 All right, very good morning Tuesday 7th of December. Hope you are doing well and let's get straight to it and up to speed of What's going on in what is a generally risk-on morning for the European session to get things underway equity index futures seen? Quite a bit higher the DAX already up 200 points the NASDAQ future up a similar margin comes after a higher close on Wall Street last night The S&P finished up 1.2 down 1.9 NASDAQ one or 0.9 percent And the general theme here has been the increasing perception that Omicron concerns are abating to a certain degree, albeit we remain vigilant and that's led them and been quite transparent in some of the sector plays on an equity breakdown yesterday. So some of the airline stocks rallying. We saw the same in the overnight session in Australia. Qantas Australia's flag carrier gained as much as 5% overnight travel groups Flight Centre and Corporate Travel Management in Australia both rose more by more than 6% On the basis then that the new variant might be less severe than feared and so equity index futures as I said moving higher this morning If I was looking at the NASDAQ and quite interestingly now We've basically taken back the entire Sell-off that was seen at the end of last week on the Friday and you can see here We're just testing up a relative point of technical relevance in short-term price action here, which is around 16,066 level you can see that previous low that we printed back towards the end of November which we've Retested and held back on the second of this month and then also on Friday So Thursday and Friday's kind of double top is where we're trading at the moment, which resides just below the R2 on the charts so yeah a decent kind of risk on morning crude oil has followed suit and WTI crude already this morning trading up around $1.30 at the moment And you can see here continue to move higher through late US trade and then continue to move higher as well in the Asia pack session We'll get to some of the other highlights as well from Asia, which is further fueled some of this risk on movement From a daily continuation chart I think it always helps to have a bit of perspective and you can see here from the initial Omicron variant being identified in South Africa So this was going back to the 26th of November when oil prices collapsed down to the low that we printed back on Thursday You can see we've now retraced Probably more than a third of that move having reclaimed a bounce back above 70 bucks a handle So it gives you a bit of context of where we'd need to get to we're obviously still about $7 short of a full recovery From discounting some of the Omicron risk. I'd say it's probably unlikely to get there very quickly because there's still obviously a few Data points that we'd need to see to come in to kind of ratify that idea and notion that the market is starting to price in A kind of decreasing risks associating to the lethality perhaps of the Omicron variant On that point though, let's flip over to Asia and get straight to the headlines before I begin if you're watching this on YouTube Really appreciates it if you could like and subscribe to the channel If you're not already part of the community would love to have you on board But straight to it and the MSCI gauge of Asia pack indices in the overnight session Actually is on track for its biggest gain in more than three months overnight Hong Kong stocks in particular advanced with Alibaba as you can see here from some of the headlines have had a bit of a management Shake-up. It was their chief financial officer that left and their shares responded very meaningfully to the upside I think the move was around 10% or so and in fact the nasdaq golden Dragon China index, which is basically like China exposed firms listed in the US Was actually up around 3% and that snapped a six-day losing streak a reminder Of course yesterday we saw an unscheduled announcement albeit not completely unexpected because they had been hinting this for a while Which was the PBOC signaled easing of real estate curbs and pledged to stabilize the economy They of course came out and cut the reserve requirement ratio the triple R And they also said that there's room for a variety of monetary policy tools So part of this movement as well definitely being supported by that and that was very evident in the Asia pack session taking positive handover and baton from the higher clothes that we had on Wall Street Not only that we've also had some data overnight Chinese trade data Chinese exports grew faster than expected in November record on external demand of course fairly seasonal ahead of year-end holidays, but also an easing power crunch domestically helping things and Chinese exports came in in dollar terms year on year third So you're not 30 22% versus an expected 19% so firmer than expected So that was also assisting some of the the general sentiment play Rounding off the kind of Asia pack coverage We had the RBA rate decision overnight nothing Untoward really came of that the Aussie is trading firma at the moment But generally in turn with the pivot we've seen back with commodity price rises with the abating fears over Omicron And they left their rates in QE unchanged They cited uncertainties from the new strain of the coronavirus while highlighting positive signs in the labor market and the broader economy One thing though to mention Is the UK specifically because we did hear The UK health secretary you can just about see his head there at the bottom. So gee Javid He confirmed community transmission of the new Omicron variant yesterday Is occurring in England case rates at the moment of the new variant are very low 336 but the idea is with community spread that that number is going to accelerate very quickly now Although it might be proven that lethality i.e. mortality is relatively low The question mark will become then what sort of pressure does this put already on the Hospital network