US Stocks Continue To Rally With Oil Set For Best Week Since Early March

Okay, happy Friday, 16th of April. Hope you're doing well. And before I begin the normal briefing, don't forget to check out the weekly Amplify Live Market Watch podcast. If you just go on to Apple, Spotify, any of the major podcast platforms and search for Market Watch, you'll be able to find the latest episode that I'll be joined this week Instead of the head of trading, Piers, I'll be joined by Eddie Donmez, who you might have seen on the Amplify Trading YouTube channel a number of times. So an episode will be going out a bit later on this morning, so do check that out today or over the weekend. But otherwise, let's go straight into things and have a quick review of the charts before I talk about the actual news from overnight and then the calendar for the day ahead. And I guess we've got to start with a bit of a wrap-up of yesterday and the really strong US economic data and the slightly unusual move that we saw at the time, which was equities and bonds moving higher irrespective of the fact that we had pretty strong data. So just looking at the numbers first, and retail sales in the US jumped 9.8%, uh, month to month in March of 2021. It was the biggest increase since May of 2020. Again, a couple of things going on there. Of course, more businesses reopening, stimulus checks in pay mid-March, the weather improvements as well following the kind of bounce back from that depressed figure we had in February. In addition to the retail sales report, we also had initial jobless claims, came out at 576,000, below the expectation of 700,000, and it was the lowest level since the negative effects of the coronavirus really have begun, going back to March of 2020. Again, vaccination rollouts pandemic restrictions being eased as certain states reopen, the $1.9 trillion Biden's COVID relief stimulus package just helping employers' confidence tick up a little bit. And that is something as well we're looking to translate into the University of Michigan preliminary number that we'll get later on this afternoon. So employers getting a little bit more confident under those conditions, the ongoing federal support in the form of fiscal stimulus and that helping then to employ more people to facilitate the growing demand we're expecting as the economy starts to grow in the months ahead. And then finally, it was kind of a trifecta of good data yesterday, all at the same time. Of course, you have the Philly Fed Manufacturing Index, and that came in at 50.2, was above expectations. Actually, it was the strongest growth in factory activity in Philadelphia in nearly 50 years. Uh, general activity, shipments, employment, they all rose. Um, so I guess just quickly summarizing, what's the rationale then behind why yields actually fell yesterday, which was slightly contradictory to a classical move that you would expect? Very good data across the board, uniform, all exceeding expectations by a clear margin. You would probably expect the opposite. That to maybe fire up yields and the conversation to begin about the Fed tightening and so on, but not the case. And I do think that's because we've had kind of ongoing repetition from Fed officials every day this week, including Jerome Powell, that they are anticipating the economies to pick up and improve going forward. But at this point, that does not constitute any type of form of change in, in their approach in terms of keeping this accommodative stance for the time being. So at the moment, retail sales sounds pretty fantastic at 9.8%. It was within the top end of the range. Also as well, given the one-time effects of what I've discussed of the, the weather anomaly in Q1, the stimulus checks, I think that the Fed are willing to just look through some of that kind of noise in the data sets at the moment. So I don't think it's really caused for concern to get overly excited at this point in time. So if anything, it's almost like the data is hitting the sweet spot. It's showing these signs of an economic growth narrative without then influencing the policymaking to impede the fiscal and monetary stimulus that's coming into the system. Still on the fiscal side as well to come in the infrastructure package from Biden, of course. So it's keeping equities up, um, And equities again, record high closes, still consolidating up at these higher levels. And yields actually, if anything, backing off. And, and we've seen a bit of a reversal of that move a little bit this morning. As you can see here, the 10-year is just printing session lows. We're down 11 ticks. So you're seeing a bit of a fade of that move of sorts this morning. But a quick look elsewhere, um, currency markets. Currency markets were probably the least reactive to that scenario yesterday that I've just described. And actually, we're trading a pretty clear range at the moment in both the major pairs and EURUSD and Cable. So I wouldn't really be looking at those pairs anything other than range plays at the moment. You can see here EURUSD is pretty much bang in the middle of that at the pivot level, which does encapsulate around yesterday afternoon's high in the US session. Cable at around the lower bound of that range that's been in play really since the last two sessions. So 137.53 in the futures was that low that we had back on Wednesday. Gold, a little bit more interesting. So a bit of a breakout in price yesterday. I do think that that was predominantly technically led, but obviously then coming after the data as well, that, that kind