US Stocks Win Streak Halted

Hi guys and good morning, just gone 7:40 here in London, Wednesday the 12th of June. Hope everyone has had a good week so far. Um, you can see, uh, from the headline at the bottom, US stocks week-long win streak has ended. Here we'll just have a quick look over the charts from yesterday before going through some of the, the stories overnight. Uh, the man on my right, who I'm sure we're all very, very familiar with now, starts his leadership campaign today. So we'll go on to talk about what that could potentially mean on the day that Labour also looked to try and pass a bill through that might just swing things a touch. Having a look at those charts, uh, bringing up the, the S&P here, you can see yesterday we did or albeit make a new high for the month, uh, come back lower. And we're just testing actually a pretty key level, the, the gap open, uh, from this weekend. You can see we're just trading, uh, a tick or so above that now. So worth keeping an eye certainly on the futures at 2878 as a good level of support, or your line in the sand. If we do get below that, then you might start to see things further tick lower. 20 minutes or so, obviously we've got the the European open and see what DAX does as well. It was a good indicator yesterday morning for that push higher above that key resistance level to lead a push on, only to come back down in the afternoon with the US as well. What else did we, we have yesterday other than US stocks on the move? We had some data out of the UK. You can see here just on investing.com those numbers. If we zoom in here, the average earnings better than expected, uh, including and excluding bonus, 3.4% and 3.1%, decent beats of, of expectations. The pound had a decent enough move considering, uh, usually off, off, uh, these figures surrounding, uh, still with Brexit going on, the market doesn't give too much away. We did push higher above the pivot, went to test our 1, which we talked about in the briefing yesterday as a good level of resistance. I guess the first test of it around 11 held quite well before finally hitting it later on. And I would still have that marked up, 127.37 on the futures. Those, uh, numbers, uh, for the, uh, the growth weekly, uh, earnings growth, you can see while they did beat, uh, the expectations, we are on a decline now from late last year, beginning of this year, for both the including and excluding bonus drifting back down, uh, to near 3%. So not looking all rosy despite the fact that, uh, it was a bit better than expected, uh, with the pound, uh, not just with, um, this data coming out but with the uncertainty perhaps of Brexit not in the way of too much movement. That could all change today, uh, Boris, as I mentioned, starting that leadership campaign the first real time he's going to go public and answer any questions. He's kind of been letting everyone else do his work for him, if you like, as we've seen, you know, overnight Rory Stewart talking up Boris Johnson and all the others. So this, you know, Sajid Javid also talking about Boris, which we'll come on to as well. It seems to be that they're, they're more talking about him rather than their own campaigns, which seems to be the way politics is going now. Also overnight, if we switch back to the headlines, we had the API out in the evening, 9:30 usual time. The headline, bit over, a bit of an over-exaggeration, but Yeah, oil did push lower into the back end of the session and we're now flirting around $52 handle. Um, crude came in at another build, 4.8, so surprise build there, a 5 million or so, 6 million nearly, change of the expected figure, which was supposed to be a drawdown of 1. On the charts, how does that look? We can see near that $52 handle on the futures. If we put this back to last night and just circle the area of the API. You can see a relatively limited initial first reaction. We have drifted lower ever since, and there were some other comments out overnight, uh, as well, which have failed to reignite, uh, the, the crude oil to the upside. Uh, the idea that OPEC might be extending, uh, the production cut just failing to, to get oil higher. Oil drifting lower into the back end of the, the session, of course, didn't help stocks either. Um, but we'll keep an eye on the DAX as that is just testing its low of the day, as the S&P testing that gap fill. Also this morning, you can see very much risk-off. T-notes is bringing into the picture now, up towards the high of the day. Keeping an eye— I know it'd be a early in the morning, would be a bit of a surprise if we were to do it, but the idea that we could push higher and then fill the gap here as well on T-notes would be worth keeping an eye on. Gold helped by a bit of a weaker dollar at parts yesterday, but more so due to the fact that stocks have been weakening. We pushed higher and that has continued again this morning. And same for Tina, it's just like equities, keeping an eye on these gap fills, whether there would be an opportunity to get short or it's long to towards there depending on your bias, uh, as well as worth keeping a close eye on as well. You've got the, the Japanese yen, which I'll just bring into picture. Pushing higher quite nicely, uh, this morning. R1 along with the high that we had back on Monday, uh, worth keeping an eye on. And yes, you guessed it, the idea that there could be a gap fill also, uh, worth keeping an eye on. Also overnight, uh, we had some numbers out of China for their inflation was in line, the month for month slightly worse than expected, uh, not the biggest way in a reaction of markets, uh, off those numbers. But we have drifted lower, of course, with equities at the moment, uh, just snapping a win streak. Whether