UK assets surge on huge election win for Boris Johnson

Morning Note

Sterling jumped sharply, enjoying its best gain in a decade as the Conservatives romped home to a convincing victory, while the FTSE also rose as investors enjoy the Boris Bounce. Broadly equity markets were well bid as hopes of a US-China trade deal crystallise into something more concrete.  

Huge win for Conservatives in UK general election

The Conservative Party has secured an historic mandate with a thumping victory, providing clarity for investors where there was confusion. For the markets and for business this is the perfect result – a clear majority for the Tories, the Corbyn risk nullified entirely, a major reduction in uncertainty around Brexit and even a quick Budget to inject the economy with some added impetus. The only doubts are around the next phase of Brexit – the future relationship – but with a large majority the government will be in a better place to negotiate and do what it needs to do.

GBP/USD, MARKETSX, 10.50 GMT, December 13th 2019

Sterling was heavily bid on the news. The going was looking a tad heavy but the ground firmed once we had the exit poll. GBPUSD surged to as high as 1.35 but pared gains a touch to trade around 1.3470 heading into the morning session. Near-term a look to 1.36 and thence to 1.37 seems feasible.

UK stocks surge on Tory election win

The FTSE 100 rose over 100 points to trend above 7,388, moving higher despite a clear drag from the stronger pound, which will cap gains. The City has awoken and the relief rally on a massive Tory win has begun. I think 8,000 looks overly bullish as a target, but something like 7700 before the year is out is doable. Near-term, 7440 offers a big test.

FTSE 100, MARKETSX, 10.50 GMT, December 13th, 2019

Now calls for a rebound in confidence in UK plc. Fundamentally undervalued UK equities – forward PE multiples have been very cheap versus European and US peers of late – will now look especially appealing as they have largely missed out on the rally seen elsewhere. The FTSE 250 put in more considerable gains – up 1,000 points to easily take out 21k and hit an all-time high. Sterling and UK equities are in for a Boris Bounce.

Remember just how cheap UK equities had become – trading on 12-month PE multiples of about 13 vs about 15 in Europe and 18 on the S&P 500. The FTSE 250 nearly made it to 22k but topped out an all-time high at 21,910. The FTSE 100 added about 100 points.

UK equities were basking in the warm glow of the Tory victory as investors threw out their worst-case scenarios for the British economy. There are some seriously relieved investors – and bankers and corporate financiers.

In particular, we are seeing some absolutely stonking moves among the UK-focused equities. Anything largely exposed to the UK economy took off at the open, while the drag on dollar earners from the stronger pound was not so large as to worry the market. It all points to a huge vote of confidence in the prospects for the British economy as a result of the Tory win. You just cannot understate the sense of relief here in the City.

Utilities had been suffering from a significant Corbyn discount and exploded as the threat of nationalisation evaporated with the Labour vote – United Utilities, Severn Trent and National Grid all jumped around 8%, while Centrica jumped 9%. 

Housebuilders were also undervalued and caught a bid on hopes that construction will benefit from the Conservative victory. We should also consider the potential risk that a Labour government could have posed to their profits being removed. Barratt Developments and Taylor Wimpey both rose more than 10%, while Persimmon was among the top movers at +14%. 

Banks were also bid – with the most heavily exposed banking stocks to the UK economy enjoying the biggest gains. RBS and Lloyds both rose 11%, with Barclays up nearly 8%. Investors are also needing to dial back their expectations for a Bank of England rate cut so this is an important boost for the banking sector in the UK, with Lloyds in particular the most exposed to the mortgage market.

Elsewhere retailers found new support with Dixons Carphone shooting 16% higher, with Marks & Spencer and Sports Direct +6%.  

Property, retail, banking, utilities – the whole lot is seeing a huge rotation.

Asian stocks higher on trade sentiment

Asian markets have rallied strongly overnight, taking their cue from the records on Wall Street as it seems a phase one trade deal is as good as done. Although not quite signed, sealed and delivered, it seems like the US and China have come to terms. 

The White House will cancel the planned tariffs on $156bn in Chinese goods scheduled to take effect on Sunday, whilst also cutting by half the existing tariffs on around $360bn of Chinese goods.

