What's Happening In Markets Today (Stocks, Forex, Bonds, Commodities)

Okay, very good morning. It's Thursday the 15th of July. It's just 7 AM now here in London, so I'm going to give you an update as to how we closed on Wall Street. We're also going to look at some of the major overnight news flow, which there's quite a bit. We had a lot of Chinese data overnight, including their latest GDP number. We've had the Australian unemployment rate tumble to a fresh 10-year low in June, and And we've also had some news as well from the Treasury Secretary Janet Yellen about relations between the US and China, as well as some new content coming out of Netflix in the gaming space. Their shares were up around 3.3% after market last night on that news. Um, and we've also got oil prices still remaining under a bit of pressure as it looks like we're getting closer towards a potential deal between Saudi Arabia and the UAE. So plenty for me to cover. I'm going to focus predominantly on the news and the fundamentals and leave the Amplify Live community and, and our traders there to go over things from a technical perspective. But if you are watching this on YouTube, really appreciate it. Don't forget to like and subscribe to the channel if you want to get access to more videos on a daily basis. But let's just have a look and start with the general overview from a sentiment perspective. And relative calm seen here at the European entrance. The dollar has continued its general softer tone that we saw yesterday, triggered by the reiteration of the Fed stance from Jerome Powell, the Fed chair. So at the moment, EURUSD and cable just kind of holding on to those moves. EURUSD firmly off those lows we had seen more recently. Gold, one product that continues to reverse really the FOMC hawkish two-dot plot 2023 surprise move. And actually we've only got another $15 or so to have taken back the predominant amount of that particular move that we saw in the middle of June. So at the moment, we continue to see, um, despite high elevated inflation numbers, the market's belief of it being transitory, reiteration from Powell has led to a continued decrease in yields and real yields, and that's helped support equities, of which US indices of course at the time did touch on fresh record highs. Again, some quite clear distinctive double tops forming in the NASDAQ, as you can see here this week. And also that reiterated in terms of the price pattern on the Dow as well, as you— on the S&P, excuse me, as you can see from the CPI. And then Powell following, fleshing out that double top at around the 83, 84 mark. Otherwise, T-notes remain generally elevated, continuing that upward trend that we saw from yesterday, and we're up around 5 ticks. And pretty sideways though overnight in Asia. And as I mentioned, oil lower, and we'll, we'll delve into that a little bit more detail in a moment. In terms of the main catalyst then, certainly was Jerome Powell. And I do find it still fairly hard to, to see really the disconnect between markets and, and the Fed sometimes, because I think I haven't backtested and run the data, but I'm pretty sure if you just listened to the Fed, as in listen to Jerome Powell, you'll probably be on the right side of the trade more often than not, because generally the market tends to kind of deviate and overamplify certain moves like, you know, scaremongering about inflation and then the yields shoot away, or we're going to start tapering immediately. And actually, if you listen to the Fed and Jerome Powell, he's basically just stuck to the script throughout. I didn't find what he said yesterday particularly surprising. You know, if you just go back to the briefing, it was kind of in fitting with our expectations. And so Powell, I don't think, is at the point of moving and deviating from that stance, given the fact of predominantly the jobs market. He said, in fact, yesterday that the US economic recovery still hasn't progressed enough to begin scaling back the bond asset purchase program. So, so kind of brushing off tapering which obviously was pretty much at the forefront of most people's minds given the fact that we had that CPI number still remaining particularly elevated earlier in the week. So government debt rallied, the dollar weakened, and the dollar softening up again a little bit more this morning, so eradicating any gains that have been seen earlier in the week. As far as Asia is concerned, we did have a couple of things for China. And first of all, a bit of an overall top-level flavor of the, the region. Shares slipped in Japan but edged higher in China overnight. Hong Kong rallied. I think there's some reopening on a COVID side that was particularly pertinent for that stock index in the Hang Seng. Also predominantly though for China and predominantly for Hong Kong as well was the technology sector. We know that technology sector has really suffered of late with the crackdown coming from the state, the government out of Beijing. But there was a report in the Wall Street Journal that's been circulating about Alibaba and Tencent gradually opening up one another's ecosystems to work work more closely together, and their shares shot higher, and that helped