WHO Declare Emergency, Stocks Rally!

Okay, very good morning and Friday, 31st of January, Brexit day. Keep saying I'm happy. We'll get to that in a second, but let's talk about the bigger, more pressing things at play for the immediate future, which is The headline you can see here, not so much the oil prices are rising, but oil and equities are rising yesterday because we've got a global emergency. I know that sounds slightly counterintuitive, but the important part here is that they came out, the World Health Organization, against travel and trade restrictions, and that in itself was seen then as quite a soft kind of comment coming out of them, and the markets latch on to that, and we pushed higher into the close on Wall Street. Oil also, pretty aggressive bid going into the US close last night. The director general urged people to focus on facts, not fear, and I do think that that's quite a good point. Not, not him and what he was saying so much, but this notion of fear. As we were talking about right from the beginning of the week, I think one of the main things in 2020 that financial markets could be potentially as a key risk susceptible to is the spreading of misinformation and fear. And what I mean by that then is that given how human behavior has changed, people are so kind of dependent and hooked on things like social media, which we know from previous cases like the election and Russia involvement, you know, things can be manipulated and misconstrued and misinformation. And fear is a very powerful thing, and it does definitely reflect and can impact financial markets because fear can change consumers' economic behavior and policymakers then, as a consequence, their response. So containing fear is actually a really important thing when it comes to something like a virus in particular, because that kind of cuts to the core of every human regardless of sex, color, creed, or religion, could impact everyone. And so controlling that, I think, was— is part of the main objective here. As I said, markets rallied, a very favorable response. I mean, actually it was a little bit choppy initially because the way of which the press conference came out and the sequence of comments in regards to first talking about the declaration of a global emergency, a little bit unsure how to take that, but then the ensuing comments obviously a lot more softer in that regard, and the market's taking that as a positive signal all the way up into the close. What is the actual current status? Well, here are the latest numbers, uh, and we're just shy of 10,000 total confirmed cases They've actually updated this live tracker now with a total recovery number, uh, on the right-hand side in green. That's at 187. Total deaths now at 213. So again, the, the combination here of that, um, not banning of travel and trade restrictions, so therefore by default that's not going to have then such a severe economic consequence as a result if people can still go about their business in that way. In addition to, I think, comparative to where we were just 5 days ago, I think these numbers are way lower, and a lot of that predominantly built on the fear that kind of grew over the last weekend, if you remember, in the reopening that we had a trade on Monday. And so yeah, I'm not going to talk about this too much. That's the current state of play, and that's been reflected across markets, uh, really last night. One thing I would say is I'd be a little bit reticent now to just come in this morning and blindly start buying right from where we are at the moment. Uh, if you weren't in the market last night, you know, I saw Sam was here at— what time was it, Sam?

Uh, 7:30.

Yeah, 7:30, 8 o'clock, Sam was still in the office. So, you know, if you're there in that situation, fine. You're in it and you're part of the move. I just think very important for any new traders this morning, don't get too carried away that you think now this is kind of a binary result, we just continue to push up today, because there was quite a decent move yesterday and, and largely, you know, a lot of that might now be, you know, priced in the news kind of norm, so to speak. So already this morning Index futures just flagging a little after that, that push yesterday. Gold and T-notes obviously fell in response to that renewed risk-on environment on Wall Street. However, some of that as well has just been pared slightly. So, um, one, you know, a couple things to also consider is the, it's the weekend coming up, and you'll remember last weekend, the weekend, you know, holding a position over that period would be highly— what would be a high-risk strategy, just given, you know, anything can really develop over the weekend. With this now, I'd say the kind of pattern is relatively known, so I wouldn't be expecting any new monumental corona-inspired virus headlines that could really dent markets. But still, the risk is probably too grave to hold a position over the weekend. So just be mindful of that as well. I mean, looking at, you know, quick look elsewhere, sterling is continuing to rally. So Boris and