US-China To Sign Trade Deal In Washington

Very good morning to everyone, Wednesday the 15th of January. Hope you're doing well. Obviously the day has arrived, the beautiful monster as described by US President Donald Trump. Where he comes up with these things, but the Phase 1 of the trade deal is about to be signed in Washington, London time. A bit later on this afternoon, penciled in for 4:30 London time. But people have already, as you would anticipate, have started to question now is some of the finer detail that has come in this relatively short document. I think it's just short of 90 pages, which is particularly unusual given the legality surrounding such a complex trade deal with two major economic powers. But some of that information has started to come out and it's just bumped equities perhaps slightly last night. But things seem to have somewhat stabilized. Irrespective of that, though, the US 10-year, you can see in the bottom right, does remain in the ascendancy at the moment. It's up about 5 ticks. Gold hasn't really done too much so far today, but did see a little blip up going into the close on Wall Street last night and into the Asian session. We are trading up about $8.50 at $15.53 at the moment. So, yeah, perhaps a little bit of caution in the air as we get down now as to not so much is it, you know, are they going to sign it, are they not? I think it becomes more clearly evident now that they are going to sign, but the narrative is already switching to now the level of compliance, the timeline of which then phase 2 might occur. Some of the rhetoric out of the US on some of the technology rules, which we'll go into in a second. And so a few other things to contemplate that maybe just take a little bit of shine off some of the— what would be symbolically a generally a positive event concluding at least part one. But I'll leave the charts for Sam to have a look at. He's, uh, he's here with some of the other guys as well, so I'll let him jump on. So straight into the headlines. And this is what Bloomberg are leading with, um, existing tariffs essentially on billions of dollars of Chinese goods coming into the US are likely to stay in place until after the American presidential election. This comes even despite, uh, the Treasury Secretary Steve Mnuchin trying to claim that it's got nothing to do with the election. It just so happens though that we're not going to do anything until after November But you can read between the lines from a political strategy that obviously makes sense. He wants to be seen firm as Trump, the tariff man, and that China are falling in line and then adhering to the agreement as that has been determined so far in Phase 1. Any move to reduce then these tariffs would hinge on Beijing's compliance with the terms of Phase 1 trade accord, according to people familiar with the matter. Is what the sources on Bloomberg are suggesting. So I don't think that part's particularly too new. These tariffs, though, will stay in place until there's a phase 2, is what's being speculated. And if the president gets a phase 2 quickly, he'll consider releasing tariffs as part of phase 2. So perhaps there was this notion that once phase 1 gets done, yes, compliance, but perhaps a little bit more active in the rolling back, let's say, of some of the built-up and escalation of tariffs over the last, what, 1.5, 2 years. But seemingly the US want to hold firm in order to just deliver the second term for Trump. And I guess that remains— that, that would be an appropriate kind of approach, I would say, from a strategic point of view. Trump did say last week that talks on phase 2 agreement— so now it's okay, so when is this phase 2 going to begin? He said last week it could, it could start right away or it could start after the election in November. So there's really not a lot of clarity on that regard at the moment. And then second to this, which is particularly quite interesting, is the US government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to China's Huawei as it seeks to squeeze the blacklisted telecoms company, according to 2 sources this time on Reuters. So yeah, it's almost like, okay, here's this, here's this framework deal for the moment, uh, they're gonna go to Washington, have a nice ceremony, sign the deal. However, here's this big weapon in my hand. Do not even think about not complying now. Uh, it seems to be the general, uh, vibe. But at the moment, I don't know, my initial takeaway from this all despite some of this apparent negatives that have evolved as we get down to the, the actual conclusion of this at this point, is that I don't see this as too much of a risk, to be honest. I don't think the two sides would have approached this any different, particularly from the US side. So not, not on itself expecting massive reaction to what I've just described, but certainly needs to be thought about over both the approach, not just short but medium term perhaps. So as I said on the charts this morning, things