Does it mean we get a comprehensive deal in 2020? Hard to say, but it this has created the necessary Christmas cheer for a decent Santa Rally. It does rather look like some of the worst risks and headwinds are fading away – a phase one deal complete, greater political certainty for the UK and even a slightly upbeat ECB. 

Some doubts creeping in about whether China has accepted this deal – of course if it were to be scuppered now there would be a sizeable downside for equity markets given the ramp we have seen.

Tokyo surged 2.5% to its best level in over a year above 24k. Hong Kong rallied 2% and mainland China is up over 1%. 

Earlier US equity markets had surged to new all-time highs after Trump first tweeted the deal was oven ready. 

European indices are pointing broadly higher.

The dollar was offered with DXY down to a 96 handle and its weakest since July. EURUSD has rallied through 1.1170 and held the gains.  

Risk-on moves hammer bonds, gold dragged lower

Bonds were crushed by the risk-on sentiment from the trade deal – US 10s taking 1.95% at one point.   Higher yields knocked gold but prices haven’t capitulated entirely. Having traded at a high of $1486, gold has retreated to $1467 having hit a low of $1462. The fact prices haven’t retested the earlier Dec lows suggests there is still bid there. Crude oil held gains with WTI above $59.50.

Sterling hit by polls as traders weigh hung parliament chances

Morning Note

Sterling remains highly susceptible to polls and specifically exposed to big downside moves on anything other than a solid Tory majority: last night’s MRP edition from YouGov showed a sizeable narrowing in the Conservatives’ lead and raised for the first time the possibility of a hung parliament. The central case remains for a Tory majority of 20-30, but we are dealing with fine margins for error. Markets for the first time need to worry about a hung parliament and what that might mean in terms of more uncertainty over the economy and Brexit.

For traders – it means election night could be very interesting indeed. We’ll be increasing staffing overnight, looking particular at the exit poll at 22:00, and preparing for a potentially highly volatile session, with all that would normally imply in terms of reduced liquidity for GBP pairs and U.K. assets anyway. Then it’s going to be all hands on deck on Friday morning as the markets reopen to whatever brave new world the voters have chosen for us. Spreads may widen out of hours for assets like the FTSE and GBP crosses, whilst gapping even in FX pairs may occur. A hung parliament takes back to a 1.27 handle on cable, and could see UK-focused stocks on the FTSE 250 hit hard.

Having been bid up ahead of the poll’s release, the pound took fright at the poll data and GBPUSD plunged nearly one big figure from north of 1.32 to around 1.3110. The pair has pared losses overnight to reach 1.3140.

The good news is the polling is just about over – the next major one is the exit poll just after 22:00 on Thursday. This has been very accurate over the last 25 years.

Yesterday, Wall Street slipped as the tariff deadline comes into view and markets stand by for the Federal Reserve decision today. Trade talks appear their usual on-again, off-again self.

Stocks were mixed but generally flagged. The S&P 500 eased back 0.1% but had been positive at times, while the DAX was down 0.3%. The Stoxx 600 pared losses of 1.1% at one stage to close down 0.3%.

European markets this morning are set to open flat with the FTSE 100 at 7235 off the back of the pound’s fall since the close yesterday.

FOMC on tap at 19:00 GMT. The Fed is likely going signal it’s sticking to its dovish mantra. Whilst no rate cut is anticipated, we may well see evidence of a noticeable shift in the Fed’s stance: specifically that it’s now willing to do whatever it takes to stimulate the economy. Powell has already said it will take a sustained and significant uplift in inflation to warrant a hike, whilst there’s chatter about essentially parking the 2% inflation target to let the economy run hot.

The persistent lack of inflation means it has a free hand to go as low as it likes, it’s only maintaining the mask of prudence by not cutting more aggressively. Moreover the drag lower from trade, global economic stress and the move to lower rates in other major economies means this is by far the path of least resistance. Out go concerns about financial stability or asset bubbles. The danger now is the Fed is becoming the monetary policy wing of the White House.