the longer-term, uh, sort of, or shorter to medium-term bias of stocks has changed, I'm not too sure. I think it's very much expected that, uh, Trump and Xi are going to meet at the G20, but there has been some half-negative comments overnight which we will come on to in a touch, which might just be part of the reason why we have started to come and drift a bit lower. So Boris starting, uh, his, his campaign today, launching his campaign to become UK Prime Minister. A quick look at the odds for the next Prime Minister now via OddsChecker here. You can see pretty much, uh, odds-on favorite Boris Johnson. I think the best price you can get, 7 to 10 which, or 4 to 6. So yeah, less than evens. Jeremy Hunt second. Michael Gove has slipped back down to 14s or 12s depending where you're looking. But Boris very much the favorite, starting his campaign today with a promise to get Britain out of the EU on October the 31st. Of course, easier said than done. He is, of all the, of all the 10 the one who has said by far the least about how he would tackle the biggest problem that the nation faces. His launch event will be the first time he has faced public questioning in months, and talk about how people have just been talking about him will do the work for him. His, I think his stance on Brexit over the months before was, you know, we will get out no matter what. No deal perhaps might be his favoured way. Um, and if we go back to the pound, just looking from— if I just bring this up showing here from the beginning of May, a lot of the, the down move has arguably been priced in for the uncertainty, uh, with, uh, obviously Theresa May leaving, Boris Johnson looking like the favorite to come in. We have had a bit of a recovery helped by the, the dovish Fed. I do still feel there is a bit of Boris Johnson no deal to be priced in to these markets. He, you know, was saying last night, or recently, you know, according to his office, we must leave the EU on the 31st of October. We simply will not get a result if we give the slightest hint that we want to go on kicking the can down the road with yet more delay. Delay means defeat. Also last night, and, and this is probably to be taken— actually, I would say definitely to be taken with a pinch of salt. There was a poll from The Telegraph stating that Boris Johnson, of course, for 140-seat majority at general election if he becomes Tory leader. Of course, Boris Johnson, uh, you know, who has a column at The Telegraph, this poll here may, uh, well, is more than likely to, to be swayed in his favor. Just like if, uh, it was the other way around and, and Osborne was running for something, you've got to imagine the Evening Standard would have him as favorite. So I wouldn't really read too much in, in, in the way of that, uh, but here stating that 140-seat majority at general election if he was to run, uh, at the next general election. Up for debate whether that would be true. or not. I mentioned a lot of other people have been doing the talking for him. I mean, if you're Boris Johnson, you're absolutely loving this. Uh, everyone that's coming out is talking about you. Uh, Javid yesterday, uh, was— it was arguing how Johnson was the, the wrong choice. I believe now more than ever, uh, there is a moment for a new kind of leadership and a new kind of leader. Uh, a leader is not just for Christmas. Or just for Brexit. So we can't risk going with someone who feels like the short-term comfort zone choice. We need tomorrow's leader today. Very, uh, very nice speech there from Javid. But I think with the way it's, it's looking at the moment, Boris Johnson is going to be a nailed-on favorite. We'll come on to Labour's influence in this in a moment and how that possibly could change things, and that is something to keep an eye out today, or later on today, I should say. Also, you had Rory Stewart, who has done by far the most talking, and fair play to him with all the videos he was doing, despite obviously getting caught with his hand not actually filming himself. He's done a lot of talking. It is quite fresh to see a change from all of the recent times and what politicians have been doing. He launched his own campaign on Tuesday evening, taking aim at Boris as well. I see everyone talking about him. It's just making him, you know, more and more popular in my opinion. I don't want to make this too personal, he said, without naming Johnson, but do you really feel that this is the person that you want engaging with the detail of the future of your health and education system? Is this the person you want writing the instructions to the nuclear submarines that you want him bodying your nation at the world stage and guiding it through the most difficult choice that Britain has faced for 50 years. I mentioned yesterday, uh, when Boris was, was mentioning how he's going to raise the, the 40p tax bracket, how many texts I got from people saying, yeah, I would definitely vote for Boris. His popularity is— has gone— it's gone through the roof recently. He's the pop star of politics. Everyone knows who he is. People call him by his first name. You know, everyone was, you know, it's Theresa May, it's Boris, it's BoJo. He, I think, will win a general election. I think that the poll that Telegraph are stating here is obviously biased, but I think if it was to go down that route and he was to deliver Brexit, I think, to be honest, these Conservatives' only choice that they have of actually having a chance of winning the next election, if they were to, of course, everything that's gone on I think has damaged Conservatives and Labour so badly, but I think they need Boris, as mad as that sounds. We also have what could be quite interesting today, is Labour