Virus Restrictions Increase Ahead of Christmas

Okay, very good morning to you. It is Tuesday the 15th of December, so I hope you're doing well. Gonna have a quick run through then of some of the overnight news and how we close on Wall Street. A bit of the disparity again with some of these stay-at-home names outperforming given the still somewhat precarious situation with COVID in North America. So the NASDAQ up but the other two major indices, the S&P and Dow, lower. I'm going to talk about COVID in particular in the UK and the potential for a new strain, a mutation of the virus. We'll have a look at what potentially that could mean, and we're going to have a look at the European restrictions that are being put in place at the moment. And then we're going to talk a little bit about Brexit and then look at the calendar for the day ahead. So let's have a look at the charts to get things underway. And just giving you a quick read across on how things are looking at the moment. And we've got very marginally higher stock futures in terms of the S&P's up around 7.5 points at the moment, Dow up about 50. If we're looking over in Europe, the DAX though down about 23 points. So a little bit of a mixed picture, somewhat following suit from overnight, the Asia-Pacific session. Worth noting in the Asian session, we now have some Chinese data. Industrial production for November came in at 7% year on year. That was in line with expectations. The retail sales 5%, touch softer than expected, 5.2%, and foreign direct investment 6.3%. So the numbers in itself, um, okay, and just following suit generally, an economic stability and pickup that we've seen in mainland China of late. So nothing really too surprising there. But looking elsewhere in other asset classes, gold has seen a continuation of its upward move. So whether it is the kind of ongoing COVID situation, whether it's of this progression in the stimulus talks and the potential reflation idea. Gold continues to remain in recovery mode at the moment, and just keeping an eye on the upside on that trend line from going back to midweek last week on Wednesday. Had a couple of tests here. Be interested to see how gold performs if it continues to make some headway as we come up to around that kind of $1,848 type area. At the moment, we've managed to break above earlier this morning the high that we printed late in the evening session, uh, what the reopening of trade on Globex for this week. So gold remaining pretty bullish this morning, up around $14. Elsewhere in the FX markets, the dollar is flat for the time being. And just having a look at the major currency pairs in EURUSD. Just having a look as well on the trend line going back to the same time frame. So, so Wednesday we had the retest yesterday and we're around that point at the moment, which is also on the horizontal, uh, support line. An interesting area of activity for, um, this week so far. So that's around 1.2168.5 in the futures. Interesting to see how we respond here. Obviously dollar has been dictating a lot of movement in these currency pairs. But at the moment, when do we get the move back up? Obviously, an area here that would be interesting to watch as potential resistance would be up and around this area of 1.2190, up and around the 22 handle then, which is— resides just above and then starts to encapsulate around really the euro highs here, um, of this recent push-up that we've seen, of course. Since the persistent weakness in the dollar and the breakout through €1.20 in euro 2 weeks ago. On the flip side, on the down, if we were to break through here, I would be targeting probably around then the lows that was seen yesterday afternoon here, and then the further lows down to €1.2136, which would be the low that we printed going back onto Friday's session, would be the other way of playing the euro today. In terms of cable, just locked into a bit of a tight range at the moment, uh, looking at 1.3331 to 58. I guess people are a little bit apprehensive of really stepping into this market given the degree of headline noise. We'll talk about some Brexit headlines in a moment, but for the time being, probably just looking for any breakout on the downside, be targeting the low point that we saw from yesterday afternoon. And then you've got the range Asian low that we had after the sterling gap up. So what would be quite interesting if we start to see any deterioration in the pound is around how the market performs at the 133 handle. That was that Asian low on the gap up on the 'we will go the extra mile' comment on the Brexit talks at the weekend. The gap fill then would look pretty heavy to get us back through the S1 on the daily you've got that previous, uh, high that was seen on Friday and that low that was seen on Thursday of last week as potential target on the downside. On the upside, we've got pivots sitting just above that range high, which makes it a little bit awkward. Some areas of resistance on the upside, but on the push through there, then obviously you've got the 134 handle here, and then a progressive move further up towards the, the high end of yesterday's price movement. Now I know a few people were looking as well, a potential trend line from the highs, a little bit messy now, uh, having broke through that a little bit on yesterday morning's session. So for the moment then, that's how I'll be looking at the pound on either