What To Expect From US Q1 GDP & Fed Meeting

Okay, very good morning, Wednesday, 29th of April. Hope you're doing well. Just a quick final reminder, later on this evening I will be covering the FOMC in full live via a webinar on Zoom. You are welcome to register whether you're a trader or a student. You can join us. All you need to do is go on the link I'm going to post in the video description. I think there's about 100 spaces left, so look forward to talking to you guys later on. Will's also going to join us as well as Piers and the others. We're going to have a bit of a chat about some tips about managing your kind of trading mindset as well, so a couple of topics around psychology will also be covered. So I'm looking forward to that, that session. But looking at the, the, the day ahead and what have we got on the agenda, so this morning Yeah, quite interesting actually. I was, I was watching the, the news when it came out last night for Alphabet, quite keen to see their earnings results. Initially in the aftermarket trade they were up about 4%, but actually went as high as 9% in extended hours trade, and that pretty much arrested what was a lower close on Wall Street led by the NASDAQ. I think the other indices were down more, the losses were more marginal, kind of like around the half percent region, but the NASDAQ was underperforming. You can see pretty big sell-off that we had pretty much through the initiation of the, the open, and then went all the way back down to around 8650, which respectively was around close to its S2 on the daily pivots. But you can see a gap up here, and then we've pushed up higher during the Asia-Pacific session. So Hong Kong, Shanghai, Sydney, all their local stock indices rose. Equities in, in South Korea also were higher despite a warning from Samsung Electronics that their profit may fall in the second quarter as the pandemic is obviously hitting demand at the moment. But otherwise it was, you know, a much-needed event to offset some of the selling pressure that was being observed yesterday. But this morning just coming under a little bit of pressure once again, reversing perhaps some of that move. There has been— it's quite a busy earnings day in general. Not only is there a few things to to look out for from the US in pre- and aftermarket. We've had— I can just see AstraZeneca, uh, been out this morning. Their core EPS a touch above expectations at $105. Revenue is also actually a beat. Their final 2020 guidance remains unchanged. I know that Deutsche Bank has been out. There's a few other names as well. So do make sure then, ahead of the cash open in about half an hour's time, that you've had a good read-through if you're trading any of those indices. But in other markets, T-notes, a little bit of an uptick amid just some of this latest, um, just fade, if you like, of the gains that were seen overnight, uh, in the equity space. So the US 10-year, bottom right here, just coming close proximity to the late US session highs that we printed yesterday at 1.3903.5. So just keeping an eye on that, some near-term resistance for this morning. Um, gold pretty unreactive to all of this at the moment so far this morning, trading just above its pivot at 1724 in the futures. And oil having dipped considerably yesterday, finding a bit of a floor around the psychological $10 handle, uh, just given again the kind of liquidation of the USO into further out duration kind of contracts in the calendar months, looking to offset any repeat of what we had last week with that kind of negative oil price situation with that front month futures contract Uh, and so prices have bounced a decent amount. We're up about just over $3 from those lows, uh, and probably now that a lot of that has happened to a certain degree, they've spread that across several months now. Probably the, the likelihood lessens a little bit that we're going to get this massive run on markets. Can't imagine there's going to be a lot of people who are going to be one of touching that, that June contract in particular. Uh, but obviously it does remain susceptible on the downside for two potentially quite violent movements as people kind of liquidate the, the positions in that specific contract rollover to say July and so on. Um, but for the moment fairly stable, um, finding a bit of a platform at a level you can see here down the bottom chart of what was providing some resistance yesterday evening and also during the I should say Monday evening and also yesterday in the afternoon session, uh, and that was also an area of support as well on the 23rd in that June contract. So just sitting at around that technical point at the moment. There were the API numbers, they were out last night. While I'm on the subject, what did they look like? Well, we had a crude build of 9.978 million, slightly smaller actually than what markets were anticipating. We've already obviously seen some huge consecutive builds. This is the 14th, in fact, weekly crude build. And gasoline surprised, though, with the drawdown after 4 weeks of build. So that gasoline number, in fact, just, just going against the recent trend. But the crude headline markets, you can see, not really that reactive to it. I don't think that's particularly a surprise. As I've said, it's been multiple weeks in a row now we've been seeing these, these particular particularly large builds, just given the, the pandemic situation that's ongoing at the moment hampering demand, and therefore still a somewhat oversupplied situation until those cuts really start to take hold from OPEC+ over the coming weeks. Back to the charts momentarily. Elsewhere, the FX markets, not really too much going on right now. Dollar just coming back a little bit from having declined overnight in the Asian session. Uh, the DXY narrowing its losses to just 0.1%. So EURUSD top left and Cable beside it, uh, just sitting above the pivot at the moment. Uh, the pivot probably being