are, I'd say, relatively calm. Any dip that was seen in the equity market into the close on Wall Street last night seemingly has stabilized. European stock futures have clawed back to basically flat now in the session. Oil's pretty flat, slight negative. If anything, currency markets, a bit of a pickup in the Dixie, but perhaps triggered by a technical break of the pivot and the overnight range low in the euro. I'd say is probably the culprit rather than any specific dollar strength. And then obviously we'll be keeping an eye on sterling currency, some major data points on the inflation metrics coming up later. And obviously, as we've been saying since Monday, economic data comes back to the forefront for the UK, just given this idea that the, the case, the evidence is, is continuing to build in regard to the Bank of England having to take further policy action in the, in the form of interest rate easing in the near term. So, um, before I get to the calendar though, we have a look at a few of those other things. The other major headlines for me to share are this. We had the API oil inventories last night, and as you can see on your crude chart, no real reaction to this. The data really nothing too much to get excited about. They had a headline build of 1.1 million. Analysts were looking for a drawdown of 1.1 million. Cushing, pretty much flat. Gasoline, a build of 3.2, distillates build of 6.78 million. So, um, we will go into the DOE this afternoon with pretty much an open mind, knowing that this data that came out last night overall was fairly neutral, flat in that respect, and didn't really have much impact on prices. Continued rhetoric coming out of Iran, although it's pretty, pretty quiet on that subject, of course, now that the kind of macro focus has shifted. But the Iranian President Rouhani was speaking just a short while ago this morning and said US forces are not safe in the region today and the EU forecast may be in danger tomorrow, according to Al Jazeera. So obviously we remain vigilant for any developments in that region. However, unless there is anything unexpected, then I wouldn't be looking for that to be too much of a, of a direction driver, if you like. For oil, oil continues to consolidate almost on that quite aggressive pullback that we saw on the downward trend that has been materializing ever really since the peak that was seen on those initial ballistic missiles that were fired, what, a week and a half ago or so. With oil, the final headline that to mention was this, um, we've got OPEC+ may delay its next meeting on output cuts until the summer in June instead of a scheduled one in March, according to TASS. I believe that's Russian news agency, citing an OPEC official that didn't want to be identified. What does that mean? Well, that means that the current agreement on limiting production could be extended to June. So again, the impact on markets fairly benign because this has happened many times. Basically, an indecision has just led to the rolling over of these, these, these quotas that have been in place now for, what, since the beginning of 2018. So something to be aware of, but from a meeting and schedule point of view, just being bumped back, but I don't think it's that unsurprising in that respect. Okay, in terms of the calendar, what have we got? Well, UK focus, as I said, and it's going to be fairly interesting. UK CPI data, um, and with Brexit kind of giving a degree of clarity— at least when I say clarity, I mean till the next 15 days, uh, when we're anticipating then the 31st Boris does indeed deliver at this point of the Brexit process. Um, obviously much to go much further entanglements between Britain and Europe over the foreseeable future, over the next coming months. But for the moment, this week, it's about economic data, just particularly given the Monetary Policy Committee members, which have been sounding more and more dovish and putting the emphasis on now the deterioration of the UK economy. And so the incoming data is particularly important for markets' prejudgment about future policy action. And we've had particularly weak GDP earlier in the week. Manufacturing industrial production was very soft. These continued that, that general deterioration in the UK economy. And from an inflation perspective, when you're looking at these measurements and you're thinking about demand, well, just given the current status quo, I'd say the risk is to a downside figure rather than upside. And again, could that act as a bit of a catalyst to help weigh further on the UK pound to have a bit of retest down towards what was a bit of a double bottom of the weekly range formed over Monday and Tuesday? So that's coming out 9:30, definitely warrants watching for sure. And then into the US afternoon, a couple of things actually of interest, however, could well be sidelined by the fact that people will just want to wait and make sure the, the trade deal does get signed in Washington, because that's not