side and just waiting for potential any developments on the Brexit side, which we'll talk about, could come as soon as today. Whether or not that's the case was yet to be seen. And then an oil chart, just having a look at the Asia-Pacific low as Europe come in. We're down about 40 cents at the moment. Quite the recovery actually seen yesterday. We came off, we broke, broke down through some of the price levels technically as well from last week, and it was pretty heavy going through really commencement of really the volume pickup on NYMEX all the way through to the European exit, really. And then as we go into the latter hours of US trade, we pretty much saw a full reversal from around $45.50 up to $47 on really a great deal. And obviously the, the downtick, not pinned only, but OPEC coming out with their monthly report, trimming their demand forecast, certainly didn't help things. But again, as we've said before last week, What I find quite incredible at the moment is that anytime this market gets pushed down in the crude space, such as here, uh, this is going into the kind of OPEC meeting territory, and then here again, every time this market comes down, it comes soaring back up in very quick fashion, which, you know, says a lot to me about the way the market feels at the moment, is that still underpinning a strong degree of support here for higher crude prices in, in general. So, um, just looking at things here at the moment, you know, we're at an interesting spot here. The next kind of line down I'll be keeping an eye on would be more around 1 or the $46.24s, and then potentially then a deeper move back down to the low that we saw yesterday if that was to play out. Otherwise, upside, $47.07 is the late US high, and then 4730, 4774, which is the R1, and Friday high would be a target. All right, well, let's get into some of the headlines because I want to talk about COVID a little bit. And you probably would have heard the headline news yesterday, particularly if you're based in London. London and parts of the Southeast are to move into Tier 3 from Wednesday. Health Secretary Hancock said there are 1,000 cases of a new variant of coronavirus that has been identified. He said that the WHO, the World Health Organization, has been alerted to this and notified. He said, quote, that there is currently nothing to suggest this variant is more likely to cause more serious disease, and the clinical advice that is highly unlikely that this mutation will fail to respond to the vaccine that's been developed. But I guess this is quite an interesting thing, and I was reading a bit about this. The FT did a good article last night, and just reading through it to give you a summation, basically mutations of a virus are quite common. The reason for that is, is that in order for a virus to spread, there needs to be a transmission from human to human in this case, and each human obviously's makeup is something different. And so therefore, although there are a lot of similarities the virus mutates ever so slightly, and as it mutates further, it starts to change. So this is quite common. It evolves through this transmission process. What this— and one of the big questions here, I guess, is that does the mutation change enough on two fronts to watch? And one being, first of all, testing. Testing is a really important mechanism to control and suppress the virus in that in order to test people you can identify then the current situation, you can take then corrective action to try and offset say rising case numbers if they're identified. The second point of course is then the vaccine is rendered redundant because the mutation is so severe that the vaccine that has been developed actually doesn't work anymore. These I'd say are a little way off. As I said, this is very common, but this could be one of those situations where if it starts to gain more airplay and if practically more evidence comes in about then the degree of mutation that's happening, any sign that testing is going to be ineffective and then any sign that then subsequently the vaccine might not be as potent as perhaps the initial efficacy rates were suggesting, then certainly this would be a very negative turn in events for the quest to eradicate the virus, but also from a market's perspective, which very much have built in now an effective virus vaccine rollout going through into 2021. Hence the reason why we're up close to record high territory in the equity market, for example. So something definitely worth monitoring. Now, the UK reported just over 20,000 cases as of yesterday, taking the total figure over the past 7 days to 131,708. Now, over the course of then a 7-day, 7-day comparison, cases in the UK are up around 21.6%, hence the reason why then much more of the country is likely to go into Tier 3 when those latest announcements are made on Wednesday. Here you can see cases are rising in London and the Southeast specifically, and it is within the Southeast where this new strain, if you like, of new variant of coronavirus has been identified. And certainly then this worrying, and hence then the reaction to go into stricter lockdown from the government because it could then put pressure on hospitals And this is coming ahead of what potentially could be a super spreader event, which is Christmas, where in the UK specifically restrictions are going to be loosened for a period of a couple of days. Um, so