Nige are going to be loving it. The pound is rallying on Brexit Day. Yeah, that's where it should go. So, you know, this is, this is great coming on the back of the Bank of England yesterday. Obviously we, we shot higher really surprise event, you know, the split 7-2. No one was really anticipating that. It was more kind of a, a 6-3, 5-4 type scenario, and that definitely didn't occur. And, and Mark Carney wasn't dovish really at all. And so we've just broken above really the post-Bank of England double top that we printed in the immediate aftermath and also late in just before the European kind of close yesterday. Um, one thing I did see is this. So on that front, you know, this isn't the, the reason why the pound has moved higher. There's a few things with the pound. There's the technical move, there's the Bank of England yesterday, but UK consumer morale in data overnight is now at a 16-month high. Post-election bounce is continuing. And this is probably underlining that reason for the hawkishness in the Bank of England yesterday. Remember, we saw some of that PMI data, the more forward-looking soft indicators, showing quite a decent kind of response to the majority government that Boris has managed to secure on the back of that snap election. And so if that is to be the case and maintained and materialized, now that, you know, today's Let's not get this wrong as well, and just to make Sam happy, I'm going to keep this up just for a moment. But today's date at 11 PM this evening is purely symbolic. I did get a couple messages on Twitter of people saying, oh, are they exiting at that time on a Friday night because the markets will be closed, and so it's It's not going to impact the pound. You know, it's a formality, and it's entirely symbolic what's happening, because actuality of the matter is our immigration, our trade, everything— nothing changes at all as of when we come back Monday, other than from a top line, we're now out of Europe. Actually, part of the implementation transition phase is that basically everything remains the same for another year. Um, so the pound's not going to move. We already know that this situation is occurring. Uh, if anything, you know, the, the soft data improvement that led to the Bank of England hawkishness is all part of this idea that, you know, it is a smooth, orderly process, at least for the moment. Yet to be seen though when the difficult challenges remain ahead in the months to come. But for the moment, you know, it's kind of a positive pound situation in that respect. Um, the other headline that I just wanted to show you was this, and, you know, I don't put too much weight into just what one bank is saying, but certainly I think this definitely is a fairly shared and common view held in markets at the moment. And this was Citigroup. They released a note last night, and they basically said that concerns that this recent that the slide in global stocks could mark the beginning of a bear market are misplaced and investors should keep buying on dips, saying that global equities should still rise 4% this year. And that was Citi last night. So again, just to make clear, this doesn't mean, right, stocks are at pivot, get long. I mean, what they're talking about is slightly more of a top-level view that if any, you know, strong pullbacks in the market, it's just better value to be able to reassert a more medium-term, long-term position in the market to be long. And I was just having a look on the daily continuation. I mean, this is from Monday, and these, these, these, these— I'll transition my screen— these ellipses here that I've got were the markups of what would be technically very sound levels of where the market would find big challenges on on the downside support if that coronavirus was to spread more violently than it— what it has done. When people were quite fearful on Monday, these were kind of downside areas to, to monitor. And look, we got nowhere near it. And if anything, that October trendline that I know a lot of guys were looking at is still relatively well intact at the moment, and we remain above that key kind of longer-term higher time frame threshold of 32.63.5, which is really this line here in Hong Kong. And so yeah, it's, you know, what a difference a couple of days makes. It's almost like stability has returned to some degree, but obviously not out of the woods just yet. I would suggest that the coronavirus still requires a degree of vigilance. However, for the moment markets are fairly happy, particularly on the coattails of that World Health Organization conference from yesterday. So overall, I would say we're pretty neutral now. If anything, perhaps a slight positive bias in the equity space as well, because we had this, which was Amazon. Now Amazon, one of the largest companies in the world, rose 10% after market. That's a mammoth rise from for a company of that size. Now, why has that happened? Well, a couple of different things. Their fourth quarter sales climbed 21% to $87.4 billion, above the expected $86.2. Their profit rose to $6.47 a share. That blew out