US Blacklists Chinese Firms Ahead Of Trade Talks

Very good morning, it is Tuesday the 8th of October. Hope you are well. Going to have a review of some updates on the ongoing trade war between the US and China ahead of top-level talks later this week. I'm going to have a look at Boris and Brexit. There was just some headlines that came out which have put some downside pressure on the pound, albeit in a fairly temporary nature. Some German data this morning, Samsung earnings overnight, and then a look at the calendar for the rest of the day. So that's what I'll cover on my side, then Sam will come on and do the look at the charts from a more technical perspective. But first off, before I go into the graphic I'm just sharing with you there, let's have a look at the charts overall this morning. As you can see, the center top chart is cable, so you just had a little bit of a leg lower this morning over the course of the last half an hour or so, accentuated by a little bit of a spike in that wick you can see just a few moments ago, a move of just around 10-15 pips or so. Reiteration, if anything, from the UK government about the stance, uh, and we'll get into that in more details in reference to the credibility behind having a no deal, obviously with that looming Brexit deadline at the end of the month. But otherwise, equity index futures in the US marginally positive. As I said, we'll look at some, some graphics from yesterday. Seemingly the market now taking that regular— what we had seen renewed lift— any signs of optimism of a deal between US and China market, markets just rally at that point. And it was a little bit of a case yesterday, could loam came out and talked about the fact that the administration in the US had begun studying US investor protections in China, but the delisting Chinese companies traded on US exchanges is not on the table. If you remember, that was one of the main stories that was moving the markets only about a week or so ago. So that, in combination with a few other things, um, leading to a bit of relief. I mean, let me just show you that graphic so you can see it really here. You've got the Kudlow comment, two kind of green rectangles there showing the market lift. China actually came out and said quite contradictory to what they said in the press this time yesterday when we were doing the briefing about the fact that there was limited signs of doing any type of deal, a concession. They were kind of making noises of the opposite, and then markets kind of rallying again. So a little bit of a lift into what was then the latter part of Wall Street trade. But going into the actual close, we did see a bit of a pullback, albeit to just— we've basically created a bit of a range, if anything, with pivot providing the downside support level in the, in the SPOOZ future. And then we remain pretty mid that range at the moment. European equities, DAX just a little lower. It's just broken through what was a fairly, uh, tame overnight Asia-Pacific session as per usual. A little bit of a run low on that break, just targeting pivot, which was the lower bound of the price activity from yesterday's, uh, late US session. Uh, oil pretty quiet, albeit minor positive, up 37 cents. Uh, gold slight negative, still sub-1500 at the moment, which is, as I'm sure Sam will talk about, a level of kind of near-term resistance. On the upside, trading down $7 at $14.97 last. So let's get stuck into a couple of these headlines then on the, the news perspective. This was the latest we've had overnight. So despite the seemingly positive comments and those developments I just discussed that saw out the end of yesterday's session, overnight the latest piece of information has been that the Trump administration has placed 8 Chinese technology large-scale firms on a US blacklist yesterday, accusing them of being implicated in human rights violations against Muslim minorities in the country's far western region of Xinjiang. I think is the way that you say it. Uh, the two, or two of the companies involved, uh, include two large video surveillance companies. In fact, those two companies alone account for about, uh, one-third of all of the global market video surveillance technology in the world. So obviously large companies. The others, quite a few of them are based around market leading in the AI technology space in the Far East. So significant in that respect. As you can see from the markets, though, not, not a great deal of reaction. I think a lot of this is because markets have become quite accustomed to the usual routine. What happens at the moment is ahead of the high-level talks happening on Thursday and Friday, There's kind of prep talks as the delegations arrive in Washington for these latest discussions. So low-level talks happen now to set the ground for the, for the big guns that come out, the high senior-ranking officials on Thursday and Friday. And normally what you tend to see here is before the two kind of sit around a table to renegotiate, you get these kind of shots fired, if you like. And this seemingly is this repeat cycle of what we have been seeing through the entirety of the trade war dialogue between these two countries. So I think market fallout for the moment is contained. Interestingly, one thing I was reading this morning was a Bloomberg article which was referencing a research note released from the Japanese bank Nomura yesterday, who are basically looking and observing the, the futures positioning that of hedge funds positioning in the market going into these talks. And from a global macro hedge fund perspective, they appear to be building bullish positions in Asian equities ex-Japan before these US-China trade talks, so indicative that they're relatively upbeat that there could be some kind of positive outcome to the discussions that are happening. I mean, this just gives you a bit of flavor for what that looks like. The blue line is the global macro hedge fund exposure to Asian stocks ex-Japan. And as you can see on the far right-hand side of the axis here, you've had a significant spike here, uh, in the recent week or so. So