What To Expect From Yellen's Confirmation Hearing As Treasury Secretary

Okay, very good morning to you. Tuesday, the 19th of January, so hope you are doing well. Gonna start off with a quick look at the Amplify Live Discord room. As you all know, this is just one element of the Amplify Live Traders Hub where you can access the actual full portal with all the material. But one of the things that we do have is this chat room, and I've made some slight modifications just to show quickly. You've got the normal different chat rooms here, all the guys conversing and talking. You get my early morning call and things like that in the morning before it kind of goes out more public. Then with the briefings in the morning, so just simplifying it now, when you've got the morning briefing, the pre-US Open, and the daily reviews that come out as the fixed video content. And again, those videos that I do in the morning, this briefing you're watching goes out here much earlier than it does go out on YouTube. Amplify Live Insights, just neatening that up. So any of the— we have the live stream running throughout the day to watch our traders doing what they're doing, trading in real time, conversing and so on. But there's also a number of soundbites that we do and we clip and record. So don't forget to check that out, any of the existing members. We're updating that on a daily basis. Useful resources can be found there as well. On the news feed, again, just simplified it just to make you aware. Got the headline feed, daily calendars, research, and the team tweets. And then the masterclass, as I mentioned yesterday, got a really great guest speaker coming up tomorrow, which is a very experienced portfolio manager. We've had others, um, an options trader who's got many years experience. We've had guest panel with Mike Bellafuri and Brett Steenbarger, some guys in the US who are probably familiar names that you might recognize. Had a fintech CEO, an asset manager who co-founded one of the world's largest consultancies. So some really good insightful stuff. We've got another good one of those coming up as well. And then you can access all the other training content as well direct from the Discord room. So yeah, do make the most of that. For any of those in the community and for any of those who want to check it out, you can access the free trial on the link below if you're watching this on YouTube. But let's get straight into it then and talk about the, the charts this morning. And yeah, yesterday very quiet as you would expect. It's always the case when there is a US major holiday, Martin Luther King Jr. Day of course. So US participants returning to market and we have had a bit of a move in the overnight session. Generally then, equity index futures move— moving higher, and not much in the way of a singular catalyst. A lot of people looking at Janet Yellen. There was basically some pre-released text from her upcoming Treasury Secretary confirmation hearing that's happening today, I believe, with the Senate. And so, um, that is taking place at 3 PM this afternoon, but the cat's already out the bag. She's kind of talked about the idea of providing big stimulus, and equity markets have just kind of grinded it out in the overnight session, reversing what otherwise had been a period of some slight softness seen at the end of last week. So the DAX at the moment here in the center left, uh, just moving higher in the initial opening phase— well, late on Wall Street and then the opening phase of Asia— just holding that gain. But worth keeping an eye on that 13,902 in the futures there as a clear area of support for the current trade at the moment. On the upside, you've got the R1, close proximity to the initial Asia-Pac high, sitting just above a 39, kind of 59.60 area. Other US indices then following suit. The NASDAQ's already up 127. Again, the overnight Asia-Pac high seen at 49, and then the S&P respectively at 96.25. Otherwise, the other noticeable thing in asset class movement overnight, the DXY just a touch softer, just continuing some of the weakness that was generally seen through periods of yesterday's quiet holiday-impacted session. And so the DXY just reversing course from, from some of the initial gains that we're seeing and is trading down about 0.15% at this current point in time, but is actually testing its overnight Asia-Pac low at the moment in the DXY. So Just keeping an eye on these major pairs. Euro looking a little bit more bullish this morning, just having a look at pivot here, um, and then probably keeping an eye just above at 21.25, which is the low on the 14th. Cable as well, sub-pivot at the moment, and that has restricted some of the overnight Asia-Pac rebound that we've had on the back of some of the prevailing dollar weakness, albeit fairly moderate. Gold pretty quiet, oil the same, really waiting for the US to come in. But with equity index futures, uh, generally higher, consequently 10-year seen down about 5 ticks, uh, at the bottom end of its recent range, uh, if we were looking at the period of the last, um, few trading sessions in the US. All right, well, let's get straight into some of the headlines. I'll leave the guys on the live stream on Amplify Live to go into the technicals in a lot more detail. So what is it then that Yellen has said? Well, it's not really a great deal. She's got her confirmation hearing today, so it is a little bit of a, I'd say, symbolic event at this, this hearing in front of the Senate. The main thing that she said is that the US must act big on the next coronavirus relief package when she speaks to the Finance Committee. One of the things that I've read, and I would kind of agree with, obviously Yellen is well versed in how markets move given that Not so long ago, she was, of course, the head of the Fed. And whether she opted to or whether this is normal procedure is beside the point. The idea here being that the text has already come out. So we're not expecting any way of great surprises here from Yellen. The fact, though, that she's talking about continuing to, I would imagine, coordinate well with the Fed. She talked about rates being low and likelihood is they're going to stay that way for a long period of time, irrespective of some of the recent reflation kind of ideas that have been floating around since the blue