happening until 4:30 London time. So if you're based over in the States, Chicago, 10:30. But prior to that, you've got New York Fed manufacturing, you've got some PPI numbers coming out in the US, and of course the DOE numbers. So we'll be here to cover all of those in full, of course. And if man A earnings perspective, you've got Goldman Sachs, BlackRock, UnitedHealth, US Bancorp. I wouldn't be expecting any of those to be an index mover. Certainly it could move the single stock price for sure. Obviously a lot of people still looking at the performance of JP Morgan. I think it was the best ever performance by a US bank. On the flip side though, Wells Fargo was a bit of an outlier because JP finished up I think about 1.1, but multiple single-digit percentage loss for Wells Fargo after disappointing numbers. So Goldman's, they'll be out obviously pre-market. I haven't got a set time as yet. I'll update you as and when I go through my equity prep, but I'd imagine it's probably around midday going off historical precedence. For my speakers, you've got a couple— ECB's Holzmann, you've got Fed's Harker, Fed's Kaplan, both voting members at 4 and 5 PM London time. Respectively. Harker could be quite interesting, um, well, both actually. Harker because the topic is monetary policy normalization, so fairly linked to being relevant for potential impact on markets. And then Kaplan speaking at the New York Economic Club lunch, which that often does get used historically as a bit of a platform to give a bit of insight into policy thinking. So both of those warrant monitoring. And then just given the status quo I've said about the Bank of England, in addition to the data, you've got Bank of England Saunders coming up in about half an hour's time at 8:40. And Saunders, you'll of course note, is one of the dissenting members and one of the doves. So you can already expect what type of rhetoric you're likely to hear from him in that regard. All right. That is it from me. Hand you over to Sam, and I wish you a good day, and I will see you in the chat room. Thanks very much.

Cheers, Ant. Yeah, just having a look over equities, which are just starting to get a bit more lively. Kind of what we were doing 24 hours ago, and it came down. We identified those support points, and they were the lower points of the day. But just keep an eye here on the DAX. Starting to come down to its lower point that we had during the Asian session, also the low that we had on Monday. So worth keeping that level marked up. You'd expect a bit of profit to be taken from anyone that is short around now as well. Of course, if we do get a bit— get below that low, then we have to have marked up the low of yesterday as well. The highs of the last couple of days, just starting to get squeezed in as well. And a rejection of that up this morning has really led to a lovely reversal, uh, in this market. So getting squeezed both ways, it's almost wait and see what happens, I think, uh, before the bigger move could come in. But literally just below here, you can see this trend line could mark up there as well. Price getting squeezed both ways, bigger move to come either to the upside or the downside on a break of that. S&P this morning, as with the Dow and Nasdaq, just breaking, uh, these little trend lines that you see were so well respected from 5 o'clock. And just bring the Dow in as well, as of course very, very correlated. And the Nasdaq there as well, all breaking through at the similar time that the, uh, the DAX was as well. So nice little trend line break there to start the day for, uh, equities. Yesterday we, we almost reached that, that all-time high for the S&P late in the session. Wasn't to be just yet, so keep a, a watch on that potential trend line if that is to come into play. Also using these, uh, trend lines here from the 10th, price getting squeezed in much like the DAX. Almost worth waiting for again that bigger move to come. Of course today, uh, you know, anything could could happen with the trade stuff. So maybe this is one to look at later on in the session and go from there. But, uh, yeah, equities across the board just getting squeezed. However, just come to the support points in European equities, so don't get too carried away, much like yesterday, uh, we saw. Having a look over at the pound, we were talking about a potential trend line yesterday in the briefing. And if we just bring that back into play here, you can see that was hit. Nice reversal off that. And, uh, we are not far away. I think we actually hit it briefly today. Let's go back to that 60-minute. The lows that we had back on the, the mid-afternoon of, uh, the 10th. Just gonna bring the pivots on here. So if you're a bull and you're bear, here is your I guess areas where you'd be comfortable with your view. Bullish if we can get back above that high that we made today, i.e., the low that we had back on that 10th, the gap as well. Can that get filled? So above 130.66 on the futures. And then for that bigger