 Okay, happy Friday. It is September the 24th. Hope you're doing well. Hope you've had a good week. Don't forget, before I begin, to check out the latest market maker podcast. I'll be recording that later this morning with the head of trading, Piers Curran. If you haven't listened to this before, it's basically where he and I get together. We have a very informal, relaxed conversation about all of the major things that have happened in markets this week. And we give our kind of breakdown, deconstruct these topics and also give a point of view about what might happen next. So don't forget to check it out. Dissearch for Amplify Me Market Maker on the usual podcast platforms, Apple, Spotify, Google, and so on. Otherwise, let's get straight to it. And I really wanted to explain using the, like I said, the S&P 500, T-notes and crude oil, a little bit of an explanation of where we're at at the moment in financial markets, particularly to bookend the week. Obviously, the main talking point has been ever-grammed throughout, and much of my update in this briefing will constitute talking about that in a little bit more detail. I'm just giving you up to speed because there's some important announcements that could be forthcoming in the session ahead. But let's get straight to it and talk about the S&P and it will also make sense about how we closed on a sector basis within that index yesterday as well, where we did finish in positive territory again, following one of the biggest rallies we've had in a number of weeks in the prior session. So first off is the S&P 500 and I've annotated this chart here to show you really two things. This was Friday going into Monday's session. So the ever-gram situation wasn't completely out of the blue. I think my colleague, Eddie and I were talking about this a while ago, but then it really caught kind of peak interest in markets and that contagion effect fear started to really impact and reverberate out over the weekend and then into the open subsequently on Monday morning and that was when we hit that low pretty much going into the closing Wall Street. We actually saw a very aggressive ramp into the final hour of trade there that marked the low. But if you actually look at where we peaked yesterday's session and where we're trading at the moment, we've had an entire full reversal of that move. So at least for the time being and I'll explain why in a bit more detail that contagion effect has dissipated quite sharply. Equity markets are back up ascending on the front foot. On the other side of things then as kind of the situation there stabilized a little bit and there's been lots of different reasons for why that has happened and we'll go over some of the reassuring comments that have come out of a lot of financial institutions to almost distance themselves from any direct exposure to ever-gram. But we've also seen obviously the PBOC being very active in the liquidity injections as well. But the other thing was the Fed and actually just before I go into the Fed if we go back to the S&P just for one second if actually you were to look at this chart of the week's price activity, you'd be forgiven to think, well actually where was the Fed in all of this? And actually the Fed, the Fed was this little momentary bout of volatility you can see here. So really the move and the Fed was very tame as far as an equity response. I wouldn't say it's necessarily being the cultivating factor to really accelerate this move but perhaps a variable in the mix and probably that's explainable by the fact that if you actually look at the sector breakdown from yesterday it really does explain that move because what we saw yesterday was stocks and yields both moving higher. Now that generally then was reflected with economic sensitive sectors. So you can see here the likes of energy which is the most bright green here on the right-hand side and financials the bright green on the bottom left-hand corner being the biggest beneficiaries of that move. Investors then, what that tells you on a sector basis, looking at the looming reduction then in Fed. Stimulus I with the hint towards tapering light to come in the next meeting in November shows confidence in the recovery from the pandemic and those particular sectors being then the most to benefit in that situation. Real estate as you'd imagine, still not the nervousness there has been some of the weaker spots that we've seen. So S&P now finished up 1.2, 1.5% and that's about 1% yesterday. Equity investors also taking heart from predictions as well that we've heard from central banks this week from the Fed, so the Bank of England yesterday that the Delta virus strain and pandemic related supply chain snarls will deal only a temporary transitory kind of set back to the economic reopening. At least that's what the central bankers are telling us. And again, that would play into the types of moves that we're seeing at the moment. So from a fixed income perspective, you're definitely not getting a flight to quality bid here. Quite the reverse you're getting as well following the Fed a bit more of a definitive move in US 10 year yields higher. And so T-notes have continued to decline post that Fed event. Now, unlike the equity move here in fixed income markets looking at the US 10 year, this is the post FMC move. So that meeting definitely the trigger there for the rates market, unlike the equity market, which was already on the bounce from two sessions prior when we hit that low late on Monday. And then talking about the kind of the economically sensitive sectors benefiting energy and financials yesterday, definitely in the crude market, any kind of momentary blip that we had on Monday, Tuesday about potential demand implications if we start to see a domestic crisis in China, obviously a large consumer of energy products that as well has continued to be reversed as we've gone through the week in step with the equity in general risk appetite return that we've seen. And on a daily chart you can see here now $74 handle really the next area of resistance in sight which would be around those late July, early August highs that we printed given the continued bounce that we've seen very aggressively from late August when we were training down to retest the mid-May low down just below the 62 handle. And we're now knocking on the door of 74. So it's been a really strong ongoing recovery here in crude oil. And I guess on a daily chart here you could say still got a little room on the upside to 74 before we see the next most area of resistance on the upside. So let me get up to speed then a couple of these Evergrand headlines. So European bankers have spent the last couple of days trying to reassure investors, clients and regulators essentially about the fallout from China Evergrand Group. And this has had in turn a great deal of alleviating some of the tensions that might have been brewing about the uncertainties of exposure to some of the fallout. It's kind of like when we had the ArchaCos situation although Evergrand is completely different the idea being there was well who actually had exposure to ArchaCos? You know, was it Credit Suisse? Was it Nomura? Who else? Whereas in this case they're all kind of putting their cards on the table saying not us kind of situation. So Credit Suisse which underwrote the most Evergrand bonds amongst international banks in the last 10 years issued statements this week showing its asset management units funds didn't hold much of the developer's