macro funds becoming more bullish on Asian stocks irrespective of the fact that the Chinese manufacturing PMI is in contractionary territory. But if anything, if you're looking at these numbers here it has stabilized. If anything, is moving further away from the initial low point that we had right at the beginning of the year. So I guess maybe some of these hedge fund, um, players in the market holding these more, uh, longer-term positions rather than trading the intraday, perhaps looking at a bottoming out in this, uh, the significance of the economic impact on China, in addition to the fact that ultimately in the longer term The trade war is going to be managed because both sides need it to be that way, particularly on the US side with the domestic political kind of milestones with the 2020 push coming next year. Otherwise, other than that, I would say a kind of word of warning is to remain a little bit agile, I guess, to the fact that there's probably likely to be more Trump tweets and things like that, rumors in various press articles being leaked. This is quite typical fashion, as I said, going into these, these top-level talks. So like what we saw yesterday, I mean, the market seemingly still has the ability to react to these headlines in a fairly aggressive way. So again, I just think keeping a good ear open to the squawk throughout the sessions going into the end of the week. I think it's probably the astute thing to do if you're going to be sitting trading intraday. All right, moving over to, to Brexit. As I said, we've had a bit of a dip in the pound this morning, but before I get to that comment, this is the latest. There's a magazine, The Spectator, publishes a message from an unnamed government official, supposedly part of the government thinking, and Boris Johnson is said to be preparing for Brexit talks to collapse, and the magazine speculating that the Prime Minister will blame Parliament and Ireland and the EU. So I think that that's absolutely not surprising. And the fact that you've had a senior Downing Street source come out this morning and say unless the EU compromises and does a Brexit deal shortly, then the UK will leave the EU without a deal. So again, that's not Downing Street direct, that's a source, but we know that that's probably come from people like Dominic Cummings in particular, just looking to position Boris Johnson and the Conservative government for the inevitability that this Ben Bill— from everything that I've read, it seems that with all the legal minds that have reviewed that particular piece of legislation, that it's almost impossible to get around. Meaning then that Boris inevitably will have to write a letter to Brussels to ask for an extension on the 19th. Now what that means then is that obviously, as we've discussed before, he's put such emphasis on do or die and so on, on the fact of getting a deal done. So all of this, including that source comment this morning, including this Spectator piece, which I think is absolutely being pushed internally by the government to drip it into the press so that both Europe and, more importantly, the public are aware that as far as Boris is concerned, he is doing the will of the people. He's trying his utmost to get a deal done, and it is Parliament that is blocking him. All of this is gearing up, as we've said before, for a general election— the people versus Parliament. And so as absolutely nothing changes in my mind. I still firmly believe that we're heading down that way, and if anything, I feel even stronger given that Downing Street source and so on, because there's— there isn't apparently any legal wiggle room for him to get out of the fact that he's going to have to delay Brexit. So now it's about how do you leverage this situation away from then what you've committed to but using that almost as a strength to just further, um, kind of hit home the belief that it's the— it's the MPs that are stopping the democratic vote. So again, um, what does this mean for the pound in the short term? Well, I mean, you've only got to look at the pound this morning to see the reaction to that Downing Street source. I don't think I'm the only one of this particular view. I think this is the market overall. I mean, look, the, the spike that happened was only about 10 pips, and we've already recovered any of that little grind lower that we've just had. So everyone knows this the case, that this is what Boris is up to. Uh, it's unsurprising from a market's point of view. Again, this is all kind of public perception he's trying to manage gearing up for that election. Um, Goldman Sachs, they've released their latest update They've said percentage-wise that they still believe the most likely outcome is for the UK and EU to agree on a deal before October 31st. So they're looking at 60% for that. Now they're looking at— I'll share the, the link so you can have a read— but they're looking about this whole latest plan that Boris put forth about a week or so ago and how it's kind of the best of both worlds of trying to get a compromise for the solution around this Irish border issue, and that this is the closest that we've been so far to potentially getting some kind of compromise. So Goldman's a little bit of an outlier, I'd say, in that sense, putting a 60% probability on that. As far as the timeline is concerned, remember, there's the kind of self-imposed deadline from Ireland, the EU, including Macron as one of the key players on the European side, but then also from Boris Johnson is that if he's going to get this deal done, it's got to happen by basically Friday. And so you're probably going to see a bit of a pickup potentially in volatility, uh, in the pound as we go through the latter part of the week. And if anything, I still think that there is— if, if I was going to pick a side— room for a relief rally fundamentally on the confirmation of the delay happening. Now that's not because Brexit's gone through some evolution and game-changing factor. This is purely, uh, the fact that the cliff-edge scenario of that no-deal disorderly Brexit has been removed, at least for the time