of move that we saw more broadly across the, across the market, we broke out over the highs that we're seeing back on the 7th, 8th of April. We pushed up that's actually providing a quite a nice floor for price at the moment. Again, just like T-notes, we kind of faded the move a little bit, but even though we're fading it, I'd still think it's enough. I think the directional trend pattern will continue. It's just a bit of short-term profit taking that's explaining this, this downtick that we've seen in the Asia-Pac session. And you can see that buyers have come back in at the previous point of resistance here at around the 1760 mark, and markets have trended back higher. On the daily chart, quite an interesting area now for gold. You can see from this rectangle, this was a key area of where price broke down at the end of February, and now we're right back up testing this. And you can see it was an area of, of support back on the 19th of February and on the 30th of November as well. So definitely it'd be interesting to see the daily close here for gold, whether or not I can get back above that level. And at the moment, you can see it's a little bit resistant to doing so. So one to watch for the close today. The other market, of course, that continues to be fired up is really oil. I mean, looking at the headlines this morning, this morning, oil is set for its best week since early March on better demand outlook. And we've had the Chinese GDP overnight, and I'll talk about that. It's a little bit of a balancing act going on at the moment because some of the kind of emerging market space like India, COVID situation is still deteriorating at this point. But generally speaking, a more constructive growth outlook in the majority of areas, like in the US predominantly, but also what we've had in the Chinese data overnight. So demand narrative is looking quite, quite strong going forward. You've got OPEC still controlling the supply side. And you've got a little bit of ongoing, kind of slow ratcheting up of the geopolitical risk at the moment as well, whether that's the US and Iran, whether that's US and Russia, whether that's US and China. So there's a couple of other things there as well to give a supportive nature to price. And obviously we saw that flare up in both Russian— new US sanctions on Russia last night, but also that tension we've seen with the Yemen Houthi militants continuing to take action in Saudi Aramco in Saudi Arabia. Otherwise then, just looking at this technically on oil, so a bit of a breakout in price this morning as Europe has come in, just snapping above the high that we saw yesterday evening London time. So going to the latter part of the US session, so now just briefly running up towards a $64 handle in front month futures. And just having a look at this on a daily chart Quite interesting levels here. Just going to broaden out the chart a little bit here to encapsulate two areas. For one, more near term, this is again on the daily close and the weekly close would be quite interesting to see because you've got that resistance area from the 26th of Feb, and you can see from a resistance support point going through Feb, March, this was quite a key area actually. So 6382, we're there at the moment where we closed today. I think Yeah, would be, will be interesting. That area as well was around the initial year-to-date peak that we had. If you remember when all of the Iranian, um, action was kicking off at the beginning of 2020, pre-pandemic, this was around that area of which we were trading at that point in time as well. So technically it's quite an interesting one to watch going forward given the acceleration in price that we've had obviously this week. Okay, quick look at the headlines then from overnight, and I guess we've got to kick it off with a bit of a review of the Chinese data. GDP came in year on year 18.3%, that was against expected 19%. So again, just to clarify, 18.3% sounds like a crazy figure, but again, remember these are year-on-year numbers, and if you go back in your memory to the beginning of 2020, obviously it took some time for COVID to then break out and become a full-blown global pandemic. It was quite early in Q1 of 2020 when China was experiencing that, that issue and went into lockdown. So on a year-on-year comparison, that's why that number is so inflated. Again, it was, it was actually slightly below expectations. There was a little bit of movement overnight in the Chinese indices, but nothing a great deal to speak of, and certainly nothing I feel that will pollute or dilute any of the market kind of movement that we're seeing in UK and Europe this morning, which I think is generally more based on overall trends and where we're at in market positioning than it is anything to do with the Chinese data. Industrial production was 14.1%, so quite interesting here on, on the mix of the data. Industrial production was, was weaker than expected, 14.1% year on year against 17.2%, but retail sales was higher than expected at 34.2%, above the expected 28%. So GDP rebound's been led by strong industrial output, robust exports, pandemic-fueled demand for Chinese-made medical goods and electronic devices. Um, consumer spending though has been lagging. You can see this, this is the blue line here. It was kind of the worst hit, it's been the slowest to recover. But obviously this is a really strong increase that we've just had here. And it had been that they had been lagging generally the manufacturing activity that had been ticking up