OPEC risks disappointment, US jobs report on tap

Morning Note

OPEC and allies are poised to formally agree to a policy of deeper production cuts, but there’s not a lot for bulls to be glad about. The 500k bpd increase to 1.7m bpd sounds good but only reflects existing over-compliance, led by Saudi Arabia, which has been pumping less than it is allowed, and it’s going to be short-lived. The deal looks at the moment to only extend through the first quarter of 2020. If OPEC doesn’t extend the curbs through to the end of next year it could act as a de facto loosening of supply that markets would punish with lower prices. There’s a real risk that even with deeper cuts OPEC fails to live up to expectations. We could of course see another meeting soon after this one to agree an extension – critical to today’s formal announcement therefore is whether there is any extension beyond March 2020. And we’ll wait to see if any arm-twisting by the Saudis forces Iraq and Nigeria into complying – but why would they bother now when they’ve not complied thus far?

Oil prices are reflecting a tinge of disappointment with WTI softening to $58.40 after hitting a high above $59 yesterday. Brent meanwhile has eased back off the $64 level to trade around $64.30 – importantly on Brent we failed to beat the November high, a sign that the market isn’t buying into this deal. The 200-day moving average remains a hurdle a little above $64. Prices for WTI and Brent are simply back to where they were before the attacks on the Aramco facilities in September. It’s all got a buy the rumour sell the fact look about it. But we must stress that if OPEC accompanies the deepening of cuts with an extension, at least to the next scheduled meeting in June, but perhaps until Dec 2020, prices could enjoy more upside.

There was good news for Saudi Arabia as Aramco priced well at the top of the range and raised $25.6bn in its IPO. A record listing values the company at $1.7tn, but we shall see where the shares head on day one. Regional and domestic investors have come good but the worry is that the big foreign institutional demand has not been there – if you’re just recirculating oil money among Arab states and Saudi households (levered) then what good has this float actually done?

In equities, Asia has been broadly higher amid more upbeat sentiment around trade talks.

Equities stumbled in Europe yesterday but the good old cocktail of trade optimism and a Friday mean they are pointing higher. However some very nasty German industrial numbers have taken the shine of European stocks ahead of the open.

Wall Street was steady with the Dow and S&P 500 trading mildly higher yesterday. Futures indicate more gains today. Trade will be the deciding factor.

After the usual pump and dump comments from Trump saying that trade talks are ‘moving right along’, we got more concrete news on trade as China agreed to cut tariffs on some pork and soybeans from the US, although it did not mention the quantities involved. This could be due to necessity from a shortage of pork because of African swine fever, more than desire to get a trade deal done, but nevertheless it’s pointing in the right direction. Nevertheless, the toing and froing of trade talks continues – we’ll be waiting for any fresh signal and will only believe a deal once it’s been served up on the table, not when the chefs say it’s in the oven.

In FX, the US jobs report is the big set piece event. A very weak ADP reading this week has forced some to revise forecasts for the NFP, although as always stressed, the ADP number is not always a reliable predictor for the NFP. Consensus is 180k but this is affected by GM workers returning. The three bears likely won’t be happy – expect more low unemployment, which is seen at 3.6%, and decent wage growth (3%). But markets are in a reasonable nervous frame of mind right now – a big miss could signal weakness in the US economy  – bears are sniffing around for anything that points to recession.

Last month’s reading showed US labour market strength remains intact: we saw a strong beat for the US labour market report with nonfarm payrolls up 128k in October, well ahead of the 85k expected, whilst there were upward revisions to the prior two months. The August print was revised up 51k to 219k and the September number was hiked by 44k to 180k. The 3-month average at 176k against the 223k average in 2018

Momentum behind sterling remains solid. GBPUSD has continued to drive higher and has consolidated around 1.3160 – perhaps resting for the assault on the May high at 1.31750. Looking at the charts it’s just one bull flag after the other, but possible 14-day RSI divergence should be watched. A debate tonight between Boris Johnson and Jeremy Corbyn may produce some moves – the election is Johnson’s to lose so he simply needs to avoid any booby traps. Polls as ever need to be heeded – latest from BritainElects shows the Tory lead down to just under 10pts. At present it does not look like the gap is narrowing quickly enough for Labour to mount a serious challenge, but upon such complacency have many best laid plans gang aft agley.

The euro remains steady with EURUSD holding onto 1.110, despite some very nasty looking German industrial numbers – down 1.7% vs +0.1% expected. The collapse in German manufacturing is staggering. Whilst PMIs are indicating recovery, these numbers suggest the very opposite. USDJPY has steadied above 108.60 having found decent support on the 50-day moving average.