move to the downside, well, a break of that daily trend and close could really lead to a strong push lower. The pivot today, relatively key, you would say. Some nice price action there from Monday evening and afternoon into yesterday early morning. We broke through it, uh, early afternoon, and that could offer a level of support. Those would be the 3 areas as it stands that I would be interested in, in trading there for, for the pound. So keep a watch on that. Obviously that longer-term trend line from the upside is, is something to, to have considered as well. A lot of these markets just getting squeezed, perhaps waiting for that bigger move to, to come through. Uh, euro here, uh, just other than, you know, bringing in that daily trend line again, you can see similar sort of price action. All of these markets, as the high is getting lower, the, the low is getting higher just over the, the recent days. Price just maybe waiting for a bigger move to happen. I know we've been saying that for the euro for a couple of years or so, but, uh, yeah, let's, uh, let's wait and see for that one. Horizontal resistance, big area around the R1, 2 highs around there. As a keeper, uh, probably a horizontal line marked up on, on that point as well where you could expect to see some profit taking if we were to break above these highs of the day, but also an opportunity perhaps to get short to continue really this overall trend since that trendline break which has been just drifting lower touches as well. Having a quick look over at gold, um, just on this slight, uh, risk-off we're seeing this morning. Gold trying to push higher. Have we been saved by these support points that we had in the early hours yesterday morning? That double bottom on the S2, you know, you've got to feel— when we were saying if it goes below 1435, I believe it was, or 1340 15.33 below there could really open the doors to a further move down. Survived for now, and if you're looking for a bit of a line in the sand— let's just bring this on the 15-minute— where you maybe want to get excited about a short, I would say 15.47.5 isn't a bad one. There's also likely to be some sort of trend developing over the coming sessions. Maybe these lows from the back end of last session. Uh, worth keeping an eye on if that does start to develop as well. Uh, 1550, worth keeping a watch on. Resistance points above where we're trading, obviously we broke out a couple of trend lines yesterday, but the R1— R2, I should say— today you've got quite a nice area where the sellers did take over at the beginning of the week. So have that marked up as a key point, and also that breakdown area late, uh, Friday evening into the Monday morning. That coming in on the futures around 1559.1. Oil, of course, DOE's out later. As I mentioned, uh, the API, nothing to really write home about. Oil's just been drifting, drifting lower. We put this little trend channel on yesterday, more respected to the upside, but I would still have that, uh, just to maybe guide price lower. And then if you're— you can use this of course as a risk management tool. Happy to be short as long as we stay within this. Uh, if you're looking for that opportunity to go long, let's just say that happens today— a break of R1, break of the trend channel, break of yesterday's highs— nice area to perhaps look for that relief rally to the upside. The continuation of this move could well happen if we were to break below that. Just putting this onto the, the 240 chart. Of course, the low of the year, that would have to go as well. But the important point, and we're trading here, the low that we had on the 5th 6th of December around 5771 as well. If that's all to go, really the next area I'd be focusing on— let me just draw this up— around sort of 5678. So it could be a, a quick dollar move if that low of the year is, uh, to go there. I have to wait, uh, to wait and see for that one there. Quick look over just a couple markets catching my eye more on that shorter term. Canadian dollar just breaking, uh, lower. You can see, and the reason I'm bringing this in is if you are short, there's this potential trend that could well come in, and it looks like it's going to mark up with some of that, some of the lows that we had in the early hours of trading. So just be aware of that. But that is just pushing, uh, to make a new low almost for the session. There's a— keep a, keep a watch on that. As usual, any questions, uh, please, uh, do let us know. European equities, which were pushing lower just finding support on their lows, but those big trend lines below. Same for US equities, which broke those trend lines. Maybe look for the retest of that. But a big day ahead. The week really for me is getting started now. Phase 1 deal, is that gonna cause any issues? Time will tell. Big levels on the, the pound. Gold, has it recovered? And oil, let's wait for that DOE and maybe the trend channel as well. Hope you'll have a good trading day. And I catch you all later on.