or the NHS and one of the things that we're seeing at the moment is the actual deaths within 28 days of positive test Remained fairly static bear in mind though that we won't really see The impact on that side of things from Omicron variant for at least another four weeks or so The ones then is about patients being admitted into hospital in healthcare and actually that's also plateaued But the case rate number is rising and in fact It's already as of yesterday at fifty one and a half thousand and that pretty much puts us up Around where we were of the double top kind of peak of cases through the outbreak of really Delta variant Which we know was highly transmissible at the time this one probably proving even more so and so Layering in on on top of the starting point of where we're at with cases Then leads to the idea then with community spreading that these case rates are going to go north from this point going forward And we'll start to see that materialized probably as we go through into the Christmas New Year period That being said then what is this leading to well it is leading to a bit of a reshaping of Market expectations of when the Bank of England are going to hike rates We know inflation is accelerating in the UK as it is in elsewhere like the US and so on and that definitely Does lead to the narrative of tightening of policy sooner rather than later However, this Omicron outbreak is still a bit of an unknown quantity at this point in time You can see here the forward interest rates in overnight index swap markets have seen the blue line from Just is basically interest rate Expectations over a timeline forward looking from today the left-hand side going further forward to April 2023 so you can see the shape of rate rises being priced in over time and The blue line is what what markets were pricing at the beginning of November The pink line is what markets are pricing as of now and you can see that that line has got more shallow Meaning then that market participants are getting a little less Kind of bullish about the rate hiking cycle from the Bank of England and actually lift off You can see it started to be pushed out a little bit So although there are still bets of a December rate hike I think it's shortly after the Fed meeting on on the 15th So in fact then if the Fed meetings next week to be able to follow straight after It's very much on a knife edge whether or not they will pull the trigger one thing we had yesterday was JP Morgan they changed their BOE rate hike forecast to now February of 2022 from December purely based on the unknowns around the Omicron variant now why February? Well, just like the Fed have their quarterly summary of economic projections Where they're outlining things like the dot plot and their economic forecasting for jobs Inflation growth and so on Bank of England have the same However, February would be when the monetary policy report comes out So it's slightly on a different calendar time frame So February May August and November is when those reports come out So hence the rationale for that timeline by February as well You know, I guess you're probably gonna have much more clarity on the inflation picture That in itself is not expected to peak according to Bank of England commentary until April anyway And then you're gonna have much better greater oversight of what exactly the situation is on the on the variant at that point in time So it makes some sense the final comment on Omicron in the US Fauci has been the health advisor in America fairly upbeat talking about again the degree of which then the negative impacts from a health perspective of the new variant have Showing some optimism in the fact that it's fairly weaker than what we were initially anticipating or what was being feared in markets However, one thing that's happening in New York has case rates have been rising quite quickly as that the State now will require all private sector workers Well, this is talking about New York City specifically to be vaccinated against COVID-19 And this obviously would be a bit of a shift to be the the most strictest vaccine mandate to be imposed anywhere in the US So it's something to just bear in mind. All right, moving off that and talking about some single stock news Tesla You might have seen yesterday Tesla shares. They momentarily traded below a thousand And that came after kind of a string really of quite negative news that we've had for Tesla of late I'm just gonna see if I can Get the chart over So this is looking at Tesla's stock price and you can see here We peaked up during that kind of peak EV frenzy almost that we had which was really this era here in November where we ran up to 1250 on that that kind of Relentless March hire that saw their market cap just rise by an incredible margin No, not much of a surprise then Elon Musk kind of cashing out when the shares were We're up at around the 1200 buck kind of level and he's been scaling out trying to accumulate that 10% exit But the shares have come off and actually from high to low in this period here You are talking about almost 25% The stock price did drop through a thousand yesterday and that's quite a meaningful price point as you can see however, it has really yet to really Hold that breach at this point in time as I said yesterday we closed pretty much out in the margin On that level. So what exactly is going on with Tesla? Well Few different things yesterday the SEC Opened up an investigation associated with solar panel system defects. Now. This isn't actually a new Case being brought forward, but it's the first time the SEC is being involved. I think it dates back to actually 2019 Separately federal safety probe is ongoing into accidents involve involving its driver assistant Systems and now Tesla according to its latest report that came out after market yesterday They're replacing faulty autopilot cameras in some cars according to internal documents You know one of the other