Wall Street estimates of $4.11. They also said they had topped 150 million Prime subscribers who pay monthly for those annual fees for shipping discounts and other perks their TV access and so on. That's up from 100 million just 2 years ago, so that's a phenomenal increase. Some analysts were a little bit concerned about their AWS— that's the Amazon Web Services, so that's their kind of cloud division— about slowing growth and rising costs, because actually AWS for Amazon is a source of about two-thirds of Amazon's operating income in recent years, but that generated revenues of $10 billion in the fourth quarter, and that was up 34% from a year earlier. So pretty spectacular numbers really all round for Amazon, and they shot higher, um, and the e-commerce cloud giant now back towards the, the $1 trillion club once again. So yeah, I mean, it quite a positive signal. Obviously Microsoft was very good. Some of those other very sensitive names like Tesla was very good. I think Facebook's fighting its own demons at the moment, but overall, you know, pretty, pretty, you know, strong stuff with earnings season. We do have a few other companies coming out later. These tend to be more oil majors, industrial-linked kind of names and services, so Chevron Exxon, Caterpillar— they're the names you need to look out for pre-market today as well. Quick look then at the calendar. What have we got? Uh, Chinese data overnight. We did have non-manufacturing, manufacturing PMIs for Jan, and they were basically in line, so nothing really there too much to speak of. Going forward into the European morning though, there is some important and interesting things that are coming out, and that is the eurozone GDP numbers. Now, just having a quick look and a scan on the headline feed. So when they do start coming out, you've got the various European nations kind of littered through the morning, but then the eurozone number will come, and that will be alongside the flash eurozone CPI. So 10 o'clock will be quite interesting if you're looking at European assets— euro, Bund, DAX, so on. Otherwise, the other things to look out for today would be US-based. You've got Core PCE Price Index, Personal Income Spending coming out. You've also got Chicago PMI. University of Michigan is the final lesser impactful reading, just so you're aware. That is also coming out. That's pretty much it from my side. So Again, a couple things is I think you just need to put into context a little bit the fact that the market did move a fairly decent amount last night. So don't be blinkered by the fact that this is now a one-dimensional situation and the market's going to go complete risk-on and we'll get a continuation. That's not to say that that might not occur. I just don't want you guys to just get— if you, if you weren't in last night, so you to be overtly aggressive and just start, you know, buying up everything like there's no tomorrow, because in the intraday environment that might not be the case. In the medium term, potentially. So again, your time horizon is quite key with these types of things. Pound still rallying right up to the R1 now. I did hear the squawk say just before I began the briefing that Deutsche Bank analysts were, were talking about month-end buying of sterling against a variety of different currencies. So perhaps also that's at play as well. All right, hand you over to Sam. I will wish you a great weekend ahead. Don't forget, I'll be distributing the calendar highlights and a summary of my expectations for the week ahead when I tweet that on a Sunday. Okay guys, take care.

Yeah, hi guys, hope, uh, we're doing well. Happy Friday. We'll bring in equities, uh, as they of course did push higher overnight. Is Europe gonna buy into that or not? 25 minutes into the, the open, we actually just drifting lower a bit, not massively aggressively. I think a little line in the sand for the S&P and the Dow and NASDAQ have got the same area of support, uh, in general. And the S&P, that's coming in around 3285. $35.25. I think as long as we're below there, this market might just start to drift down. Areas of potential support, well, yesterday's overnight, uh, kind of high, uh, around the pivot, and then $32.64, $32.65, a decent area as well potentially below there. Is anyone really going to want to hold over the weekend after seeing what happened last Friday. And you can see there, there, what's that, a 30-odd point gap or so? I'm not too sure. But if we do, you know, push above these levels, 3285 to the upside, then there could be a further rally. You can see last night we just struggled to get above, um, around 3295 area as such. So keep, uh, keep a watch on, on those points. But as long as we're below here, I think we might just see a bit of a risk-off morning. You can see gold in early trade up towards that pivot point. Um, let's put it on the 15-minute. You can see here just pushing over the last hour or so. Nothing really to, to say we can smash through this just yet. Quite a lot of decent price action around here. You can see 1581s was the double bottom initially