wave initiated back on the 6th of January. But that, accompanied by the continued persistence of a big coronavirus relief package, just shows now the more kind of coordinated effort to follow that, that process. Remember, with Biden, we've already had the kind of fiscal coronavirus relief plan We're still yet to see the more infrastructure, climate change type stuff that's going to come next month. So the point being here is that Yellen, an advocate of doing more, of which generally defined her, her chair as the— at the time at the Fed, where she was always very much seen of a dovish disposition to support markets through the financial crisis kind of recovery era. Remember, for any US people coming in, there was that article in Wall Street Journal yesterday. She is expected to affirm the US's commitment to a market-determined dollar value and give assurances that the US will not seek a weaker dollar for competitive trade advantages. So just looking to clarify her, what will be, approach, which is obviously very counter to what we had under Steven Mnuchin and the Trump administration. Jumping then to the coronavirus situation. I know you can see a headline here, US hospitalizations fall for a 6th straight day. So a kind of glimmer of positivity there to some extent, but I was going to have a look at the EU and get you up to speed on what exactly is going on there. So the EU's executive arm will urge member states to set a target for vaccinating at least 70%, 7-0, of the bloc's population by the summer. According to a draft of the latest pandemic response recommendations, which are due to be unveiled later today. Now, a couple of areas to have a look at in Europe, i.e., particularly France, but also Germany. So France's average daily number of new COVID-19 infections hit a new 6.5-week high yesterday. It was just over 18,000, while the number of people being treated in, in ICU rose above 2,800 for the first time this month in 2021. So very much unlike Britain and Germany, the latter of which is now expected to extend and toughen its latest restrictions till past January amid increasing fears of concerns over the new variant of the virus, France's government so far has stopped short of imposing a third national lockdown. So the UK obviously has taken that step a while ago, particularly in the aftermath of that kind of super spreader event that was the relaxation over Christmas and the potential over New Year. And that's happened also in Germany, where their kind of lockdown status has rolled over several times now. France hasn't gone that far after what had been one of the stringest nations in terms of its adoption of measures back in the spring. So a combination of that and the fact that the speed of administering the vaccinations has been particularly slow in France. And if you actually look at the composition of their vaccine contracts, very much geared towards the more— perhaps could be classified as the more difficult to distribute drugs, like those out of Pfizer, for example, comparative to, say, AstraZeneca, which of course is a British drug, or LAD, I should say. So a couple things there to be aware of, and obviously all of this is important because later on this week, on Thursday, you've got the ECB meeting. Not expecting it to be particularly interesting from a policy change potential— that all happened in December, of course— but there's going to be updates. We've obviously had the blue wave emerge, we've had rollover of lockdowns, we've had a new variant of the virus continue to spread, and so this is impeding at the moment some of the activity, of course, in mainland Europe. So it means you'd to see what she has to say. Christine Lagarde, who used to be president. One thing I did see actually on this point was this chap here. Some of you may or may not be aware of him. He was kind of the head political correspondent at The Sun newspaper for a number of years. He's now moved on to The Times Radio. But Tom Newton Dunn, if you're, you know, Brexit but also now the virus, he's pretty much on the pulse of things at Number 10. And he put out some, some tweets last night, which was around midnight, so I'm not sure if you would have seen them or not. But he said, will Easter be the new Christmas, albeit a thin one? I.e., this is the PM's new hope. He's told he's privately shared an aspiration to see restrictions begin to ease by Good Friday to allow some families some contact time again. So again, this is exactly the timeline that I was commenting on a few weeks ago. I think the mid-February target is probably overly optimistic, particularly as well given the cultural aspect of Good Friday and the Easter break, given the fact that from a political point of view, for the optics to manage public perception, he probably will want to loosen restrictions in a similar fashion to what we had at Christmas, which of course brings the tail risk of a renewed acceleration of the virus in the, uh, accompanying period thereafter. So yeah, I just wanted to point this out. There's a string of tweets. I did put it, all of this, in the Discord room earlier this morning, probably worth taking a read. The other points here being that the government says there's a grim dawning realization that emerging from heavy restrictions, Tier 4, Tier 3, are likely to remain in place in big cities through April and even May. Now, I don't find, again, that particularly surprising. Um, you know, it's a very much a staggered approach with withdrawal of such stringent measures in order to, um, contain, suppress the virus without it spreading rapidly. That would come with just kind of collapsing of all, all measures entirely. So it definitely is a a graduated withdrawal, let's say, from national lockdown, as Dominic Raab, the Foreign Secretary, was saying at the weekend. I think his probably timeline is more realistic, which would be September until we start to see more normalisation of behaviour where the tiering system is down at a much lower level. But in reality, it's going to be a slow burn to get through there until obviously the vaccination program starts to roll out and we start to see much greater spread of different categories of age and so on getting, getting the vaccine. So yeah, just thought I'd get you up to speed. How much of this is important obviously for Sterling this