 Okay, very good morning to everyone. I hope you are well. It is 1st of November and Friday, of course, meaning that it is non-farm payrolls later on this afternoon. So we will be covering that live on YouTube later. I'm going to go into a bit of an overview in this short session about what our expectations are, but we'll go into more detail later this afternoon ahead of that number. Remember the time difference. So, hop-off 12 for payrolls. The US clocks don't change until this weekend, then we revert back to normal timings. Overall, looking at the charts this morning, then, very much a reflection of what is quite typical on the morning of NFP, meaning that everyone's in kind of a wait-and-see mode. And certainly, since the last time, probably I spoke to you guys on the night of the FMC, just given in conclusion what the Fed were saying, which was an idea basically hinting towards that what they've done is enough. However, they will continue to just monitor incoming data. It does mean that economic data does play quite a significant role now in how markets will be building up their expectation of what the Fed are going to do later this year. Obviously, no meeting from the Fed in the month of November, the next meeting until December. And on that notion, let's just actually have a quick look at the federal funds rate futures and what the implied probabilities are for December. So at the moment, the market is still heavily priced in that it's three rate cuts in this mid-cycle adjustment, and that's it for the time being unless things were to deteriorate further. So it's a seventy eight point six percent probability of rates remain on hold and where we are. One and a half to one and three quarter percent 21.4 percent for a cut at the moment. So even if payrolls came out particularly bad you could see then that section see a slight uptick, but the way that general market rate expectations fluctuate this twenty one percent doesn't go to seventy eight percent on the back of one data point. Remember, it's a lot more central bankers will look at data as a whole in terms of the reflection of different parts of an economy not putting great weight on just one economic indicator because that in itself then would create almost instability in the market where you'd see wild fluctuations and just a singular data point. We're going to talk about payrolls in a second because there's a very important thing about payrolls which I think renders it almost redundant and it's going to create large fluctuation, but ultimately I think it will be largely discounted if it is a weak number which is likely to be the case and I'll explain that more in a moment. So overall on the the charts is it's pretty quiet as you will anticipate the dollar is a touch weaker the Dixie's down about one tenths of both major pairs relatively supported quite interested to see obviously yesterday I believe we're still we're waiting royal ascent for the election date But that's all formalities now for that 12th of December election So it takes a little bit of the sting out of I'd say some of the volatility that we were seeing ahead of some of these legislative deadlines that were Influencing the pound now it goes down to the campaigning side of things So pretty quiet there As I say holding patterns really for other assets. So let's just go straight into the news No Sam today, so I'm going to keep this a more fundamental rundown. I'll leave the technicals to yourselves And then as I said, we'll talk payrolls more later Starting off overnight. We had the Chinese case in manufacturing PMI now check out that graph everyone talks about China the economic slowdown and What we've seen here is an unexpected rise exceeded market expectations. We were looking for a well the market was anticipating reading of 51 It came in at 51.7. The latest reading pointed to the strongest pace of expansion in the manufacturing sector since February 2017 output grew the most since December 2016 Total new orders increased at the fastest rate in over six years Boosted by a rebound in exports So remember you have these kind of the state PMI number and then this occasion PMI so difference between big and in small medium-sized companies as well. So this Pretty healthy actually and if you actually look at it again on the longer time frame That the severity of the dip of course that we were seeing towards the back end of this time last year When we had that stock market route couldn't be any really different at this point in time We're pushing back up to the highest levels here in the headline reading since 2016 so a bit of a welcome relief because the other thing of course that's happening at the moment and it this is absolutely No surprise in my mind at all China said now that they're in doubt about the long-term trade deal possible with Trump Remember this graphic it's a graphic. I've shared many times before a little bit of history repeating itself once again Of course because we were here. Well, we've got the red Sign here dropped to where we we have been recently Remember you've had the Fed cutting rates and you've had a partial trade deal secured Temporarily holding back on any new implementation of tariffs on China by the US what happened? Record highs in the US stock market this week. What happened now? Well, we move on in the trade war cycle Loan behold no progress is made as much as Trump was tweeting yesterday About the deal is almost 60% done. I think is what he was saying one of his tweets The idea here is that China still aren't budging on the more contentious issues about intellectual property theft Which is the key one really that they've not addressed as yet. So The agricultural purchases are ongoing perhaps that appeases and keeps the keeps it calm for the moment But ultimately there are still tariffs looming at the end of the year Someone yesterday was asking me what's my outlook for year-end? Well, if