lift the index. From a, from an economic data point of view, Chinese GDP year on year came in at 7.9%, was a little bit below the expected 8.1%, and certainly a sharp deceleration from 18.3%. But this is all very much largely as expected. Industrial production 8.3%, stronger than expected 7.8%, and retail sales came in at 12.1%, above the expected 11%. So actually, you know, if you put all of this together, remember pretty much this time last week on Friday, we saw a surprise cut to the RRR, the reserve requirement ratio in China. And generally speaking, then this is a prelude to a weaker period of economic activity in China. We've also had a little bit more cautious commentary coming out of the government themselves and government state officials. So this data, if anything, might go some way to alleviate at least short-term some of those concerns that might have been mounting about the speed of the deceleration, because those data points last night were actually pretty okay, all things being equal. So China was up, the technology sector outperforming, lifting more prevalent in Hong Kong though from that respect. So not too much of a read across for markets this morning for the European Open, but certainly a potential ticking time bomb averted for the time being, as far as that could have been a lot worse, that Chinese data overnight. The other thing then that we have had is from overnight, uh, sticking with China, is the Treasury Secretary Janet Yellen and her staff have come out and said that there's no plans to resurrect the regular US-China economic dialogue that governed ties between the two nations during the Bush Obama administration's. In typical Trump style, he kind of blew that dialogue apart before of having more structured continuous meetings as he was going through the trade war and the tit-for-tat that that led to. And Biden keeping the same stance. So again, we've seen this right from the beginning, really. The, you know, Piers and I have talked about this on the Amplify podcast in many episodes about the idea that And Biden has inherited this, this current relationship status with China, but he's not going to move the needle. Trump moved that in the more assertive direction, and Biden's likely to keep his foot on the pedal at that same speed all the way, probably up until the next 12, 18 months, until we have the midterms next year. And the point being, then it allows him to be more focused on more domestic forces like infrastructure bills and so on, so forth, the post-pandemic recovery situation and getting people back to work, because that's going to have more political payoff for him come the midterms next year. And he needs to appear as well still in an assertive way against the stance of China on the trade front. So none of this I find particularly surprising, to be, to be quite frank. I think it's just the ordering of the priorities for the domestic focus from the administration. So something to just be aware of because the tensions between the two nations still remain fairly tense at this point in time. The other thing in the Asia session, you had Australian unemployment rate hit a 10-year low. And actually on the chart here, you can see the unemployment rate is the black line. So obviously exploded higher on the back of the initial onset of the pandemic, but it's one of the fastest nations to not just recover, it's even better than it was. There is a bit of a disparity though here between a couple of things. One, wages. Wages are still pretty much on the floor. And as far as the central bank looking to manage inflation, this will be an important metric to manage going forward. If unemployment continues to remain in this positive fashion, are people going to be paid more as the availability of, of workers becomes tighter? You have to pay them more and that leads to generally inflationary conditions. So that's one thing. The other thing is as well in Australia, Greater Sydney, which accounts for about a quarter of the Australian economy and just over a fifth of the national workforce, has gone into a lockdown. And again, that lockdown keeps getting rolled over as they battle to contain the outbreak of the highly transmissible Delta variant. So the other thing is Melbourne has come out overnight as well, and having had them they just come out of lockdowns, they're going to go back into another lockdown from midnight. And so there probably is going to be a consequent impact on these figures going forward. So something to just bear in mind that this type of trend is likely not to last given that situation that's happening and the magnitude of the overall jobs market being concentrated on the likes of Greater Sydney given its larger population. The other thing I thought was interesting last night, we obviously had UK CPI yesterday and that did come in above expectations. The market somewhat nullified by the idea of it being transitory. Used cars, that's a— the supply chip, the chip supply shortage is a global issue emanating from the pandemic. So just like used cars are promoting price pressures in the US, it's the same case in the UK as well as energy prices and so forth. So people largely were able to look through that to