debt. UBS risk is immaterial and limited to the execution of just collateral calls and margin loans according to their CEO whereas Deutsche Bank have said that we are not really directly affected by or at all by the events of the last week or so. This follows U.S firms we had at the beginning of the week we had Citigroup stating it has no direct lending exposure to Evergrand according to their spokeswoman and JP Morgan and Bank of America also said they had no such links according to people familiar with the matter. So again, a lot of that has played into this calming over the situation which kind of was escalating at the beginning of the week. However, there is one firm HSBC's asset management arm has been according to what I've been reading among large holders of Evergrand debt the bank has no material exposure on its balance sheet though there is some through client portfolios and I was reading a statement that one of their guys was saying about second, third order exposure in that respect. So perhaps HSBC one to watch if the things were to take a material worst turn at this juncture. The other thing then is about China in general China have obviously stepped in and just to kind of summarize what we've been talking about throughout the week they've injected a net 460 billion yuan equates to around 71 billion US dollars of short-term cash into the banking system in the past five working days that included 70 billion on Friday overnight amid concerns about the ongoing contagion the effect that that could have on inter-bank market liquidity in China. A good quote I heard in response to this or summarizing the situation was a quote that said inter-bank funding so inter-bank being again quite simply if you think of a central bank at the top you think of consumers, companies down at the bottom you have your inter-bank market which is your large financial institutions and what is the mechanics then of a functioning economic system is liquidity in the inter-bank market which keeps lending rates then low let's say in this current situation what we had in the financial crisis of course was a situation similar to Evergrande where those concerns on a very systemically important financial institution Lehman's goes down all the other banks panic about other banks exposure to subprime in that example and that meant that lending rates went exponentially higher to the point where you had a credit crunch and there was no liquidity in the system requiring authorities to then intervene to address that situation so that's what the inter-bank funding is so critical to the wheels greasing the wheels if you like of how financial markets operate and the inter-bank funding stability is key to ensure the financial plumbing of the market remains intact and I've heard bond traders use that terminology before that the kind of repo market is the plumbing if you like of how markets operate you know without the plumbing there is no functioning household to that extent i.e. the marketplace this is especially important when there's increased demand for cash given the interplay between quarter end and the Evergrande event and hence the reason why that liquidity injections the PBOC have done this week are so important for markets so the end conclusion of this and something to look out for is the fact that Evergrande has yet to make a statement on a dollar bond interest payment that was due Thursday so definitely need to be vigilant as we go through the hours ahead to see off the rest of this week obviously Asian markets coming to a close now but when full swing of UK, Europe and then the US will come in later I'm sure at some point will get an Evergrande update and that could be a decisive trigger to dictate market direction sentiment for the rest of the session so do be aware of that as far as Europe is concerned Europe have kind of been saying the same as much as the banks have been trying to just be quite clear about their levels of exposure like I mentioned Deutsche, Credit Suisse, UBS Christine Lagarde, the ECB president has also come out and said there's limited direct exposure to Evergrande's debt crisis also Lagarde did say the main drivers of the recent spike in Eurozone inflation she believes are temporary and will fade next year so that transitory view very much being echoed at the Bank of England yesterday even though they see inflation near term being excessive 4% they still see it falling back much in a similar vein to the FOMC's projections we had a Wednesday night where they see 2021 inflation a little bit higher bit more sticky but then reverting back down as to previous forecasts in 2022 and 2023 Okay, quick look then at the calendar for today it's pretty quiet overall you've got German IFO coming out at 9 a.m. this morning German IFO generally has been deteriorating of most elevated levels in fact last month the president of IFO said the mood in Germany has started to cloud over a little bit again and he was commenting specifically on the supply bottlenecks for intermediate products in manufacturing in combination with worries about rising infection numbers that we're putting a strain on the German market don't forget as well we've got the German federal election happening on Sunday this weekend so the number here expected to just see a minor decrease down to 98.9 is the median consensus from 99.4 continuing that downward trend that we've seen since the month of June so I don't think now necessarily comes a great deal of a surprise otherwise new home sales coming out of the U.S. at 3 o'clock no major 130s the main thing then is really the speaker slate it's super busy actually as a whole load of speakers coming out from the Federal Reserve later on today so let me just adjust my screen here so you can see just move it up so you've got Feds Williams so they're all kicking off into the afternoon if you're based in the UK and Europe Feds Williams who is a voter very closely aligned with your own power the Fed chair at 12 Mester non-voter Hawke at 145 you've got Clarida voter neutral at 3 Powell obviously important 3 and then non-voter Hawke George also speaking at 3 o'clock so yeah definitely be keen to keep an eye on these comments this isn't too unusual so how the blackout period works is that Fed officials cannot talk in the week in the run-up to an event or 24 hours post an interest rate announcement so normally it's quite strategic on the half of the central bank to litter the calendar then when they can then speak out of the blackout period on the back end of the event just in order to then clear the air if you like if there is any uncertainties or misinterpretations of what the Fed conveyed in their more formal event that we had mid-week but to be quite honest I don't think there really is too much more to clear up for the Fed so not expecting too much from these comments but nonetheless definitely worth being aware that the docket is stacked with Fed speakers this afternoon you also have got Bank of England leaning Dove 10 Ray Rose speaking at 2 p.m. as well this afternoon so that is it don't forget check out the podcast later the episode will be going live in the next couple of hours otherwise have a fantastic weekend I am actually away next week so going to speak to Piers the head of trading and I'll get him to cover the briefings as per normal for next week so I won't be as active on YouTube and Twitter and things like that but yeah take care till I see you again and yeah I'll catch you the week after thanks very much