you think about it You've got a general election happening in mid-December and you've got the next initiation round of tariffs coming from US on China in December So for me, it's not so much about November It's about December when things really start to kick off and you've obviously got the Fed decision as well So here we go back in no progress made lo and behold. I would absolutely anticipate Trump now to be talking out Increasing the rhetoric of aggression towards China I Was collecting data when? Donald Trump first became president and he was tweeting with an average frequency of six tweets per day Anyone know how many tweets he did yesterday? What do you reckon? He did 36 tweets yesterday. He was averaging six when he became president so I don't think that's surprising obviously he's got a An election campaign to manage to embed or secure his second term at the end of next year and that begins now And of course, what is he talking about at the moment? Well, it's the great witch hunt, of course Which dominates in the Twitter sphere yesterday. So what happened yesterday? The house voted 232 to 196 to begin public phase of inquiry in regards to the Impeachment of Donald Trump now I did get a message of one of our former traders yesterday And he was asking amp what would happen if trip if Trump gets impeached Now my first response to that question is he is not gonna get impeached What I mean by this is sure the house might he might get impeached in terms of the pro the Procedural process of impeachment will begin But he is not it's not gonna get ratified I can tell you that now And I will put my neck on the line and make that call definitively Trump then Becomes just a fourth president of course to be subject to a formal impeachment process The other two were Bill Clinton and Andrew Johnson both similarly impeached by the house But were not convicted in the Senate. So again never got impeached formally and in Richard Nixon We know the deal there. He just basically Hopped off before before it was pretty evident. He was gonna go down. So he just resigned so The idea here then is that a lot of people making a lot of headline noise about the fact It's the first president to go through impeachment and seek re-election Couple things here that have been happening one Trump has been said to be having lots of face-to-face meetings with more than 60 house members And no house Republicans voting in favor of the peak impeachment resolution because of course he needs to keep his own People on side and that will block it when it comes to the formalities of passing through the different chambers of Congress So it means that he can't really get impeached without them walking across the floor and joining the other political party For me how I interpret this is from a political point of view. I think Trump being impeached Absolutely plays into his hands for getting re-elected next year It galvanizes his base and it gives him plenty of ammunition to continue just banging the drum He always does everyone's out to get him and it's been I think a such a strong message to his base From a market point of view if he did get impeached Now this isn't like he gets impeached the market collapses If it we've got to go through like what we've seen in Brexit lots of political barriers before we get to that point So it wouldn't be a one-and-done dramatic headline move in the market It would have to be to the point where there'd be this kind of main Event being a Senate vote and there'd need to be lots of rumors coming out Markets would have already been pre-positioning and what the rumor mill would have been indicating at that point If it was looking like he was going to get impeached completely formally Be the first really ever or since Nixon let's say before he were to leave then I Would anticipate equity markets to get absolutely slammed in the initial move Because a lot of this is propped up on this idea about what Trump has been able to do in order to cultivate this economic stimulus However in the medium term perhaps then you know What's the longevity of the US's protectionist stance? Perhaps only it's diminished somewhat and then does that then? Create almost relief for the likes of Eurozone for China for global trade and then do actually We start to stabilize perhaps the initial move I'd say there'd be a significant correction some of the market moves We've had of late over the last three years Anyway, we'll move on from that as I said I do not think this is a risk worth contemplating at this point despite this of the the amount of news coverage It's likely to get other things we had last night Apple Generally quite positive as the headline would suggest no blemishes positive demand for their iPhone 11 and in particular increased revenues coming from the services and wearables divisions and so they continue to quest to diversify away from such Dependency on the iPhone which of course is seen as a positive So their shares were up as much as 2.2 percent hitting record territory valuations now 1.1 trillion knocking Microsoft off the top and Facebook Games show user growth still possible in the US Shares were up after market albeit marginally quarterly sales reached a record this of course coming amid Ongoing concerns about political ads policy and privacy you'll remember this week Twitter now have stopped Any paid advertising for political messaging? So they're the first to do that, but I think given the I Guess environment that we live in Socially at the moment. I wouldn't be surprised if other Companies look to kind of follow a similar suit Even though it's obviously a massive revenue generator as they try to manage the political fallout of these types of issues But Facebook Apple generally positive. So it's a little bit of a balancing act at the moment. You've got The trade war seemingly coming a little bit undone at the moment perhaps then people a little bit