some degree. But there were some surprising comments that came out from the deputy governor. And as far as listening to these central bankers speak, obviously the deputy governor tends to be like a vice chair or vice president of the ECB, quite aligned with the centrist view of what the governor is thinking. And that's overall very important for any definitive changes that the center ground might make for their ultimate policy. And he came out last night and I was a little bit taken aback because Dave Ramsden said inflation may peak at double the target in the UK. Um, obviously this came after the CPI print leaped up to 2.5% in June. Expectations were for only 2.1%, and remember the target of course is 2% in the UK. Ramsden estimated inflation may peak at 4%. Now the previous communication from the bank have said that it could run up to 3% and possibly over 3%. No one's actually said explicitly the number 4, so it's getting a little bit more punchy on the upside in that respect. He did say that unemployment may end up lower than the Bank of England's forecast in May, and wage growth is like to surge again in the report that we're looking out for later today. So definitely much more on the hawkish side. He went on to say, I can envisage those conditions for considering tightening being met sooner than I had previously thought. Um, so his remarks quite in contrast with the other members of the MPC that we've heard more recently, the other being the other deputy governor who's John Cunliffe, who gave a much more neutral assessment of June's jump in inflation yesterday. So there's a bit of division going on here, and as far as these members are concerned, here's how the hawk-dove scale looks like at the MPC at the Bank of England. Haldane's now out of the picture, as we know. He's going to be replaced by Catherine Mann, uh, come next month. So the two guys we're talking about is Ramsden, Deputy Governor here, and then Cunliffe, Deputy here. So Cunliffe being a little bit more neutral, I would say, is a little bit more probably aligned with the Governor Bailey. As you can see, they sit pretty center But Ramsden being hawkish, I think you've got to take with a little bit of context. He is one of the more hawkish members. With Haldane out the picture, he is the last remaining hawk on that board. So stepping out and kind of away from just the headline in itself, yes, he's an important person as a deputy governor. No, I don't think it's quite— we should get panic and, and just go long sterling blindly on the fact that this is an ultimate BOE shift to becoming hawkish. I think it's partly he needs to assume now that hawkish position given the departing Haldane, who we know was a real outlier, just to balance the board. Because don't forget, we are heading in a tightening direction. You know, I know yields are declining, equities remaining bid at the moment on the premise of we're putting off tapering. We are going to taper, and real yields might be falling now, but they will rise in the future. So they do need to still strike a semi-hawkish tone. It's just the fact of management of the time of tightening is what's the balance at the minute. Moving on, the only other thing I thought was super interesting was Netflix. Netflix shares spiked higher after market. They're up about 3%. It's— they're making their first kind of big, bold move away from TV shows and films, and they're planning an expansion into video games. And apparently they've been just going around Silicon Valley picking out some of the best people from large competitors like Facebook and other areas and, and Electronic Arts and so forth. And the company doesn't plan to charge for this content, but what they're looking to do is trying to expand— it's a fairly saturated market that they have in the US, which is their biggest audience. They want to keep customer loyalty. It's a very competitive space in the streaming world. As we know from the pandemic, that's been accelerated and even more acute now for the companies to confront the likes of Disney and Amazon and AT&T and so on. And then gaming overall as a strategy might well help to justify higher subscription prices in future, which is always a model that tends to play out over, over time as well. So I think it's a pretty interesting move. It's said to, to happen within the next year. And so, yeah, I, I don't follow Netflix particularly closely. Perhaps this was talked about, but I'm guessing not a great deal because the fact that the share price reaction was quite sharp last night of over 3%, as I said. So something to just be aware of when we get— when we open up later on today. And then the final thing in energy markets, oil is actually printing session lows as I'm talking right now. We're retesting the Asia-Pac low, and it came after quite a significant down day yesterday. We were trading at the high around $75.50. We're now trading down at $72 handle. So we're down a decent $3 or so. And it's come on the back of the fact that we, although we've had kind of a lack of deal, a lack of Iran dialogue progression on their nuclear deal in a tightening market, and that's promoted more elevated prices. One of the key components, of course, was