Elsewhere, gold was down at $1473 having encountered firm resistance on the 50-day line at $1482. At send time gold was trading at $1473, with November lows sitting at $1445.

Pound steadies as Boris goes to the brink, Hong Kong worries ease but risks remain

Morning Note

The pound edged higher as Boris Johnson’s Brexit strategy appeared in disarray. The PM lost 328-301 in a key vote that hands control to Parliament.

He will now table a motion to call an election, however it is unclear whether Labour will play along. Do they fall into the ‘elephant trap’, or do they prefer to watch the new Tory regime implode? With rebels having the whip withdrawn the government benches are now very much in the minority.

However, the threat of no-deal remains high. An election has to happen sooner or later – surely it is better to happen now? Even if Parliament gets its anti-no-deal legislation on the statute book before an election, a new Parliament would be free to revoke.

GBP/USD finds a floor

GBPUSD appears to have found something of a floor for the time being at 1.20 and was last pushing up to 1.2130 and close to 1.2140. Lots of short covering is no doubt in play. The move higher only serves to underscore the kind of headline risk and volatility we can expect to see over the coming weeks which will make sterling a tough currency to trade. And it is worth noting that at least a portion of the rally is down to the drop in the US dollar following that weak ISM manufacturing reading. EURUSD has also pushed higher and was last at 1.0980, threatening to retake the 1.10 handle. The dollar index has fallen below 99 again.

Wall Street came back from the Labor Day holiday to the first down day in five. Trade wars continue to gnaw away at confidence. SPX fell 20 points and the 2900 line was breached at one stage but buyers quickly stepped in and the index finished the day at 2906.

US manufacturing data was the weakest since 2016, driving down confidence and bond yields. It was the confirmation that the trade war is biting on the real economy. The US 10yr plumbed a new 3-year low a little above 1.4%. The 30-year also stretched to a new low. Markets are increasingly betting the Fed has to ease more.

Stocks recovering as Hong Kong tensions ease

Asia has bounced back as reports indicate Hong Kong leader Carrie Lam will formally drop the controversial extradition bill that was the spark for the wave of protests over recent weeks. The move will be taken as a sign that the authorities are willing to be accommodative. However risks remain as this has become about much more than the hated bill. If the protests continue now, China’s response may harden quickly.

The news more than compensated for figures showing Hong Kong’s economy has been badly hit by the protests, with private sector activity at a decade low. Other overnight was equally concerning, with Australia’s economic growth slowing to its weakest since 2009.

After sliding in a broad risk-off move yesterday, European shares are on the advance again but see the major indices fairly rangebound for the time being. The FTSE 100 regained the 7300 level in early trade but as ever in the current climate these gains always look a little fragile.

Oil was hit hard yesterday by the broad risk-off moves and the US factory data but WTI bounced off rising trend support around $53 to recover the $54 handle, bolstered overnight as Asian stocks rose.

UK services data at 09:30 will be risk for sterling crosses following that very soft manufacturing reading. If this too shows contraction then we’ve got to be looking to a technical recession as a possibility and for the Bank of England to take note and ease.

Trump blows up markets with surprise China tariffs

Morning Note

All hell broke loose in the markets yesterday and continues today. with the sharp shooters having given way to the heavy artillery.

The trade war just got very hot, just as we thought things were improving. And just as the Fed had come up short as far as the market is concerned. What can the Fed do now?! Markets are like Test matches – you think you’re on top and suddenly a big hitter comes to the crease and knocks you all the park.

Donald Trump torpedoed the markets with a surprise decision to slap a 10% tariff on an additional $300bn in Chinese goods effective Sep 1st. China is sure to retaliate – this is real escalation.

Commodities hammered as risk-appetite evaporates

Risk assets took a pounding and gold rallied very hard from its lows of the days. Gold found bid to rally about $40 off its lows – incredible. It has eased back slightly today but still remains around a two-week high. Bond yields have sunk as investors sought shelter. These kind of risk-off moves are quite phenomenal.

Oil was absolutely hammered. We saw enormous selling in crude oil and Brent with the latter retreating to the $60 handle. Having been hanging around the $63 mark it gave up 5% in a matter of minutes. WTI shipped $4 from $58 to $54 in minutes too. Those are big, big moves and highlight the kind of sensitivity the market has to trade. Today the two benchmarks are on the rise, but even with gains of 1.5% for crude and 1.9% for Brent yesterday’s pre-announcement levels are still far away.