from yesterday's low before we spiked through on the cash open of the US equity 50s, and then it got really choppy around there. So I wouldn't be looking to aggressively get in just yet. And, and if you can see, maybe if you're putting on a trend line like so, so maybe we can get some sort of retest of that later on. And those previous highs, 1578, could be the opportunity. Or really being patient and waiting for the pivot to break through, I think, would be the way I go about it. Oil Yesterday did push higher, and it's been actually a really good guide, I have to say, for, for what equities are going to do as well. So when I was trading the Dow last night, I was really keeping an eye on, on what oil was doing, how it was going to, going to take, um, take cue, if you like, from the WHO. And oil here just, just finding a bit of support on, on these lows. You've got a couple of trend lines in the mix there there as well. I know a lot of people are talking about getting us down to 51, 50, 50, just because of the sheer support that we've had going back to June last year. It's just an incredible zone. Um, and then even, you know, to January last year, almost literally this time last year. Um, so it'd be interesting to see where we close the week. Do we get another test of that trend line in that low or not? Or is it, is it to hold and when we push on? You can see this morning. We are just coming down to a pretty key zone, you'd call it the low from, uh, the yesterday morning. We then broke through to find then resistance on the way back. We broke through then again last night and found some support. And I'm just going to move that up to a bit of a zone from the open on Electronic Trade last night around 11 and then midnight as well. And now, now you can see it's a pretty key clear area of what would now be support support. So a break of that, well, things could, you know, start to drift lower with a bit more aggression. That zone, 52.68 and then 52.77 to the upside. Having a look at the pivot as well, just below there. So do obviously be careful in the, the early hours of, of this trade, uh, because, you know, the volume is not necessarily going to be there. Having a quick look over the pound, it of course had a lovely day yesterday and that's continued. Break of some resistance this morning, up to the R1. Great place to have a little breather, you'd imagine. And you can see here, that's the highest we've been since we spiked on the, on the 24th and came back down last Friday into the, the end of that session. So there's quite a lot of, uh, noise just above where we're trading. So that R1, again, it's almost like gold. If you're, you're bullish, fine, but just have that patience to wait for that to, to break if you want to get in. Or identify some of these previous highs from yesterday, double top broke through around 7 AM, to look to potentially get in for, for that retracement there. Euro off the, the low that we had on— what day would it be— Wednesday. We confirmed after that close above, we came back to find support. We then pushed higher quite nicely. It wouldn't be all too surprising, especially if we close the week above there, that next week we can just try and push on a tiny bit. And I know the longer-term bears wouldn't mind a, a trade somewhere near that 111 on the futures, or even a retest of this support that broke through as well. We'll have to wait and see what happens there. You can see the potential trend line to the downside I would have on. Of course, as you know, that weekly one as well, going back from 2007. 17, 16. Um, that's potentially a trade for later in the year that I'll be keeping an eye on. But for now, euro off those lows. However, there is a lot of resistance, you know, horizontally anyway, just where the high that we had last night. So it's not out the woods, of course, if you are bullish. And you know, we've been trending down, uh, since that, that high. Let's have a quick trend line, see if we can get anything in the mix there. A bit choppy, to be honest, a bit choppy. But some support below, uh, range band hasn't been moving too aggressively in all truth. So better markets out there, I would say, to be getting involved in. A quick look over the DAX just to wrap it, to see how we, we are doing 30 minutes into the session. Just slowing down a bit. You've obviously got all those lows from, from yesterday and before. It's a pretty key zone, isn't it, going back to the low that we had back on uh, Monday to now, you know, each time we come into that area, the buyers are stepping in. So, you know, not to say that we've, uh, um, you know, found the floor, but there could well be some support coming in here. An interesting one is if equities do push up into, you know, the afternoon. FTSE is obviously down quite heavily, uh, because of the strength for the pound. So if the pound of course runs into some resistance as well, could be a really nice recovery trade, uh, there, uh, for, for that market. But, uh, we'll cover that throughout the day. Hope everyone has a good Brexit day and, uh, an even better weekend.