Unsure about what to take from the Fed is this the end of any of the immediate Policy support in terms of the mid-cycle adjustment. These would all be negatives However, Chinese manufacturing PMI picking up overnight and you've got solid generally on balance corporate earnings Hasn't been the case for every single company But when I was looking earlier this week 80% of all companies reported in the SAP have exceeded their earnings per share estimates And some of these tech giants these fang names generally Facebook Apple last night certainly have been pretty decent All right Before I move on to payrolls quickly two other things to be aware of Oil prices haven't moved too much this morning, but I did clock a headline earlier about half 7 a.m Yemen's Houthis so the Houthi militants have reportedly downed a US made drone near the border with Saudi now oils not really responded the proxy war with Iran Via the Houthi militants in Yemen is nothing new Just wanted to make you aware of it in case you get caught with a headline You're unsure what the situation is I would say although that sounds like quite a dramatic headline a US drone being shot down in Suspect circumstances, I would say it's not the first time of that kind of tension happening in that particular region So I wouldn't be too shocked by it Final thing I just wanted to say Before I jumped into payrolls was about Brexit obviously I've not delivered a briefing in a couple of days and I know Sam's done a good job covering everything What I intend to do is sometime next week. I'll give you my call for the election So I'll have a think about it over the weekend before I commit for my next call on what I think Who's gonna win by how much and most importantly How the markets gonna react between now and then and then after the event So I'll do that next week, but a couple of things food for thought here That I thought was quite interesting having talked to some people about this yesterday and one is this This general election is completely different to any general election in recent times What I mean by this is Jeremy Corbyn talking about Nationalization free university school fees Boris Johnson talking about more funding for the NHS police on the street All of that is absolutely irrelevant. This is not a normal general election. This is 100% about Brexit and what people feel about Brexit polarized by Maybe the Brexit Party on one side to the Liberal Democrats on the far side either You know do the most aggressive Delivering of Brexit to revoking it. It's kind of the state of play that we've come to at the moment polarizing this issue completely on a singular narrative, so This graphic here was from the BBC. This was a recent opinion poll not looking at who's gonna win the election But by what is the key subject here and you can see since 2016 Even though things like crime of course with the uptick in life crime particularly in central London I mean that has seen an uptick, but it the undeniable Balance of power here is on Brexit and this in itself brings up some quite interesting things to be aware of for one I Was reading quite an interesting thing about the area of Wimbledon for example now Wimbledon is a very affluent era of London and No surprise then that it voted heavily to remain and yet it's always been a conservative seat Now the Liberal Democrats quite interestingly Were way behind the last time there was political votes within that particular constituency However, the Liberal Democrats have been vocal saying they quite fancy their chances of winning Wimbledon Remember even though Wimbledon will be an area that has always voted conservatives They also heavily voted to remain and so can they Given that the government wants to deliver and needs to appease Also for arches Brexit party by maintaining quite an aggressive stance on delivering Brexit as to not Disenfranchise those people that want the delivery of that and appeasing for arging not running in their seats talking that game talks against then probably these people and And and strengthens the Lib Dem argument So yeah, it's gonna be really interesting on these folds the other thing as well as another question I had was our political opinion polls gonna be market of moving events for the pound I would say no For two reasons one is I don't really see political opinion polls changing or deviating too much between now and the next Couple of weeks not unless there is an absolute scandal that rocks the boat now Stranger things have happened, of course if Boris Johnson comes out and is found to be I don't know part of some kind of Pedophile ring or has done something of that nature fine that could have a obviously monumental impact Think about what happened before the referendum. There was the murder Of a parliamentary MP just days before the referendum which did have a meaningful impact on the opinion polls So these types of things yes, but these are unusual Circumstances which are low probability So in all respects, I continue to foresee the conservatives will hold on to this 10 to 15% kind of lead over their main opposition party labor for the moment So I don't really think opinion polls will be to market moving not now perhaps closer towards the event in itself Depending on how things pan out over the campaign period The other thing that's particularly key here is The accuracy of polls now if you remember in 2017 Theresa May had a 22 and a half percentage point lead in the average poll of polls when she called the snap election And she came out with a worse majority than she went into the polls with so the only Polster that got it right in 2017 was you gov, which at the time used a experimental Multilevel regression and post stratification model Basically what this means is that they were using a larger data sample size now The reason what makes polls quite inaccurate is they usually typically they only canvas about a thousand people