at the moment then, looking at these patterns, uh, you've got kind of the different, um, age categories, but here you've got cases in 60 plus, hospital patients, hospital admissions, and deaths. And as you can see, if you're looking at the northwest or Northeastern Yorkshire, pretty much all four of those metrics are moving lower, whereas in the case of London, apart from deaths which have plateaued, same in the Southeast, the case rates in the elder demographic, patients and hospital admissions are all going up, which would be indicative in the end of an increasing death rate, and so hence the reason why this action is being taken. One of the things here is about the effectiveness of the tiering system. This has gone through somewhat of an evolution for the UK because it was more criticized for its, I guess, looseness in the first instance. It has become a little bit more tighter, and here you can see areas in the UK that have been under Tier 3 and under Tier 2 as of the 8th of December. And here you can see then the level of which— that's a bit hard to see, probably the shadow the rate when tiers were imposed to where they are now. So you can see the tiering up of tier 2 to tier 3 definitely has had an impact on bringing down then the transmission of the overall virus in terms of case rates comparative to other areas where it's been pretty constant. A couple of things here to, to think about. One of the things is a rise in mobility is what scientists have said. Rather than a case of this new variant that has really been the key culprit for areas like London to see pretty exponential growth more recently in case numbers. A lot of people saying that obviously London is much more condensed, if you like, in terms of its population and its geography and demographics. But otherwise then, it's this idea that a rise in mobility is quite a key factor. Are people getting a little bit pandemic fatigued at this point? Lesser adherence, more willing to take health risks on the idea of then just getting back and resuming normal, normal life, if you like. This, of course, worrying to a certain degree because it does come, of course, ahead of what I said was the super spreader event. And this is, this is what we're looking at actually in America at the moment. In America, cases particularly high at this point in time, and test positivity has soared since Thanksgiving in the US. And this is what's underscoring the fears in European countries that they may see a post-Christmas surge. Again, not to state the obvious, but obviously a lot of people, whether or not they do adhere to recommended restrictions, there's obviously a lot of pressure then that gatherings and so on, lack of social distancing, intermixing of different groupings is going to lead then to an outbreak. And certainly this is what we've seen in the US, which here you can see the share of tests that are positive has started to move up after plateauing, if not decreasing, prior to the Thanksgiving period. And what this has led to then is if you look at the actual US and averaging of more coronavirus deaths uh, in a, on a 7-day average, it's more than ever at the moment. So we're higher already than the initial first wave that we saw in the tri-state in the spring. And as you can see, this little kink here in this acceleration is all coming in post-Thanksgiving. So what we've had in Europe, of course, is perhaps a little bit more stern approach from the offset. The Dutch government now restricting are imposing stricter lockdown measures for a period of 5 weeks. That's going to take them out to the 19th of January in an effort to reverse a jump in daily cases and hospital admissions. Germany is set to enter a hard lockdown on Wednesday until the 10th of January. Italy is said to be doing the same stricter lockdown that same date of the 10th of Jan. So Christmas is being jeopardized at the moment in mainland Europe. But the The kind of government stance in the UK at present is still that they're going to allow this loosening of restrictions over that period. I guess it could be one thing to watch. Could that change? We shall see. I think politically, I'm not sure if they, they will do that. For their own kind of political capital would be damaged quite significantly from a public perceptions point of view. Given the cultural holiday of Christmas. So the economic impact, obviously, I don't think actually would be too severe because of the nature of businesses generally being, being closed anyway over that period. So it could be something to look out for, but I'm doubtful whether or not that would happen. So hence the reason why COVID-19 is particularly prevalent right now and restrictions are getting more, more in place as we speak. Okay, moving elsewhere, let's have a quick update on Brexit. What's the latest here? Has gone a little bit quiet since the kind of, um, the kind of high frequency of, of talks and headlines that were coming out towards the back end of last week. It's almost as if like it builds up to these crescendo pressure points and then nothing happens, the deadline moves and kind of fizzles out, and then builds up momentum again. And I definitely think that momentum will build towards the end of the week At the moment, the latest is then that Barnier said that fishing rights can be settled, then the deal could come as soon as this week. But he warned that there's still a lot of