Equities sink on tariff drama

US equity markets, which had been in the green, turned sharply lower. SPX dropped 40 points or so from its highs in short order to breach the key 2970 level and trade around 2952 at the lows. Today is has shed another 6 points to trend around 2,943 – after a brief drop all the way down to 2,933.

European indices are still being hit hard – the FTSE 100 is off 0.75% to trade around 7,446, while the DAX has drop a whole percentage point to trade sub-12,000.

FX: Yen leaps on flight to safety

Bid for the yen, which had been strengthening all day, accelerated markedly as USDJPY returned to the 107 handle – and today it dropped lower, bouncing off support at 106.70 to trade a little shy of 106.90. GBPUSD has held its ground and the euro also a touch firmer as the dollar has taken a knock. USDCNH has firmed up – a possible retaliation by China is to let the 7 handle be breached. Australia’s dollar has been hit for six.

All bets are off as trade war escalates

The new tariffs have completely taken the market off guard. You have to question the motives when a) the trade team have been in China this week conducing talks, and b) it’s coming just a day after the Fed disappointed the president by not signalling enough cuts. Trump got his cut, so he’s pushing China again. It’s just gaslighting.

Your move, Beijing…

Shares climb post Powell, gold and oil rally

Morning Note

All power to Powell, but is this the Waterloo for the bull market? His dovish remarks lit the green buy light across the board. Stocks, oil, gold, bonds and currencies ex the dollar are pretty well all bid up with the Fed apparently happy to keep its hand on the pump. What happens when it stops cutting (one and one for insurance purposes?) and what happens if the US-China trade sitch goes awry? Market seems priced for perfection and earnings are slowing.

The S&P 500 briefly broke through 3,000 to achieve an all-time high, but closed a few points short of its record close at 2,993.07. The Dow also set a new intra-day peak, while the Nasdaq set a closing high. 

Asia has been lifted higher on the coattails of Wall Street. European markets are up across the board. Roughly quarter point gains for the main bourses – hardly euphoria in Europe and still some way off all-time highs. Come on Mario, now’s your time!

Powell power 

Powell said the stronger jobs report last week didn’t alter his outlook – so what might? Certainly the jobs market has slowed a touch this year – employment growth has averaged 172,000 per month thus far this year, compared with an average monthly gain of 223,000 in 2018. But it’s hardly requiring a cut.  

As noted yesterday: Investors are buying the Fed put hook, line and sinker. 

The Fed chair has well and truly left the door open to a rate cut in July, albeit there remain doubts about whether this is going to be first of several cuts or just an ‘insurance’ cut designed to keep markets on an even keel. The testimony didn’t appear to tell us anything about what the Fed is thinking longer term. His comments though did nothing to nudge market expectations towards a more neutral position. He seems happy to allow markets to crystallize their belief in a July cut.


Interesting set of minutes from the FOMC’s last meeting coming in the middle of this Powell testimony. What’s clear is that they will cut in July. Hat tip to Helen Thomas of BlondeMoney for noting that the Fed has basically admitted that it is going to cut because the market wants it to. From the minutes: “While overall financial conditions remained supportive of growth, those conditions appeared to be premised importantly on expectations that the Federal Reserve would ease policy in the near term to help offset the drag on economic growth stemming from uncertainties about the global outlook and other downside risks.” 

French-US relations 

The threat of EU-US trade spat needs to be considered. The White House is not happy with France’s digital tax, which it says unfairly targets the big US tech giants. For sure it does – but that is because they do not pay an appropriate level of tax. It’s also because Europe doesn’t really have many big tech firms that would be affected. Nonetheless, Trump will use this to beat the French and we can expect Tariff Man to do something. The US doesn’t want to cede the regulatory leadership to Europe either. 

FX – Dollar weakness has returned after Powell’s testimony. Some bid seen this morning for the euro and sterling. Neither the euro nor pound however are able to mount a serious challenge yet – we’re not seeing this as a major technical breakout. GBPUSD has firmed above 1.25, but Brexit fears are unabated. Richard Branson says no-deal would take cable back to 1. Pound-dollar parity is a risk but longer-term it wouldn’t last. A kneejerk to that level is possible, but we’d anticipate the pound recovering ground.

