Amplify Trading Global Markets Review - 4th November 2019

Amplify Trading Global Markets Review - 4th November 2019

Today's Highlights

  • US Ross said there are far along in Phase 1 of China trade deal

  • US Ross said US may not impose auto tariffs on China this month

  • China might make further compromises but Phase 1 deal is not comprehensive

  • UK MPs set to elect new Speaker of the House

Macro Review

The week following Non Farm Payroll is usually a quiet one for data. This week is perhaps slightly different as the payrolls was released on the same day of an European holiday and so this week we will have US (Tuesday) and European non-Manufacturing PMI (Wednesday). Moreover, this will be the first week of Lagarde as President of the ECB and nonetheless a block of FED speakers are due this week. On the UK front expect the election campaign to drag more attention. The pools from YouGov, Opinium and Orb point out to a Conservative lead of 12-16 points over Labour (prev 8-11 points).

The week started off with Equities on the front foot after positive comments from US Secretary Ross and US Trade Representative Lighthizer on US-China trade deal. In related news, there were also comments form WH Trade Adviser Navarro that the sides had good talks, while he also suggested the trade deal with China will require 3 phases. Markets cheered to the positive developments with Equities printing fresh all-time highs and notably SP500 closing for the first time since July above the 3050 handle. To add up to positive US-China development, last week Non Farm Payroll highlighted one again strong job growth numbers with another 128,000 jobs added to the US economy in October plus the 95,000 of positive revision to the previous months despite the GM strike and the ongoing slump in manufacturing activity. Along with the strong job number, the lower than expected wage growth in October slowed to 0.2% point out to a solid economy without significant risk of rising inflation in the medium-long term which creates a perfect storm for risky assets. Nonetheless, last week FOMC meeting made clear that this current cutting cycle is not going to end any time soon leaving doors open for further cuts in case of negative surprises. 

Therefore, despite the slight change in communication (initially processed as more hawkish wording) is simply excluding hikes ahead - which is enough to excite stock bulls - and putting on HOLD FOR LONG the base case scenario for the FED with the option to cut in case a "material reassessment" in outlook is needed. Interestingly, looking at the risk radar and incoming data it looks like the FED is unlikely to receive enough information prior to the next December meeting that could lead to that "material reassessment". Obviously, the reintroduction of auto tariffs on China on 13th November could flip expectation towards more accommodation once again.

The bulls have it the bulls have it! 

_______________ EU Close

If you missed the morning briefing from the desk click HERE

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