What you gov did in that previous one which did actually call The fact that may was gonna come out worse in an hung parliament they canvas 50,000 people so Yeah, perhaps some tweaks in methodology have made things a bit more accurate But again, I would take them largely with a pinch of salt in that respect, but again I will Collate my thoughts into a more constructed Slide-by-slide argument to make things crystal clear next week. Let's talk payrolls then I'm gonna go over this a lot more detail later But this is the kind of state of play remember key to understanding how payrolls might come out is Understanding the employment indicators that have come out from the US as the prelude to this figure now here What have we got? Well, there is a Hierarchy as well to these numbers. I mean there's no point Looking at jobless claims continuing claims initial continuing and thinking that's a definitive factor Just because both of those have been neutral. It's gonna be a neutral payrolls Well, no, I would place greatest weighting on the likes of ADP that was Pretty much in line. It wasn't really too much of a shock. However, the ISM Manufacturing non-manufacturing employment constituents were both weaker the employment index and the very important service sector Came in at 50 spot for in September a much smaller figure than the 50 point or 53 point one level seen in the prior month For manufacturing the employment subcomponent disappointed for a second month in a row printing a modest 46.3 So still significantly and heavily in contraction. So there the two are placed greatest weighting on So there is some expectation of a downside number today if you actually look at the headline non-farm payrolls Just given the data that has been coming out. It has been Refined and analyst expectations now is for a 89,000 job creation print So continuation what has been month to month to month to decreasing levels of jobs created in the US and hence The reasoning behind why the Fed felt appropriate to cut rates again earlier this week now the range here Check out the range Is 10,000 at the low So the most pessimistic bank on the street is looking for 10k the most positive 155k now the reason why this number is so low comparative to previous and there's such low ball estimates on the street Is and a very important factor This month's data is likely to take into account the impact of nearly 50,000 Striking general motors workers As well as related effects from idling at the company's suppliers and contractors who work alongside that firm What it means then is that this automaker General motors has had its longest nationwide walkout since the mid 1970s Which would have occurred right slap bang in the middle of the survey period for which the bls conduct this month's non-farm payrolls So it's right through the mid month reference period So that being said if we got a 10,000 job number I would expect that initial algo kind of hit hitting the figure But I would say that any downside number will quickly get Downplayed and accounted or put accountable to the gm strike So the manufacturing data sub component figure will be quite key And actually I think don't get caught out and spooked by a particularly low changing non-farm payroll headline Just like when if you look on the data set of what non-farm payrolls looks like and the long term on trading economics, for example Every time you have an anomaly, it's normally down to explainable reason Usually the weather or a government shutdown. This time it's down to a phenomenally large Strike and an auto manufacturer So I actually think that this non-farm payrolls if I was a central banker I'd be thinking it's not really that clean a data point So it's not going to change the needle too much upon. What is it that really we're going to do and so by default I don't think it's going to have too much Long lasting impact on the market for the rest of today That doesn't mean it's going to be very volatile on the initial release If anything it's going to be more volatile, but ultimately I think it's not going to reshape market expectations about the Fed too much So it's going to be very volatile on the release. Maybe not so to carry through for the rest of the day I'd be looking out more so then for anything further from trump if he ramps up aggression on china and they retaliate in their commentary Could we see a bit of a pullback in equities to reprice in the breakdown of the partial trade deal? That would be more interesting. I feel So, yeah, I mean that's pretty much it for the day I mean after payrolls you do get ism manufacturing and things like that Sure, that needs to be watched because all data obviously is being factored in at this point But it does come after the main event So might take a bit of a sting out of the tail speakers wise This I think will be particularly interesting This is kind of the 101 of tactical placement of federal reserve speeches after a FOMC meeting. Don't forget. There's still an additional day blackout period where they can't speak Now you've got key data plus payrolls and ism plus the weakness in chicago PMI yesterday Actually, I'm probably more interested to hear what these key FOMC people have got to say Williams is a voter Cuárez is a voter Clarida is a voter And so a lot of these guys I think will give more definitive Stances than perhaps what we're going to see and what's going to be a fairly Noisy data set because of the anomaly of the strike being factored in from GM All right, I'm not going to talk any more than that. I'm going to leave you guys to it Will will be here as well through the morning and payroll. So great to have him alongside us I'm sure he'll be happy to help as well. So I'll come back on we'll go for a full payroll preview We'll kick that off At 12 o'clock midday and the numbers will come out at 12 30. So hope to you will join us then. Thanks very much guys And good luck today