things I was also looking out for And talking to a couple of people yesterday was as we have we actually had in the update about that four-point $2 billion hundred thousand car Hertz deal and as far as the analysts I were talking to said there's been no confirmation that Actually is being inked as a deal and so despite all the hype that we had for Tesla I think it was somewhat inevitable that the shares were going to come off and Companies EV pure plays like Lucid for example were down as much as 19% yesterday They did bounce a little bit. They didn't close as negative as that I think they were down about 5% but I think a little bit of a return back to normality for some of these EV stocks was was Probably going to happen at some point and it's probably a healthy thing and more more broadly speaking for these these stocks going forward You know an interesting statistic if you don't listen to our podcast that Pears and I were talking about a few weeks ago when EVs were really blowing up was the fact that if you go back to the Early part of the 20th century when mass manufacturing of automobiles really started to kick off As much as there were Ford and other automakers. There was actually 250 250 start-up auto manufacturers in the US in the beginning of the 20th century by the end of the 20th century There was only three left Ford motor who you know today general motors and Chrysler the other 247 All blew up or got amalgamated into those three. So in the end there are going to be winners and losers I'm certainly not calling that on on Tesla, but when you've got Rivian, you've got Lucid As much as each of them have their own individual kind of case studies like the Rivian Association with Amazon For example, there's going to be lots of EV pure plays. I'm sure that come and some that go But yeah, in terms of short-term price action, there's been quite a lot mounting Negative press, let's say for Tesla's created some of the the recent movements One thing is that the drop below to 950 bucks that we saw yesterday in Tesla shares Actually saw their market cap briefly come back below that trillion level bearing in mind It was up at 1.25 trillion only a few weeks ago So incredibly volatile for a stock of that magnitude All right other stories of note The US and European allies are weighing sanctions against Russia's biggest banks and the country's ability to convert rubles for Dollars and other foreign currencies should Putin invade Ukraine That's been according to people familiar with the matter And of course this is in the spotlight at the moment because US President Biden is going to be having conversations with Vladimir Putin at 3 p.m. Later on today The US could also restrict the ability of investors to buy Russian debt on the secondary market is also being talked about as well Now the Russian leaders made clear He's willing to invade Ukraine to protect what he sees as vital national security interests and he's also shown a willingness to tamper with energy markets by of course the high degree of Dependency that much of the mainland Europe has on gas coming from from Russia So he has that kind of string to pull to really leverage down on some of the negotiations that are happening A senior Biden administration official speaking of waters yesterday made clear that the US does not want to commit Its troops to Ukraine in the event of a Russian invasion So this is the other delicate matter of course that Biden has to tread and hence the reason why it's more about Targeted sanctions than any type of military intervention or support in that matter Because Biden wouldn't want to do that That's gonna be of no use for him most likely at the ballot for the midterms coming up next year When the more bigger payoff for him politically will be much more domestic focused issues rather than foreign affairs To that degree so that's what he's gonna have to manage then the final articles of the day Quite interesting one out the FT policy makers at the ECB they've said Are said to be reassessing the extent of their commitment to extra stimulus Recent events have led to doubts among governing council members Which has been forecasting for months the inflation will fall back below its target and justify the continuation of stimulus a Policymaker added that they would be they would be very comfortable committing to anything beyond Q2 So yeah, there's just a lot of doubts again around the new variant and Whether or not then this is going to cause more inflationary issues down the line and how best is it for the ECB in order to act The debate inside the sentiment reflecting the question then over how quickly inflation will fall was the new variant Could well stoke price Rises and simple fashion to what we've seen before In the effects that we've had through the summer Alright in terms of the scheduling for today. We've already had bulk of Things come out already this morning In terms of the German data at seven o'clock Just to give you the update on that figure the German industrial output came in at 2.8 percent was quite a bit firm and they expected 0.8 if you're a homeowner in the UK and and you're slightly Nervous about a potential correction UK house prices fear not the latest UK Halifax house price number actually came in slightly High than expected for November at 1% so continues to plow on at record levels And then for the rest of today, it's pretty quiet on the docket You've got Germans lew, which of course will be watched quite closely for European traders this morning at 10 a.m But otherwise, yeah, it's pretty quiet You've got the API for trees after market fixed income supply UK Germany and fifty four billion dollars of three or no auction out of the States 6 p.m. Later This evening. All right, but that is it Again, if you're not already Subscribe to the channel and you've watched this to the end. Thank you and remember to hit that button And I'll see you same time tomorrow. All right. Take care