a fairly decent level in both pairs for the time being. I'm just having a look here. You can see if I just quickly highlight it, this area of highs that we were, we were trading back on on Monday session. We had a retest of that same area yesterday evening, and that's where that pivot resides at the moment. And then in EURUSD, you've got the overnight Asia-Pacific kind of low here. So we'll just make this a bit bigger. And you've got those other highs as well that were seen from yesterday evening, and then going back as well to some of those other areas here and here of interest. Around that similar price point, which again would coincide around the pivot level. Now, the one thing to be aware of, I guess, going into today's session is we now start heading into what is the fairly busy part of the calendar. Um, we've got the Fed obviously happening later on this evening, got the ECB tomorrow, you've got lots of earnings coming out, you've got people like Boeing coming out later, uh, I think you've got Microsoft aftermarket today. You've got Apple, Amazon, you know, some of the world's biggest companies reporting over the next 2 days. So there's quite a lot here that could act as potential, I guess, catalysts to then inspire, uh, the next kind of more directional move in markets. So at the moment, I'm kind of going into this morning, I guess, fairly neutral in a sense. I mean, with the S&P 500, I was just looking this morning, there's a fairly nice level of, of support more broadly speaking. This is just what I wanted to do here was encapsulate this rectangle here, which was the S&P coming under pressure via the kind of drag that the oil price shock was creating at the beginning of last week. And as we were discussing in the briefing yesterday, that kind of time has passed now, and equities largely have been ignoring a lot of that negative price movement Yesterday we saw a breakout of kind of the, the range of what we had been trading over the course of the last kind of 2 weeks. Quite a powerful initial move on the upside, you can see. However, then as soon as the, the market opened on Wall Street, we came crashing back down again, only then to reverse. But there's a couple of nice, nice points, I guess, of support that— just going to zoom this in a touch here. So the pivot level, again, just kind of like with those currencies here, uh, looks quite nice just from the, the Monday high top and going back onto the 20th as well. So it's probably going to be a decent level now, certainly until we hear a bit more from these earnings reports. They're going to be coming out later, uh, and then the open on Wall Street as well. Um, just having a look, seeing what this trend line potential couple of touches there, and that would coincide where, depending on what the time frames are, with around some of those highs that we've seen, uh, in the overnight late Asia-Pacific session, early European entrance. That comes in around that 2900 level, which is also around that R1. And depending on where that would come in with that trend line, might be worth just keeping an eye on if we come back up to that level. Uh, later on as part of the session as it develops. Any break below pivot, uh, then on the move to the downside, you've got the, uh, the kind of the weekly low, if you like, down at this level, which I'd probably be keeping an eye on if we were to trade a little bit more heavy around 2853. So some nice— you know, the S&P has been— I know Sam has been commenting with it to a couple of the guys, uh, quite nice technically over the last week or so. Been forming these nice kind of periods of consolidation, break in either direction, but typically from the back end of last week breaking higher and then forming in this a kind of nice structure to then push ahead again on a break. And a classic to get back in and long on the pullback. So be similar, similar kind of techniques we'll be using as we go in the period ahead. But as I said, Going forward, will the market have much appetite? Not sure. Obviously there's quite a few things. The Fed, although I'm not really expecting a great deal out of them, um, they haven't really provided any way in the form of real clear guidance since their last meeting post the pandemic and lockdown. And so that's going to be probably the most interesting point rather than any new policy shifts in, in that sense, because we've already seen them do so much already. Um, all right, a quick run through some of the headlines. Alphabet, as I mentioned, um, pretty, pretty decent upbeat executive comments showed the company's cloud and YouTube businesses kept growing despite the COVID-19 pandemic. Sales were $33.71 billion, up 14% from a year ago, above street estimates. YouTube revenues jumped 33.5%. Their Google Cloud top line soared 52%. And their shares were up 9% in aftermarket trade. The company's search and display ad revenues though had dropped 10% in March, a lot of that coming amid the kind of the associated lockdowns, a lot of businesses having to tighten their belts, so decreasing their marketing budgets, and that hurting that side of the business. But overall fairly positive and executives optimistic on usage trends and your longer-term prospects. Elsewhere, the other thing that I just saw in Bloomberg that I thought I might point out, because often you hear people referring to the VIX, and they were suggesting that the fear gauge basically is close below its second month future. And I'll explain what that means in a moment, but in summary, it means that the S&P 500 volatility measure a bullish sign over the next month. And what this looks like is, is this. So essentially, the VIX closed below its second-month future on Monday for the first time since February. If you look back to where we were here on the 21st of Feb, and this, this would reflect going back to a more normal structure. So contracts dated further out tend to carry more uncertainty than those closer