beforehand. So, um, actually, despite the softer GDP, I think it's a relatively healthy combination of figures there. Um, otherwise, the other thing I just wanted to mention was on the geopolitical side of things. I did briefly mention the US has imposed a broad array of new sanctions on Russia including curbs on its sovereign debt market to punish it for interfering in last year's US election, cyberhacking, bullying Ukraine, and other alleged, uh, malign actions. So, um, the Russian ruble has seen a touch of weakness on the back of that, but I guess like I said, it's just more that broad geopolitical risk just stepping up a tiny bit at the moment that I think just warrants a degree of monitoring at this point in time. Don't get me wrong, I don't think that's going to spill out and impede this theme of record highs in, in global equities or US equities at the moment, but it definitely does help that oil move get supported and underpinned, I think. So you've kind of got the best of both worlds for oil traders. That's more of a, um, a kind of risk on the potential supply side, but then you've got demand increases with what we're seeing, the likes of the Chinese and, and US growth story at the moment. The other thing I wanted to mention then was this was COVID. What's going on here, which is a couple of different things. Before I talk about the UK, just wanted to mention the US CDC panel tentatively set a meeting date for toward the end of next week, Thursday, Friday, for reviewing and discussing J&J's vaccine safety. The CDC advisory panel head said a hold on the use of J&J's vaccine in the US could stretch out for several weeks. So just reiterating really some of the news and the timeline that we had, we covered yesterday. So going from days to weeks obviously carries— the longer it goes, more problematic for the rollout for those countries highly geared towards the supply from J&J. Somewhat offset as a week as a whole, of course, as we know Pfizer have really been committing to ramping things up. I think it was a 10% increase for the US, 25% for the EU. And actually, just while I'm on the point of the EU vaccines, you know, we've always been quite critical of how slow the EU have been really to, to pick up their vaccination rollout. But I was looking at the numbers earlier this week, and actually across the EU, average daily doses are up 34% week on week, um, Germany and Spain leading the way. And Spain now vaccinating at a pace faster per head of population rate than the UK is, because obviously we tend to look at eurozone-led numbers, but Spain doing a good job at the moment. Um, so yeah, just something to be aware of. But what's going on with this UK COVID situation? Well, the COVID variant, as the headline suggests, first detected in India has been found in the UK, and this has created quite a big push for an increase in testing in 4 specific boroughs in London at the moment. In total, 77 cases of a new variant known as B.1.617 has been recorded in the UK up till Wednesday of this week. Um, it has worried experts as it contains 2 mutations in the spike protein that's been suggested may boost its ability to then escape the body's immune system. And comparatively, um, you know, one of the reasons that made, say, the South African, the Brazilian, the UK Kent variation of the virus so problematic was this particular mutation that meant that it was more transmissible and so on and so forth. And this latest identification of this particular variant has actually two mutations rather than just one. So definitely this is something to keep an eye out for. Obviously, the UK is on its way to full inoculation in the coming weeks and months. But until we get to that point, there's obviously still a degree of kind of tail risk to this. So not moving markets now, but something I'd be looking at just keeping half an eye on. And then elsewhere, just noting, uh, 4 more Japanese prefectures are set to impose a new heightened level status of COVID restrictions at the moment, and that is putting into jeopardy the, um, the Summer Olympic Games. Again, it's being questioned at this point in time. So a couple of hotspots geographically around the world that are seeing some fairly worrying developments on the COVID case side at the moment. That's worth just being aware of, that's all. But again, not enough to impede the short-term intraday sentiment, I would say, as far as today's session is concerned. Finally, quick look at the calendar then. Going through the morning, it's pretty quiet. You've got the HICP figures for eurozone, but these are final numbers, so not expecting any market reaction to that. US 1:30 housing starts, building permits, and then you've got University of Michigan, which as I said earlier is expecting an improvement up to 89.6 from 84.9 for all those, those reasons mentioned earlier. Now, Bank of England's Cunliffe, a notable member of the MPC, but is speaking on regtech, so not expecting much there. And Kaplan's a non-voting member. And then for the earnings, Morgan Stanley, Bank of New York Mellon, State Street pre-market, um, probably going to move the individual stock share price but not going to be something the broader market on the index perspective will be too bothered about, given we've already seen a number of those large financial institutions report this week already. All right, that is it. Gonna leave you to it. As you can hear, my voice is struggling slightly, so hopefully it'll be okay for the podcast. Do remember to check that out. Uh, stay safe and have a great weekend. Thanks, guys.