EURUSD at 1.1270 is still well short of the Jun highs around 1.14. Potential head and shoulders – we could in fact see a big breakdown to the downside if the ECB turns extra dovish. Need to clear the left shoulder at 1.1350 for bulls to be happy. 

Oil – Brent futures firming up above $67 and WTI north of $60 after a big drawdown on US stockpiles and an escalation in tensions around the Strait of Hormuz. Reports indicate a Royal Navy frigate warded off Iranian boats that tried to impede a BP tanker. Iran had warned that it would retaliate after Royal Marines seized an Iranian ship off Gibraltar. Dollar weakness and Fed dovishness are also supportive.

Bitcoin – another rollercoaster session. Bitcoin skidded sharply lower yesterday and continued to move south overnight. Seems to have encountered fairly stiff resistance around that $13,300 level we mentioned previously but the selloff was pretty brutal – down to $11,600 in short order, where it has found support. Look for another push higher to the $13k mark, but if the $11,500/600 level fails to hold then $10k is possible in double quick time.

Stocks mixed before Fed chair Jay Powell testimony

Morning Note

Stocks are a pretty mixed, directionless bag right now as the market awaits Fed chair Jay Powell’s testimony in Washington. Wall Street was split – SPX nudged a touch higher, closing about one-tenth of a percent higher close to 2980 having been around 15 points lower earlier in the session. The Dow meanwhile slipped a touch. 

Asia broadly stronger overnight but Chinese shares down a touch. European shares are mildly lower as Mr Powell is set to go up the hill. Caution will be the order of the day until markets get what they want from the Fed chair – if they do. 


Sterling is still languishing at its lows. Ex the January flash crash we’re down at 2-year lows for the pound, with the threat of a no-deal Brexit looming over sterling. GBPUSD was last at 1.2450, a shade off yesterday’s trough but still looking weak. 

Dollar strength is returning as traders dialled back expectations for a deeper, aggressive round of cuts by the Fed. All eyes on Jay Powell’s testimony later on as well as the minutes from the last Fed meeting. The prospect of the Fed chair nudging market thinking slightly away from cuts should keep traders on their toes. Euro steady at 1.120 – look for a move below 1.1180 to push the cross back to the lows. 


Oil is firming up after yesterday’s surprisingly large drawdown on inventories. API data showed stockpiles fell by 8.1m barrels last week, versus a c3m draw expected. The data could offer renewed support for oil prices. Meanwhile speculative long positions are growing again. Brent was last a shade below $65. Patterns look a bit bearish and flaggy though. Price action for now looks bound between the $62.50-$65.50 levels, the 50% and 38.2% Fib levels of the big rally through 2019. 

Data overnight – China inflation came in as expected at 2.7%, whilst PPI was weaker, coming in flat in June from the month before. 

Trade progress boosts equities, dents gold; oil soars as OPEC gathers

Morning Note

It’s been a week of good progress so far, with positive noises on trade and oil production cuts. Markets are firmly risk-on, which is good news for equities and oil, while gold is feeling the pressure.

Equities have recorded strong gains today on the back of trade progress at the G20 meeting. The US and China have agreed to restart trade talks after President Donald Trump met President Xi Jinping at the gathering of world leaders.

European indices have shot higher, with the FTSE 100 up over 1.1% and above 7,500 points for the first time in around 10 weeks. The DAX has hit a fresh 11-month high thanks to a gain of 102 points to trend above 12,559. Futures suggest a strong US open, with both Dow and S&P 500 futures up 0.8% at the time of writing.

Meanwhile, gold is trending below $1,390 today, recording losses of 1.5%, as investors unwind the recent flight to safety.

Oil races higher on OPEC progress

Iran has now given its backing to a proposed extension of OPEC’s joint oil production cuts. Other key OPEC members, as well as non-OPEC ally Russia, also seem to be in favour. This means the cuts could be finalised during the two-day meeting concluding tomorrow.

Oil has shot higher on the news, with crude breaking above $60 per barrel and Brent testing $66.50. Both represent gains of over 3.2%. Crude oil could face resistance near $60.80, the 76% retracement of the top-to-bottom move seen between late May and mid-June. Brent, meanwhile, is trending around the 50% retracement level, with $68.07 the next key resistance, on the 61% retracement line.