in. So what you should see then is that normal kind of trajectory of a curve in its regular kind of shape, saying, you know, the further you go out in the future, the more uncertainty that there is about what might happen. And so therefore, uh, we're seeing a bit of a reversal that would be a signal that actually this pattern would suggest that potentially people are foreseeing a period of calm, uh, in the period ahead. Whether or not that materializes or not, uh, obviously a lot of the things that we've been talking about, what could create the next spark of, uh, potential violent price movement, um, I think probably the main risk to that is going to be the potential for a second wave on the back of the relaxation of lockdown measures globally. But the reality of that is we're probably a couple of weeks away from that, even being known, because if you think about it, not only are we looking at more like mid to late May for most countries' lockdowns really to be loosened more significantly, but then there's that incubation period which can be up to 2 weeks before people even start to show signs that they've contracted this virus. So probably makes sense that why this is reflecting in that way, but, you know, a couple people looking at this as then um, you know, if you're following that trend in the equity market, despite the little sell-off that we had yesterday, um, then, you know, we could be on for a continuation of that move. And just looking at the S&P on a slightly longer time frame, if we were looking at the, the daily, this is kind of that fixed chart I've had for, for a while, and we've managed to get above quite a key area of resistance around that 2855, which was the October low And it was also an area which the market found some resistance, uh, back in the, the mid part of April, so about 2 weeks ago. But we've managed to push back above that. We've now got the 618 fib from the all-time high to the March 23rd low coming in not too far above the current price. It's probably the next target to look out for. And then above there, around 2949.50, which would be those peaks that you can see there that we've printed, which were previous all-time highs, of course, back in October of 2018 and in April of 2019 as well. And you can see the peaks of some of the, the other price action through the period of '19. So probably up around here will be the next interesting test if we continue to move higher. You've then got the 200 DMA coming in, which would kind of run into around 3,000 level if you're looking at the S&P. In the futures. Okay, other things to be aware of. We've had some Australian data come out overnight, and the Aussie touch firmer, uh, nothing spectacular, but is trading above its R1 at the moment, up about 37 pips. Uh, the Australian CPI makes for quite sensational reading, but I would say it's probably more of a temporary lift rather than anything sustainable. So food underpins stronger inflation, essentially. So if you think about it, they've had wildfire, they've had the bushfires that's caused immense damage, and so the available number of goods to eat in terms of fruit and veg and so on would have been diminished, and therefore prices were higher already. Now you've had the coronavirus shutdown impacting food prices given the kind of inventory building and things that people were doing. Kind of stockpiling and so on. So CPI rise at the fastest pace since 2014, yes, that's the first time the headline figure back inside the RBA target since 2018, but I don't think— I wouldn't really read too much into that because ultimately beyond that, those, those effects, generally speaking, the Australian economy like everyone else in the globe is going to slow considerably under the pressure of the reality of the the, the pandemic and people's loss of jobs, loss of income, loss of confidence. And so naturally inflation will decline under those types of circumstances, particularly in the context of more loosening of monetary policy from the RBA. Another headline as well, you had a surprise announcement from Fitch. They downgraded Italy's rating by one notch to BBB-. That's just one level above junk. For Italy. They weren't actually scheduled to hold their next meeting until July 10th when they had a review date. Moody's is due next month, but they came out, they made this out-of-cycle downgrade anyway. Um, quite a few people I saw on Twitter were talking about this, um, because it was an unexpected announcement. But the one thing I want to remind you is, remember, the ECB has already kind of made that move in buying sovereign and corporate, what they call fallen angels, which means that a credit rating that drops as far as a certain level below investment grade would be aimed— or that they can basically still be eligible for collateral with the central bank. So yeah, I wouldn't, I wouldn't read too much into this, to be honest. And it is still in investment grade. The point is it's just one notch away from being junk, which obviously would be quite symbolic in nature. but the overall changes and shifts are already being made by the central banks, and, and namely the ECB. And perhaps this could be something we'll be looking out for in the press conference for sure, in terms of questions that will be put to Christine Lagarde. Interested to see what she has to say when that happens. As far as the Fed is concerned for tonight, as I said, the registration link for our, for our Zoom session is in the video, so, so do sign up for that. I'm not going to go into this in any great detail right now. All I'm going to say is really, um, we're looking out mainly for forward guidance. As I said earlier, they've kind of deployed a lot of their weapons or bullets at this point, and what we're more concerned about now is their— how do they currently see current conditions and what's their future expectation. The current guidance as it stands officially from the Fed was issued before