being. Um, okay, let's have a look at a few other things. We had some German data this morning. Markets have really brushed over this, and I think that's likely due to the, the fact that I mean, if you look at this data set for industrial production in Germany, it does tend to be a little bit all over the place, albeit we had a positive surprise this morning at 0.3%. Expectations were for a 0.1% fall. And then the other thing overnight that could reverberate across some of the other chipmakers, both this morning and when the US come in, and particularly in the tech sector, is The Korean firm Samsung, they've beaten forecasts with a 56% fall in operating profit. Now that actually sounds a little bit counterintuitive, doesn't it? They've beaten expectations because they had a 56% fall in their operating profit. That's actually good news, if you can believe it. The reason chiefly behind there— behind this and the reaction in their shares overnight is because low chip prices are weighing on third quarter guidance. But analysts have interpreted the information that they've released overnight as reckoning the worst is now past for the sector. So this could have repercussions for the, the broader market in terms of that specific chipmaking sector later when the US opens. So worth just bearing that in mind for the NYSE open later on this afternoon. Um, the other thing is overall I would say markets so far have been relatively, um, quiet overall. And one thing I just wanted to remind you was that there's a couple things obviously that are big happening in the latter part of the week. The biggest of course being, uh, the resumption of those trade talks. Then you've also got US CPI, which is probably one of the main economic data points this week, and that's on Thursday, and you've got the FOMC minutes on Wednesday night. So, you know, if you were thinking about this whole week as a whole, the composition of where the kind of ebb and flow might come as we go through the 5 trading days that comprise the week, then I would say it definitely is going to be back-ended in that respect. So I think just a little bit of patience, not letting frustration kind of come in if you are trading, you know, kind of throughout the intraday session. There's definitely going to be plenty of opportunity, I feel, to come if there's any, you know, the schedule and fundamental catalysts or anything to go by. Okay, so for today's session, just for the calendar, what have we got? We just skipping ahead, it's fairly quiet now for the rest of the morning. You've got ECB's Lane speaking with another more newly appointed De Goff, de Kos speaking later at 10:30. Bank of England's Tenreyro is also taking part, taking in that panel discussion. Fed's Evans later on this evening. Fed's Powell also speaks, but it's a little bit of a generic kind of speech, a view from the Fed. I wouldn't anticipate much in terms of real clarity updates on the economic situation or kind of forward guidance in in that respect. But always be aware, Powell 7:30, Kashkari, the biggest dove, talking at a town hall event later on this evening after the US close. From a data point of view, the main thing for this afternoon is the PPI numbers coming out of the US, and you've got the API inventories later this evening. But overall, relatively quiet. So still keeping an ear to the ground, obviously, for updates on the trade discussions is probably going to be one of the, the key things to, to bear in mind. And then obviously the technical setup will be increasingly important with the kind of lack of calendar significant events upcoming. All right, that's it for me. Hand you to Sam, and I wish you a good day ahead. Thanks very much, guys.

Hey guys, hello. We're all doing, all doing well. It's just having again a look at the, the charts longer term and it's all still quite contained. I think the, the data calendar from yesterday was, um, relatively quiet, so that's not the biggest surprise in the world. Uh, we, we completed that gap into the afternoon, uh, obviously coming down to that pivot just after cash open, a good opportunity to have got long Um, we didn't really offer much insight from the close yesterday to where we're going to finish today. So it's the same sort of levels of interest really. Can we, you know, for the bulls, want to see, you know, confirmed break really above this whole zone. We had a couple of attempts yesterday at trying to really break above it, and we just couldn't, uh, couldn't, couldn't get above. But it's not like we broke below the, the low of the afternoon noon and the day and that pivot. So 20-point zone that we talked about yesterday, I probably would say is still in play. And really waiting for confirmed break lower, uh, is going to be the, the way to play that. I would, would suggest for the S&P and, and the NASDAQ and, and Dow likewise. You can just see that we did at one point, uh, into the afternoon, into the back end of the session, get above what was the previous low of the first. However, Again, like the S&P, that pivot holding firm to the downside for the, for the whole day. So for the US equities, you have your key levels, I would say, in play there. The pound, we had that trend line on from the, the previous days, and that did, however, that did break. And any, uh, I would say move to the upside today, just keep an eye on that. Just keep an eye on that trend that broke, uh, over I would say probably more 7 o'clock, around there. That's something I would, would have marked up. And, and also, by the time that could potentially push, that trend line we also had from the top, uh, could well come into play around there as well. Zooming in to see at the moment, if that was to come in now, I mean, admittedly you'd have to get a spike there for that to happen. There's no data at 9:30, uh, then, you know, that would be coming in around 1:25. 