seeking to block the no deal. So this vote, as— or Labour, if you can see here, have tabled a cross-party motion to try and stop a future Prime Minister pushing through no deal Brexit against the wishes of the, the MP. So this could be quite key if this was to get passed, and come the 31st of October, the idea of a no deal, uh, is, say, off the table. Well, the new leadership, uh, what person they get in for, for the leadership, may then start to, to get swinged. If, if it's— if this no deal was off, well, suddenly if we go back to, uh, those odds Boris, Hunt, Gove, uh, Leadsom, who have all talked about a no deal, well, suddenly they're not going to be able to do anything. They're not going to be able to have that influence by taking this hard stance that they may well do with Europe and say, listen, come what October, if we haven't got anything, yeah, we're gone. And it might then start to increase the chances of, say, this, uh, you know, this outsider at the beginning, Rory Stewart, who is perhaps a bit more pro-Remain than the others, to start getting more headway in this leadership race. Of course, the end of this vote will happen before we know who the next Tory leader is. So, I mean, it's only gonna pass, it's not obviously guaranteed at all. The motion will only pass if sufficient Conservative members rebel and support it. And it— I mean, if there's a quite an interesting point here, they're free Tories. So the motion has cross-party backing, including from one Tory MP, uh, Letwin, who's supporting Gove in the leadership contest. But if we go down here, due to, um, the confidence supply agreement from the DUP, the Tories have a majority of Parliament of 5. However, that only means then 3 Conservatives have to vote for the Labour motion, obviously, if all Labour back it, for this to be passed through. It did for a moment look last night that Rory Stewart was, was going to back it. He did, however, come out and say that he had read the, uh, the wrong— is it up here? He did, however, say he read the wrong motion. He was getting a lot of stick at the time, and, uh, when he, he did tweet this, everyone was like No, that's, uh, that's the way to go about it. Um, so whether this gets passed through or not, be something to keep an eye on. That's coming out later this afternoon. Uh, if that was to be the case, I think you probably would get a half-decent rally in the pound on the idea again that this no deal, uh, is going to be pushed down. So just having a look at the pound, where could we get to if this was to get past? Well, I think we get to the top of this range relatively quickly. Trading at 127.68. So keeping an eye on that as well overnight and throughout the session yesterday. Of course, trade was, was still very much in, in the forefront of people's minds. And just having a look at stocks, you can see still finding a bit of support on that gap fill. Worth keeping an eye on that for, for the, for the, you know, the, the early morning trade. Um, but we did, uh, have some comments from Trump, uh, as usual, of course, not just about trade. He was talking about inflation numbers ahead of today's release, but he was saying he's personally holding up a trade deal with China and that he won't complete the agreement unless Beijing returns to terms negotiated earlier in the year. So that is what— if you're looking at this positively The idea is that at the G20 they're going to pick up from where they were back in the year and all is going to be good and they're going to reach this deal and stocks are going to go higher from a trading point of view. Also going on to say, Trump, it's me right now that's holding up the deal. We had a deal with China and unless they go back to that deal, I have no interest. So he said, he's, you know, he's starting up this, this hawkish rhetoric again. He's playing with the markets, he really is. Um, yes, a bit of profit taking. Yes, this hawkish rhetoric has continued, but he's gonna more than likely last minute, even if it isn't at the G20, get this sorted ahead of the election. Uh, in my opinion, he's got the Fed where he wants him. Yesterday he was tweeting, um, about the, the dollar and, and how the Fed interest rate was way too high. We had a bit of dollar weakness off this. If we go to, to the euro chart, these comments, uh, kept coming out, uh, in the back end of this session, uh, around sort of, well, yeah, 3 o'clock, 4 o'clock, and then into 5. We did push higher on this dollar weakness, obviously helping gold as well, as mentioned earlier. But he's not going to stop. And you can— sorry, I think I didn't have the euro chart up there. You can just see, uh, that weakness in the dollar against the euro, pushing higher in both the euro, uh, and of course gold as well late in the session yesterday. So he's going to continue this rhetoric. I do think he's got this market where he wants, um, again ahead of these releases today. The United States is very low inflation, a beautiful thing, um, so just sort of saving himself if it is a bad number perhaps. Um, on Tuesday, uh, in Beijing, a foreign Ministry official mentioned, we have noted that the US publicly stated many times that it looks forward to arranging a meeting between the US and, um, and, and China. If we have this release information, we will release it in due time. There's— there has been a couple of, of comments where certainly from certainly from within China, that they don't want to, to be bullied into it. China's state media has ramped up nationalist rhetoric. The Communist Party's flagship People's Daily newspaper, they ran a commentary last month saying China will never make decisions that give up power and humiliate the country. Whether this could really develop