Bitcoin tumbles further from 15-month high

Bitcoin has moved further away from the 15-month high struck last week when markets pushed the world’s biggest cryptocurrency towards $14,000. BTC has recorded 10% losses so far today, leaving it to trade in the region of $11,300.

It looks like the once-key $11,000 resistance level has now turned into support.

Bitcoin rollercoaster, focus on G20, pound higher

Morning Note

Markets turn higher in Europe amid talk of a trade truce between the US and China ahead of the G20.

All eyes on the G20 in Japan and we’ve not had the most auspicious preamble – Trump has criticised the US-Japan defence pact, saying the Japanese would watch the US being attacked on a Sony TV.  

SPX marginally lower at 2913. It started as a more risk-on day, but the rally fizzled out. Defensives were the drag as growth sectors rose. Looks like bond proxies came off a little with diminished expectations for Fed rate cuts. We’ve got this strange balance between risk-on and risk-off right now that makes it a tough market to be in.

Asia was higher across the board. European markets are on the foot front, with the DAX leading the way. The FTSE 100 is close to the flat line around 7240. A stronger pound in early trade appears to be keeping the lid on the FTSE’s gains. 


GBPUSD drove up to 1.270 – look for a break above 1.2710 to suggest a sustained push higher. Dollar is coming off a touch this morning with a similar move in favour of the euro. But the yen back at 108 – looks like broadly risk-on environment ahead of the G20.

We can now expect an awful lot of news flow on trade and tariffs over the next two days so it’s wise to be cautious about reading too much into statements.


Bitcoin endured a tumultuous session, but bulls are regaining control of the situation. Bitcoin pushed higher towards $1,400 before it crashed around 21:30 last night, with futures dropping a staggering $2k in a few minutes.  

It looks to have been down to problems with the cryptocurrency trading platform Coinbase. These technical glitches have been resolved and Bitcoin was last trading around $12,500, still some way short of yesterday’s highs.  

Flash crashes like this can happen anywhere to just about any major market, but bitcoin seems particularly susceptible to them. This indicates that there is yet not the maturity or liquidity in this market than many of the crypto evangelists would like to think. Still volatile, still very risky – still Bitcoin. 

We’ve talked a lot about the catalysts for this rally and we have now another positive for Bitcoin – LedgerX has won CFTC approval to offer physically-settled futures and swaps contracts in Bitcoin. 


Gold lower but holding the $1400 level. At send time it’s testing key support around that zone. Risky-looking head and shoulders for bulls. With the dollar creeping up and yields basing for now, we could gold pull back further. Ultimately if the Fed follows through with rate cuts and we a further depression in nominal and real yields we could yet see gold topping $1500 and even $1600. 

Oil – steady with little in the way of new news on Iran and uncertainty about the G20. Prices spiked yesterday after a big surprise drawdown in US inventories. EIA showed a 12.8m barrel draw, well ahead of forecast and coming after the API figures also showed a large draw on stocks. However bearish fundamentals are not abating and we need to see what the G20 brings, specfically the meeting between Trump and Xi. Brent holds $65, with WTI at $59. 


Kingfisher – A new hand on the Kingfisher helm. Carrefour veteran Thierry Garnier is taking over from Veronique Laury. Removing management uncertainty may offer a modicum of support to shares in the near term but ultimately investors will want to see what new, if any, strategic direction the new CEO is planning. There should be scope for new management to drive change and carry out disposals that are necessary to make this a leaner business. Splitting up the business into smaller parts is an option. 

The entire ONE sourcing strategy was suspect from the off given that, for instance, the fittings and fixtures in Poland and Germany are not necessarily the same that are needed in France or the UK. Unification of the supply chain and joint sourcing has been the cornerstone of the Kingfisher turnaround strategy but has not delivered. Will there be an overhaul or will Garnier press on? 

Serco – more good progress as it bucks the outsourcer trend. Management today reporting 20% growth in underlying trading profit on 4% organic revenue growth. Order intake looks strong and FY19 revenues are seen at the top end of the £2.9-£3bn guidance. Underlying Trading Profit guidance is maintained at around £105m. The good work by Rupert Soames and co is paying off.  