the mass layoffs begun, And obviously we've got jobless claims coming tomorrow. I think I caught headline, we're gonna probably see another 3-4 million type number. And obviously this is getting into the idea then that we could see layoffs in the month of April alone when we get around to non-farm payrolls next Friday, which could be around the 25 million marker. So, you know, it's this type of thing. Well, you know, what are the Fed not just saying about that situation, but what do they see for the period ahead for the second half of the year would be particularly interesting to see what options— how confident they are and what options do they have on the table if things were to take another sudden turn for the worse, if we were to see quite a large second wave on the relaxation of these, these lockdown measures. So that's the type of thing, in summary, I'm looking at. From a calendar point of view, we have got on the docket here the German state CPIs. They typically start coming out at 8 o'clock. We'll get Saxony followed by Brandenburg, Baden-Württemberg, and so on. Then at 10 o'clock you've got the various sentiment indicators coming out of Europe— economic, industrial, services. I know these are highlighted on the calendar, but they don't really move the market, so I'd kind of discount those. I wouldn't really factor them too much into your, your strategies for this morning. Um, and then going into the afternoon, of course, we get the Q1 advance US GDP. Now, a little bit up for debate about how important is this going to be. One of the things here, I don't know if you can quite see it, but I'll read it out. The expectation is for a -4% reading. So this is GDP in the US, their, their growth rate over the period of the last 12 readings. And as you can see, we've kind of hovered around 2%, and in fact Trump, you could say, had done a pretty good job at keeping this number fairly consistent. I mean, there were periods where, you know, we were— we saw the inversion of the yield curve and we thought the trade war wasn't going to play out. There were fears that this was going to get quite low several months ago, but it somewhat stabilized until obviously the pandemic has hit. And what we're expecting today is a median consensus of -4%. Now, -4%, I'm gonna have to put this onto a 25-year chart of US GDP to capture then the global financial crisis. So you can see here, during the severity of that fallout, the GDP level got down to around the -8%, -9% type level, and today -4% would be here. However, the bottom end of the range, if you look on the calendar, is -13%. 15% to a high, most optimistic, +1%. So -15% would be by far the worst there on record. So why is that? You know, when you're looking at the distribution of these estimates from these banks, obviously the models that they run to try and generate these economic predictions about this type of data, you know, given the fact that we capture the last 2 weeks of March within this first quarter reading, it's incredibly difficult then to get a degree of real concrete evidence, uh, or calculation into that model. And hence the variance is very wide because the, the lockdown would have been hard to just get good quality information, uh, given this, the, the time frame. So here what I'd say is yes, it's expected at -4%, Could it come in much lower than that? Sure it could. So the point is there is how important is that beyond the initial knee-jerk reaction? I'm not so sure, because ultimately, don't forget, people are more obsessed about Q2, not Q1. Q2 is what's going to be the shocker, uh, when GDP is going to, you know, put, put whatever today's number comes out as well in the shadows because that's going to really capture the severity of the total national lockdown in America and this mass layoff situation that we've seen unfold in the jobless numbers. So yeah, I definitely would be out of any positions, definitely would be listening out for that figure. We're more than likely going to see an initial knee-jerk reaction to it, but don't forget as well, traders will be mindful that you got the Fed later So if there is any trade opportunities, they could well be fairly short-lived as people will be wanting to just clear the deck just in case we do hear of any surprises. No point going in in any position of risk into the Fed as much as we're kind of suggesting that it could be a fairly tame event with all things being equal. From an earnings perspective, this is a bit small for the Amplify guys. I've sent this out to all of you this morning, so you'll have the full list and you can see all the corresponding numbers, what you're looking out for. The pre-market names I'm particularly interested in, going in chronological order: General Electric will be around 11:30 London time. I'm also keeping a close eye on Boeing. Boeing actually, you know, was one of the biggest companies in the Dow not that long ago. It's now the 10th largest company in the Dow. So yeah, quite a radical shift obviously for that firm. Their market cap's only actually around $78 billion now. $1.5 trillion now, so way smaller than what it was only around 2 years ago. To put it in context, I think Netflix has now got a market cap of more than double that size, nearly triple. So yeah, what a world we live in. Aftermarket, of course, as I mentioned, there's quite a few other key names to look out for, namely Microsoft and Facebook. They're probably the biggest names to be aware of, but you also have the likes of Qualcomm, uh, as well as eBay. And Tesla is another interesting name that's going to be reporting as well in aftermarket trade. So remember, just follow me on Twitter. I'll be tweeting some of those results as they come out later on this evening for those interested. All right, that is it. I wish you a good day. Don't forget to register for the event, and hopefully I'll speak to you later on this evening. Alright, have a great day ahead. Thanks very much.