line up at that top, but we are trending lower in a bit of a broken channel. But certainly if you're a euro bull, you're wanting this to break, and that's coming around 1.1250. So a break of that, then sure, we can look to go to the upside. I just can't quite see it happening at the moment, but on the same point point of view, those first few days of August, I didn't quite see the strength of that coming through either. To the downside, you know, key break and close below the, the 112 and the low that we had back on the 12th, the beginning of the week, which we've hit a double bottom now as well, uh, would, would mean that I'd quite like to look at a long— a short, sorry, back down to the lows of the year. Speaking of lows of the year, obviously the pound is a lot closer to Hits one, um, the previous low of August I've got marked up, so I'll just draw that on. You can see, you know, this— every time we come back up to these areas, I know yesterday we were talking about how the, the previous low from the 5th acted, and we are just now starting to trend back down. Every time we come higher, it's just met with the opportunity to get short. Again, and I still think you've got to go with that. We are getting squeezed in, of course, from both ways. We don't really have the third test of things, but with the data, you know, coming out at 9:30, probably best to hold off for that. But if it is a bad number, you know, really bad, then sure, 120 we can get pretty easy. From Friday, the reaction from 9:30, you can see we did drop down quite a bit bit. So the data, if it is widely aligned, then fine, we get a reaction. But, you know, as Anthony was mentioning, Carney's hands are pretty tied. Brexit is driving this market. Uh, having a look over at gold, which on the comments yesterday did come down, but we have already retraced a fair bit. The trend line I want to bring your attention to is from the, the highs that we had, uh, following that on the pivot. I'm gonna put this onto the 15 minute, just to show you in, you know, lower detail— more detail, I should say. Let me just adjust that. And you can see here, if you are looking for that long, again, ideally you would want the volume to be there for this one. But a break of that could, could lead to a push higher and, and gold to retrace more of this move. Of course, if it does, just keep away— aware of all those previous areas of resistance. We'll— what we'll support in this case, uh, as potential targets to the downside. If we are to see some more dollar strength come through, uh, or reversal of some of these moves effectively we saw other than yesterday, you can see 1504 is pretty key. And then of course 1500, although spiked through yesterday, remains a pretty important level along with the low that we had from the 12th. So for gold, I guess it's a case of be wait and see. Keep an eye on what happens on this trend line that started from yesterday around 3 o'clock. But oil, decent push higher. The high of yesterday— just going to squeeze this chart— you can see was also the, the low that we had on the, the 1st of August in the morning before that breakthrough. So really, uh, quite a key level there. Also trend line-wise, and we're probably actually not far from coming to test this now, the high from from yesterday. You can see matches up then with the 7:15 spike, and then this morning as well. So coming to test that, that would be something I'd have on, similar to gold, and sort of waiting to see what happens. The only issue we're going to have here is whether the volume is actually there. So I think, you know, maybe in an ideal world it'd be afternoon and you wait for that, that push, um, push higher. But worth having on anyway for oil. And of course with a push like that to the upside, any of these previous levels, uh, of what are now going to be support should we come back to test. And yesterday as well, we, we did break out this, this trend, uh, so I would have that marked up on the, the chart should we come back to get a retest of that level. Any questions, as usual, obviously do, uh, let us know. I think, you know, short to medium term, my favorite stocks go higher, the dollar to strengthen against the euro. Obviously, understandably, the Aussie did push higher yesterday on, you know, the positive trade talks effectively. But I do think, you know, things are still bad there. So I think dollar to strengthen despite what the Big Don might want. As usual, any questions, please do let us know. I hope you all have a great Great trading day.