Order intake boosted by £1.9bn in UK asylum accommodation and support services. It’s also enjoying greater profitability from the Carillion healthcare acquisition, which it bagged at a big discount in 2018. Nothing on Babcock but watch for more acquisitions. 

Super Bitcoin goes ballistic, Fed signals are atrocious

Morning Note

Bitcoin moves higher, threatening $13,000, whilst stocks and gold have dipped as Fed policymakers tempered expectations for a July cut.

Bitcoin has gone ballistic: it is building up a head of steam and there’s no point trying to stand in the way. Bitcoin futures began ramping from 11pm last night as they jumped to $11,600 before driving up to almost hitting $13,000 and then paring gains a touch to trade at $12,770 at send time. Look for these little pullbacks along the way as potential entry points, but there is every chance now we see this top the all-time highs and make $20k. 

Causes can be found in many places – the halving in 2020 is one that is being talked about increasingly as bearing on price action now. Facebook’s Libra whitepaper also looks to be a spark. The biggest players are looking at cryptocurrencies afresh and don’t want to miss out. There’s a ‘haven’ play too as nominal and real yields have retreated sharply, reducing the opportunity cost of holding (or HODLing) bitcoin. And the liquidity injection from central banks has forced a range of assets like gold, bonds, the yen etc, so bitcoin is just being swept along by those macro currents.  Whatever the cause, the momentum is powerful right now.

Other major cryptos were firmer with gains for Ripple, Litecoin, Dash, Ether and Bitcoin Cash. Our traders remain roughly 80-90% net long on these assets.

Stocks ease on Fed

Stocks dropped after the Fed chair Jay Powell asserted the central bank’s independence from politics and cautioned against short-termism affecting monetary policy, in a speech that appeared to try and temper expectations for a rate cut in July. At least it looked like he was saying the Fed is by no means sure to cut – we should remember the recent dot plot did not suggest a cut would come until 2020.  

On top of this we had uber-dove James Bullard, who lest we forget was the sole dissenter at the June meeting in voting for a cut, saying that he did not think a 50-basis point cut in July was warranted. This left the market less confident in getting the two-for-one 50bps cut in July – expectations down from around 40% to 26%.  

The market has baked in rate cuts that the Fed is yet to see as completely necessary. As we noted last week after the FOMC statement, there’s yet optionality for Powell and co. In last week’s statement the Fed refrained from explicit references to cuts. The median dot plot showed no cuts this year. The market is ahead of itself again. 

SPX declined 1% to 2917, while the Dow gave up 180 points as Wall Street had its worst day in almost a month. Asia has been softer overnight. Futures indicate European shares are being dragged lower by the Fed’s less-dovish language and by the broader market fears we are seeing around trade and geopolitical tensions in the Middle East. As we head into the rest of the week, the G20 and the Trump-Xi meeting will be front and centre. A bit of de-risking ahead of the meeting is also to be expected.

Dollar gains

The Fed’s jawboning lifted the greenback as yields fired a little, with the dollar index climbing back to 95.75. EURUSD was softer, losing the 1.14 handle to trade around 12.1360. Sterling also eased, with GBPUSD down to 1.2670. Boris Johnson goading Jeremy Hunt to say he would take Britain out on Oct 31st with or without a deal is not really helping. Whatever the claims ahead of the poll, the eventual winner would in any event have to face the cold granite of EU negotiations (or lack of, given the EU says it won’t reopen the deal). Dollar firmed up against the yen but remains near 6-month lows.

Gold softer

A stronger USD hit gold, which has retreated from its six-year highs above the big $1433 level to trade around $1406. You would think that gold will need to hold $1400, or it could reopen a move to $1380. Gold’s enjoyed such a strong run that it would make sense to see a pullback – the bull run may not be over by any means. As we noted yesterday in our commodity strategy, the 14-day RSI and standard MACD indicators were showing the market as extremely overbought. 

Oil higher on API data

Oil rose to highest in a month as we saw stockpiles drop 7.5m barrels according to API. This was well ahead of expectations for a c2.5m drop and has given bulls some reason to cheer. Although fundamentals remain weak, prices have pushed up around 10% in the last fortnight largely on Middle East tensions. Brent was last around $65.30, sitting on the 38.2% Fib retracement of the 2019 top-to-bottom decline, after pushing to $66. WTI was holding the $59 handle.


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