morning? As I said, I think, you know, rolling over lockdown till kind of Easter or up into Easter, and then this graduated tiering system to withdraw out of lockdown, I I think it's completely as expected. Although obviously this is different, way more longer time period than the government is suggesting. You know, since when did we really believe what politicians say? We understand, I think, in markets that, you know, they need to manage a situation in terms of the appearance of it rather than the practicalities of its implementation. So I don't think it's a big thing for sterling particularly. That doesn't detract from the point though, I'd still continue to keep an eye on the the acceleration of the vaccination program. Things are going, touch wood, relatively well at the moment in the UK, and long may that continue for everyone's sake. But they would still be things I'll be looking at, in addition to obviously any variation or further variants that we see of the existing virus and the impact that could have on the vaccine. Elsewhere then, a quick word on Italy. Basically, the latest is that Conte, the Italian PM, faces a crucial vote today in the Senate after he won a similar vote in the lower house of parliament yesterday. Now, a narrow win in the Senate would allow him to stay in power even if his support fell short of an outright majority. A defeat could force him to hand in his resignation to the Italian president. This is a quick look at the something that will make a bit more sense. Then this is looking at the, the seats in Italian Parliament, and you can see Italy Alive and their 18, which was led by Matteo Renzi, the former premier, is who's kind of pulled the plug on the coalition that was caused and prompted these latest political instability in Italy. Now this can be filled. He can pick up some other kind of minor party members who have a more centrist moderate disposition to try and bring them in. The main thing here is that I still think we're some way from snap election scenario, which would obviously be the worst case scenario given the context of the country still very much in the midst of dealing with COVID-19. I think only in, in that real scenario do we start to see the Italian kind of story start to break out from just being a yield and BTP play into something that could be more meaningful for the euro. Now, The process here is that even in the event of him failing in the Senate vote today, handing in his resignation, that doesn't immediately mean that we're heading for elections. What it means then is that the President Mattarella then gives the order for him to try to form a new government. If he can't, it moves to the next person within the next popular political party within the formed coalition to then have a go. So there's a period of time there before we'd ever get to that point. And I think that's why you're seeing the euro largely, um, not impacted by this for the time being at least. Okay, quick look at earnings. There's a few coming out today, uh, from a US perspective. Pre-market, you've got Bank of America, Goldman Sachs. Again, I would anticipate that it could have a single stock reaction on their, their share price at the reopening of trade. How important is that going to be though for the overall index futures? I'd say little, um, because of the fact that we've already had a number of those banks come out last Friday— JP City and Wells Fargo. So they've already kind of taken the limelight from the first of the banks to report. But obviously more pure banking or investment banking in the form of some of these firms. So, uh, the individual breakdown of the performance across divisions might be a little bit different from obviously people like Wells Fargo and Citi, for example. The other one, of course, is Netflix coming after market. Now, Netflix always creates a bit of fanfare, of course, because their average kind of aftermarket volatility range is way higher than, you know, many of the other companies that we see, just given just generally how inflated and before their share price has become, how lofty expectations have been over things like subscriber numbers. So in terms of the numbers, headline EPS expected at $1.35, revenues, uh, $6.62 billion. As per usual, subscriber growth, which is expected around 6.5 million, is what's going to be in focus, as well as the outlook for 2021 that will be scrutinized. Um, you remember last quarter, a bit poor on the subscriber growth, which has somewhat dampen expectations this time around, or lowered the bar at least, because of the fact that the company's facing stiff competition from Disney+, Apple TV+, HBO Max, Prime Video, Comcast Peacock. So there's a lot of competition out there at the moment. So again, I'll keep you posted of the kind of implied volatility from the options market later ahead of the earnings. Now I'll let you know in the Discord room. Otherwise, in terms of the calendar, pretty quiet actually today. I did mention this in yesterday's briefing, it gets a little bit more interesting as we get into the second half of the week, more so. So not really too much to look out for this morning. You've got the German ZEW survey, not expecting a great deal from that to be honest, but perhaps something to just keep an eye out for. Could act as a somewhat catalyst if we're near any technical levels of relevance in European assets more than actually being something fundamentally to dictate the kind of narrative. Yellen's Treasury Secretary confirmation hearings at 3 PM. So there is no major 1:30s today coming out of the US. And you do have Bank of England's chief economist Andy Haldane speaking later today at 6 o'clock. He does tend to be a fairly vocal member of the monetary policy committee at the bank. Not— I wouldn't say he's kind of hawkish, he's just not as dovish as the rest. And so he definitely sits on that side. And with all this talk of negative rates, you could get a little bit of a pushback from him, very much in contradiction from the likes of Tenreyro and so on that we've heard just from a week ago. All right, that is it. That's your brief. I'll let you get on. Any comments at all, let me know in the Discord room or on YouTube. Leave a comment. Absolutely happy to help. And don't forget to subscribe to the channel. Thanks very much, guys. Have a good day.