the inability for OPEC to strike a new deal to increase the supply they're bringing to market. Because of the fallout predominantly from the UAE in those recent OPEC meetings. Well, the latest here is basically that the UAE and Saudi are close to a deal now. Agreement could unlock a call to raise production, but discussions are still continuing. And one thing I would say is that given that details are yet to be finalized, I'd definitely be vigilant and keeping an eye out on the headlines today because oil could see another distinct move depending on what happens. You know, any breakdown of this potential expectation, prices could well shoot back higher again. But confirmation, and depending on how much is the concession that the Saudis gives the UAE, could then see some further, further weight come into the price. The interesting thing I read about this as well, and this was actually slightly separate, was the fact that Iraq now is reportedly seeking an upward revision to its baseline. And I think that just goes to show what a delicate balance and why Saudi Arabia is so reluctant to concede to the UAE's demands. Because think about it, not all of these countries get on particularly well. They have this shared common interest, which is the management of the price of oil, which they're all highly dependent on. But if you give a concession to the UAE, if I'm Mr. Iran, Iraq, Libya, Nigeria, I would say 'What, you're giving them a concession and not me? So I want an extra 50K, 100K, 250K, thank you very much. Because if you're going to show them some flexibility, I want some flexibility because I want to sell more oil as well.' So this is what Saudi need to be careful of. So it's interesting that Iraq has started making some noises now, and Iraq, as we know, is actually a large producer of crude oil. It's up there at the top of the table as far as the OPEC members are concerned in terms of volume of potential of oil that they can produce. So something to just watch, um, at this point in time. Double-edged sword for Saudi to manage. As far as the calendar goes for today, we've already had quite a bulk of the data come out already. If I just refresh my feed, I can bring to you the UK data that's come out as I've been delivering this briefing. The average earnings ex-bonus, 6.6%, in line with expectations. Um, so no real great surprises there, hence not much movement in the British pound on the back of that. Later on this afternoon though, quite a lot coming out at 1:30. You've got the latest initial jobless claims, expected to see a decrease to 360,000 from 373,000. You've got the New York Fed manufacturing figures, import-export prices, and Philly Fed all coming out at the same time. You also have industrial and cap utilization coming out at 2:15 as well this afternoon. So plenty to go at at the US session in terms of the data calendar. From a speaker's point of view, Bank of England Saunders speaking on the inflation outlook. So probably the most topical area to talk about for a central banker at the moment. So worth keeping an eye on Saunders. Keep in mind though, Saunders does sit on the dovish side, so likely to be talking more on the transitory factors as to not spook people about imminent tightening. So slightly more softer certainly than what we had from Ramsden last night would be the expectation. Speaking at 11, Fed's Powell testifies to the Senate. So for anyone new to markets, this is just basically the same delivery from the House we heard yesterday, gets recycled to the Senate, so it's highly unlikely that he'll say anything new, but just to be aware of, that's 2:30. Fed's Evans voter speaks at 4. Fixed income supply coming out of Spain and France of a sizable amount this morning, and you've got a 10-year TIPS and 20-year refunding announcement at the US at 4. And then one of the bigger earnings to be aware of today is UnitedHealth. And, you know, as a reminder, UnitedHealth is the biggest company in the Dow Jones Industrial Average. Now that might not make sense again if you're relatively new to trading because of the idea that what, UnitedHealth bigger than Apple and Amazon and Microsoft and so on. And it's all down to how the Dow in itself is calculated as a price-weighted index. What that means is stocks with high share prices basically have a greater weight in the index. Index. So it's different as to a market cap basis as what we'd see in the S&P 500, for example. So UnitedHealth account for nearly 8% of the entire Dow Jones index, and they are reporting pre-market, so do keep an eye out for that. And then you've got Morgan Stanley, the next of the big US banks to report as well ahead of the opening bell today. Um, that is it. Gonna let you guys get on. I know I haven't talked about the charts technically too much, but I'll leave that to Tim and the guys in the Amplify Live community So just go there for, for more information on that side. He'll have his live feed on all day. Otherwise, as I said before, if you've made it this far, thanks for sticking with me. And please do, if you don't already, subscribe to the channel and like the video. I'd really appreciate it. All right. Take care and have a good day ahead. Thanks very much.