into a story that means that Xi isn't going to go to the G20, isn't going to you know, fall into Trump's hands or not. I'm not too sure, but again, it's worth keeping an eye on any developments from this. And it could of course weigh on things short-term in the build-up to the, the 27th and the 28th and 29th, where the G20 is held in, in Japan. However, on the flip side, does Xi have to? Um, the, the economy has taken a pretty big beating. Um, the argument to me comes down to the need to prevent greater economic damage. The Chinese imports of May tumbled, underscoring domestic economic weakness that could hurt global growth. For China, 25% tariffs could result in a drag of nearly 1% of global growth by 2021 if they were to remain in place. So they kind of do have to do a deal. I think Trump knows he holds the key here. And is just stepping up this, this rhetoric. Whether that means we're going to have a big down day or not, I'm not too sure. Be worth keeping an eye on DAX right now, uh, for a guide for early morning sentiment. That's just pushing to the low of this increased volume. And your line in the sand for the, the S&P can pretty much be where we're trading now, 2878, the gap fill. Below here, then we start looking at a negative week. Above here, we still remain positive. And that's the really the way I would look at it. Also, if we just have a quick look at the calendar for things that could influence stocks today, we do have the inflation numbers out of the US in the afternoon. That would be the, the most important thing to, to focus on at 1:30. I mean, we do have some speakers. I know Draghi speaking in just over an hour, and then we have some further ECB speak throughout the after, uh, the morning and into the afternoon. But the main, main release today to keep an eye on will be those inflation numbers. The core expected at 2.1, the infla— the headline at 1.9. Let's have a quick look on, uh, Trading Economics at those. You can see here relatively stable around that 2%. So if it was to come in anywhere near that, market's not going to blink too much. And likewise uh, here for the, the headline inflation rate around that 2% is not really going to influence things too much. What does a good number mean for stocks? It's a tricky one. Probably get a knee-jerk reaction to the upside to, to come back down. I think any really good number just will, uh, decrease the chance of rate cuts, and therefore that would be seen as a net negative for stocks. But positive number, stronger for the dollar, and you know, just looking at some of these markets of recent time, bringing the euro into the picture just for, uh, the recent trend to the upside, it does have a fair bit to perhaps go down to, uh, the, the bad— the, the downside, the bad side, the downside, if it was a, a good number, uh, as well. So yeah, I mean, that would be the, the main thing to, to keep an eye on for sure, uh, this afternoon. Before we had the, the DOE. So just going back to those API figures, you can see, um, expecting or pricing in a build around 5 million. So that's kind of how the market will look at it. Where oil goes from here will be pretty key. We're just finding a bit of support this morning, but you can see around 50, um, 53.30 on the futures was where we started. before the API. So it's got a fair way to go to before recovering for that. The last two Wednesdays have seen decent pushes to the downside, uh, and we appear to have a similar move as we did for last Wednesday's DOE. We'll be back down near, uh, the low that we have had, uh, as well. Those speakers, just, uh, to, to carry on with there, you've got, uh, Draghi 9:15, uh, and Kuo into the afternoon speaking twice at 1:15. And also, uh, 4 o'clock. Elsewhere, things to keep an eye on going into, uh, the, uh, the best— the rest of the session and the back end of the week. You can see here, obviously, we've got the, the, uh, the, the consumer prices for May on Wednesday. ECB Draghi speaking in Frankfurt 9:15. The race to succeed Theresa May heating up. Keeping an eye on Boris Johnson. Keeping an eye on this Labour deal, how far that goes down. And how that could influence the, uh, the candidates favoring a no-deal. Um, also, uh, we have China and US releasing industrial production, retail sales data on Friday. So ahead of the weekend as well, that'll be pretty key to, to keep an eye on. Uh, just having a quick flick over the charts before we wrap up. You can see the DAX continuing its, its, um— oh, sorry, I didn't have the chart down there— it's continuing its recovery. I was wondering why that looked like it was on the low to see the S&P finally support. So that's helping there with this gap fill. This would be the key level for stocks for now. It's a line in the sand. Below there, I'd be favoring a short. Above here, looking at areas to go long. Yes, there is a couple of points to still be considered strong resistance. This trend that we broke early this morning, a retest of that will of course be an area to keep an eye on, and that looks like it will come in around 28 25. The pound favoring a bit of patience, I would say, ahead of any comments from Boris Johnson, uh, and this Labour deal, uh, cross-party deal. But that does look like with a bit of dollar weakness this morning, it's just testing that key level from our one yesterday. So that could be a level to look at should we get a breakthrough, uh, to test higher up, uh, as well. So dollar slightly weaker starting off, risk off but stocks on a key level, uh, of support from that gap fill. The NASDAQ doing the same around its S1. Hope you all have a good trading day. Any questions, as usual, please do let me know. If I don't speak to you, uh, hope you'll have a good session.