Amplify Trading Weekly Strategy Report: 21st-25th October 2019

Amplify Trading Weekly Strategy Report: 21st-25th October 2019

Monday: JN Trade Balance, All Industries Activity Index, CN PBOC Interest Rate, House Prices, GE PPI, Buba Monthly Report (tentative), UK Rightmove House Price Index, Meaningful Vote on Brexit Deal (tentative), US Federal Budget Balance, CA General Election, UK BoE Haldane Speaks, US Earnings: Halliburton


Tuesday: JN Holiday, SP Trade Balance, EU ECB Bank Lending Survey, UK Public Sector Net Borrowing, CBI Industrial Trends Orders, Withdrawal Agreement Bill in Parliament (tentative), US Existing Homes Sales, Richmond Manufacturing Index, 2-yr Auction, Weekly API Inventories, CA Retail Sales, NZ Trade Balance, US Earnings: McDonalds, P&G, UPS, Biogen


Wednesday: FR Business Survey, GE 10-yr Auction, EU Consumer Confidence, US House Price Index, Weekly DoE Inventories, 5-yr Auction, CA Wholesales Sales, US Earnings: Boeing, Caterpillar, Microsoft, Tesla, eBay, UK Earnings: Barclays


Thursday: AU/JN Manufacturing/Services PMI, JN Leading Index, SP Unemployment Rate, FR/GE/EU Manufacturing/Services PMI, ECB Interest Rate Decision, Press Conference, UK BoE FPC Meeting Minutes (tentative), Gross Mortgage Approvals, US Durable Goods Orders, Weekly Jobless Claims, New Homes Sales, Manufacturing/Services PMI, KC Fed Manufacturing Index, 7-yr Auction, US Earnings: 3M, Twitter, Comcast, Amazon, VISA, Intel, UK/EU Earnings: AstraZeneca, RBS, BASF, Daimler


Friday: GE GfK Consumer Climate, FR/SP PPI, IT Trade Balance, GE Ifo Business Climate, US Michigan Consumer Sentiment (F), Baker Hughes Rig Count, Treasury Department Report, CA Budget Balance, US Earnings: Verizon, UK Earnings: Lloyds


*126 S&P 500 companies reporting this week (incl. 12/30 Dow components)




MACRO OVERVIEW - Anthony Cheung (@AWMCheung

) and Tommaso Iaquone (@tommasoiaquone
)


You can watch the week ahead briefing HERE

. Topics covered include:


· A review of the Brexit vote at the weekend and what to look out for next

· Summary of major corporate earnings to look out for this week (126 S&P 500/12/30 DJIA)

· Sam North provides his technical view across the charts

Brexit: Saturday turned out to be a big disappointment for the Government as the Letwin amendment was passed in Parliament, withholding approval for PM’s deal until the legislation become law. This also implied the PM - in compliance with the Benn Act - was forced to write a letter to the EU asking for an extension. However, it looks like that after Saturday’s delay, some sceptical MPs might have changed their mind having now received reassurance that No-Deal is off the table. Therefore, the PM should count now on the backing of all ERG, most of the moderate Conservative rebels (previously expelled from the party) some independents and pro-Brexit Labour, which should be sufficient to achieve a majority of 320 votes.




However, UK Parliamentary law might undermine Boris Johnson plan to resolve Brexit this week. Let’s see why.


On Monday the Government has already confirmed to present the Withdrawal Bill later today. However, the government thinks there is a good chance Speaker of the House Bercow will not allow this motion to be voted, on the ground MPs have already answered this question. Should Bercow deny permission to go ahead with the Withdrawal Bill - given the Benn Act in place - the government is still expected to table a motion to initiate Brexit and trigger art.50. Although, with a very good chance the motion will be rejected, leaving an extension as the most likely option on the table. Nonetheless, the Government will have to wait for a confirmation from the EU to grant an extension (and its terms) - already requested by the Government after Saturday delay.


Crucial will be the discussion on two amendments:


1) Confirmatory Referendum

2) Permanent and comprehensive UK-wide custom union (Theresa May’ deal)


As the chances to approve the former remains limited, there is a significant likelihood that the latter will pass if DUP supports it. Should 2) pass it would materially be in contradiction to Johnson deal. Logically, this should lead to the EU granting an extension and eventually the Government tabling a General Election motion.


Conclusions: the reaction in the GBP could result very choppy given the multiple possible scenarios ahead. Although headline risk is still significant, with decreased No-Deal risk fundamental remains in favour of the recent upside in the GBPUSD. However, the possibility of a second referendum or general election, could open up to new uncertainty and mild downside for cable, leaving no-deal as a tail risk for now.




Equities/ US-China


According to the latest developments, it looks like “Phase-one” of the deal is to be papered by mid-November. However, the possibility of a real deal being signed by the end of the year remains significantly low. Both China and US said to have achieved “substantial progress” making clearer the willingness of both parties to de-escalate the ongoing war, which has been enough to boost Equities very close to all-time highs again. However, considering most of the positive developments priced in and the usual “by the news mute the facts” move in North American Indices it looks like Equities might be poised for a period of consolidation and mainly driven by US Data and FED communication. Traders are pricing in one more cut by the end of the year, with expectations anchored to upcoming data and any development on the geopolitical front (Note last week we received confirmation that Brexit tail risk and its unwind, does move US Equities). Trade uncertainty has also continued to hit on global growth outlook, after IMF recent forecast pointed out to the lowest World GDP growth since 2009 and China's GDP hit 30 years low.



This week we will also have 126 SP500 companies reporting with special attention on Wednesday as results from Boeing, Caterpillar and Microsoft are all due. Last week US banks earnings looked relatively solid. However, market attention, for now, seems very much switched on political risk, with this round of earnings likely to be overshadowed by other risks.






TECHNICAL OVERVIEW – Tommaso Iaquone (@tommasoiaquone

)



GBP/USD futures


Gold future


S&P 500 future



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