risk that talks could drag on all the way up to the end of the transition deadline of December 31st. People close to the British team has said talking about a deal as early as today to give the UK Parliament time to ratify the accord before it breaks up for Christmas. However, yesterday an official said there was no significant progress in recent days despite despite efforts to reinvigorate the process. So I'd say it's highly unlikely that a deal will get done today. If I'm wrong and there is a deal, I would say, just given markets aren't really looking for something this soon, you'd probably see a pretty strong relief rally intraday at least in the pound. And certainly we would probably plow through the highs that were seen yesterday through the R1, um, for sure. Other than that, I'd probably say just keeping an eye on the dollar, um, and the dollar firming up a touch as Europe come in. So I'm a little bit keen to see if we get that and we break out of that Asia range fairly tight and cable, and we get down to the lower bound of where we were in the Asia PAC session after the gap up on Sunday night, then perhaps then it could be, um, an interesting short player there. down to around the 132.5 type region, um, in, in cable. Otherwise, elsewhere, US stimulus, uh, what's the latest there? Um, well, a bipartisan group of lawmakers delivered details of their proposed $908 billion in spending on relief. House Speaker Pelosi and the Senate Democratic leader Chuck Schumer have embraced the group's effort, but the Senate Majority Leader Mitch McConnell and other top Republican leaders have said that they're in favor, of course, of the Treasury Secretary, the guy on their team, Steven Mnuchin's plan for a $916 billion relief. So we're still at the same point at the moment, which is similar to what I was saying yesterday. This is something that needs to be watched as we go further into this week. I definitely feel that the end of this week is going to be interesting if the Fed don't deliver any kind of mildly dovish tweak to policy in the wording around their commitments to bond buying, if the COVID situation continues as it is to worsen and result in more restrictions, if there's no Brexit deal, and if politicians roll this over again and there's still no deal, and also this is really the last week of trade before any then book squaring going in for year-end, as people will likely— you know, things will thin out as we go into the Christmas week next week. I think the second half of the week could be particularly interesting, perhaps then in a negative way as far as financial market prices are concerned. So for the moment, I think don't get too ahead of yourself, just trade what you see. And equities this morning are moving up again, um, and kind of um, with the mental kind of planning of it I have here of the first half the week, perhaps things relatively bullish and it starts to sour as the week continues, is, is my kind of outlook at the moment. But at the moment we're seeing US stock futures just picking up a little bit, looking to reverse some of the losses that were seen from yesterday at the moment. Obviously the NASDAQ, um, still, and was before yesterday, the outperformer just given the COVID situation. On the election front, just wanted to say that the Electoral College members last night in all 6 battleground states which Trump was legally contesting have cast their results, and they're all in favor of Joe Biden. Effectively then, it's over as far as President Trump is concerned. We've still got to look out for the, the composition of the Senate, of course, with Georgia in focus. But as far as Trump's challenge on Biden, it's a— it's pretty much a sealed deal now. Biden's got it, as expected. This was a headline as well I think probably warrants watching when the US stock market opens later. Apple plans a 30% increase in iPhone production for the first half of 2021. That's a pretty bullish planning here in their supply chain. Uh, the Nikkei is often where you get these kind of leaks about the component part orders for Apple, and this would be potentially quite bullish for the stock. We'll be interested to see how they open later on and how they perform in pre-market. All right, quick look at the day ahead. What have we got? So UK data has already come out, so let me get you up to speed. We have the UK unemployment change -144,000, expectation were for -250,000. The ILO unemployment rate 4.9% against the expected 5.1%. So if anything, slightly better jobs data, but this is October. Things are expected to deteriorate going further forward. So hence the reason probably why you've had minimal reaction in sterling, because people are, are more apprehensive now about the near-term future, particularly with the UK as we've just discussed, going to go in more larger portions of the country into a tier 3, which means that pubs, restaurants, and things will be, will be closed apart from takeaways and so on. Otherwise, going further forward into the US session, you've got Empire Manufacturing, Industrial Production, Manufacturing Production, Cap Utilization, and kind of your main events at 1:30 and 2:15 ahead of the stocks open at 2:30 to look out for. But that's pretty much it, so I'm going to leave it at that, let you guys get on with the day, and I will see everyone else on the live stream in Amplify Live. All right, have a good day. Thanks very much.