3.42 or so. But yeah, not the biggest move in the world to the downside. Failure here to, to make and confirm a break below the, uh, the low of the third. So, you know, keep an eye on, of course, those previous lows. We saw some really good opportunities, uh, yesterday with, uh, gold, of the, the classics of the low of the day. And again, you've seen the pound do something similar, and it breaks a low, good area support, 1, 2, 3, break, come back, good area resistance, and come back down. So yeah, a bit of a fundamental reason, but also the technicals nicely in play there. The euro, uh, had a go at trying to get back up to that key level, uh, of Thursday and Friday's high. Just didn't want to really have a proper test of it, and the R1 was in the mix there as well. That's still the important level, 1.1055, give or take a few ticks to the upside or downside. That's your zone, and that will be you know, a key level if it was to, to break to the upside, as we've also got a trend line coming from those highs that reside around the same sort of area. To the downside, I mean, you could just argue this is now in a bit of a zone, isn't it? Thursday, Friday low, yesterday's low— I mean, today's low, I should say— all really contained around 1.1010. So good range-bound market for euro. I personally probably would wait for a break either way, um, you know, favoring probably the downside just because I do still think the dollar is overall going to be stronger. If you can get it higher, fantastic, but worth keeping an eye on that range in euro. Oil just catching my eye at the moment, just trickling lower. And if we have a bit of a trend line on from the low of yesterday evening, I mean, it's It's not amazing actually, to be fair. Let's have a look and see if it comes into play around this one from this morning. A bit better, but to be honest, you know, worth keeping an eye on this, this move here in oil because you've got a similar sort of price action that we saw in the pound earlier and gold yesterday. And you, you get this solid base of support and then these, these levels break. So worth having, uh, you know, these previous lows that's marked up in an area of interest, I guess, in looking also around $53 now as an area of resistance should we come back. Oil, yes, they did push higher in, into the morning and then afternoon continued before falling back down into the evening. Uh, $52.24 is the level I've got marked up on, on my charts, not just because of the S1 but also you've got the lows from Friday and then the second as well. It's quite a key area I know we'd have to get through yesterday's double bottom for us to get there at 52.58, but I just like the look of a, you know, key level around 52.24. Also to the upside, I know we broke through it as well, uh, 53.35, the high that we had back from Friday. We had some nice price action around there yesterday. So as a range goes for oil, I'll be looking for it to, to be contained within here, or, you know, see significant move either direction if it was to break to the upside or the downside. Quick look over at gold, and we'll go through those trades from yesterday as they were just, you know, really, really nice. You had obviously here, you can see it's still marked up, the low of the day came back to find resistance once and twice, uh, before continuing, uh, lower there. And we also had a couple of trendline breaks as well. But before that, you can see again what was low of the day, came back and found resistance again before a push down to yesterday's— or what would have been, we were saying yesterday, yesterday's low, so Friday's low. Good area of support, really nice, just price action all over for gold, which it can't always be said to be the case. But some really nice opportunities there. Where are we now trading? It's that very important 1492.93 level, depending where you take it of course. And you can just see significance whenever we come to this level. It's important. That's your, your line in the sand to, to be aware of. You get a close below there, then we can start looking back down towards 1480, and of course then the low of October. To the upside, well, those previous lows from yesterday, which offered good levels to, to get short on breaks or long from support— so 1501, 1506, 1509, well, 1510 if you you want to say as well. They're going to be key levels of resistance as well. Worth keeping an eye as well with gold and any market that does just drift lower like this is if we can, like we've got now, get this 1, 2, 3 tests of the trend, and then, you know, then suddenly you get a really big push above that trend line. What suddenly looked a good area to go short at 1501 now doesn't look as good just because the speed of that breaker that trend. However, of course, you still got a bit of time before we confirm this is a real strong resistance, but it's just interesting to see initially on that first test we're finding some resistance on there. The DAX just drifting lower, coming in down to the pivot. So of course for US equities, keep an eye on that. And actually around this zone, if you like, I would, would say it's pretty significant. Just having a look at yesterday as well, you've got a high around there. You've also got the Friday finish of the day, that high point, and also some nice price action from the second. So again, can we confirm a break below here? You also could argue we are now on the wrong side of a few of these, uh, trends from the lows of the month. But this one here is somewhere I would be keeping an eye on, is the— well, first of all, if we can break the pivot below, but also you've got the, the round number 12,000. Potentially on the third test of this trend line where we've got the low, the third and the fourth, and of course potentially today. We've also then got some support from the seventh as well. So as an area perhaps that it would be drawn towards, 12,000 for me looks pretty key. As usual, any questions of course please, uh, do let us know either in Trading Live or on YouTube. But I hope you all have a good trading day. Stocks just coming down a touch Uh, the, the dollar relatively fat— flat. The pound, uh, still below that trend line, so keep a close eye on that. Euro range-bound, uh, as well. And gold just coming up to what was a really key level yesterday, but keep an eye on that trend line.