 Hello, good morning, and welcome to the briefing here. It's the 27th of September and As you can see Anthony Chung is not with us So you're going to be stuck with me this week to make sure you're up to speed on all things Macro so straight into it because as you can see here, we've been locked in on the German Elections over the weekend and we have got a result of sorts Except don't get too excited because we're probably not going to have a German government formed for probably Well, who knows could be months yet, and I'll explain why now because here are the results with the SPD party just sneaking it with a 25 point seven percent Of the vote which does mean of course that Angela Merkel's party. That's the CDU party there Coming in at twenty four point one percent I mean for Merkel's party just to put it into context as you can see a massive swing in terms of losing minus 8.9 percent and twenty four point one percent for the CDU party is the worst Result in a national election in its entire history So as Merkel is swanning off into the sunset having led the country for 16 years Looks like she's not leaving her party in any good position and looks like they're going to be out of power However, we'll see how this goes because the SPD's have sneaked it, but look obviously no one's anywhere near a room An outright majority So we're definitely having a coalition and if you're up to speed on your German politics Then it's all about it was well the debate was Jamaican Coalition or is it going to be the traffic light coalition and basically this was talking where the Greens and the FPD party those two parties would definitely be the junior members in the broad Government coalition it was just down to who would be the big brother and would it be SPD or would it be CDU and for now The SPD have sneaked it the the colors of the three parties making up Then the the Jamaica coalition would have been CDU with the Greens and the fpdps and and and obviously traffic light is SPD so with the SPD, I mean this is Olaf Schultz Who's the leader there? Definitely the most popular of the two candidates from the big parties, I would say Armin Laschet of the CDU party Merkel's kind of replacement has just been a bit uninteresting not particularly inspiring in terms of as a character So certainly Schultz here I would say as the front runner although in the kind of aftermath of the election in the early hours of this morning Laschet is still insisting that this they're potentially in the running because what happens now is these parties need to negotiate to try and form a Coalition normally what happens is the lead party the person the party that gets the most votes Then has the first right to attempt to form a coalition But of course there's some big differences in policy between these parties and so can the SPD Form a coalition with the Greens and with the fdp party And we're going to see in the weeks ahead and it may be that they fail to agree in which case There is still an angle for the CDU party to come in and then be given a mandate to try themselves But the point is that this German election whilst it's over in terms of the voting It's really only just beginning and markets aren't particularly responsive to this this morning I mean I'll go across and we'll have a look at the DAX chart here You've had a little pop to the upside you might say that the SPD party Maybe a marginally more market favorites But there's not too much in it and anyway There's not much market reactions simply by view of the fact that we're not expecting a result here in a government being formed for Maybe months so that's what's on the ticket for the weeks ahead It's how are these negotiations going between these parties and ultimately What's the government going to look like when when actually it does ever get formed? I mean obviously this is a big turning point a big moment for Germany from a political point of view Merkel has been in charge as I said for 16 years putting her as the third ever longest Chancellor of the German Nation, but you know, I'd say kind of Merkel's sort of let's call it comfortable and cautious Style of politics has probably meant that there's been perhaps under investment in a lot of things Related to the German economy over the last sort of 15 years while she's been in power And so there's a there's a lot to kind of pick up on and you know through no fault of Merkel's I think her term will be remembered for crisis management rather than you know Economic and political reform and really modernizing and pushing the nation forward It's been a back dealing with the financial crisis. Then we have the eurozone debt crisis Then we had the refugee crisis then we have the coronavirus pandemic. I mean to be fair to Merkel It's been one after the other and she has been a safe pair of hands through a crisis But I'd say they probably slipped into that mindset of kind of crisis management has become that substitute for initiative and kind of investment So, you know, they've been very sluggish to reform their pension system for example This is what we should be expecting the SPD lead in our shots to be kind of pushing on And selling out agendas to reform that pension system. Obviously Germany got an aging population and so that's a concern They're a bit they've been sluggish on the climate change front. They don't spend enough on defense and XYZ Okay, so there's lots to come here But from the even though the headlines are all about German election this morning I don't think the markets are particularly Interested we have a look at the euro here, which has come off a little bit, I guess But we just broken down below the low point that we had Friday afternoon So just a little bit of a technical move not hard Look, we've moved when I say moved down we've dropped sort of 20 30 pips here So given we've had a national election this movement isn't really Of any note whatsoever. We're kind of just eyeing up that low point that we had Back last week down around the 117 handle as the kind of key technical for that euro But yep, so the German election is is done I mean, let's let's just kind of step back I guess because we'll come back and have a look at the euro because I want to talk about what's ahead this week And certainly one of the big things is the ECB Cintra forum. This is the ECB's forum on central banking. It's like the ECB's Jackson Hole If you like but before we do that, let's just take a look around markets And we'll have a look at the general mood and the vibe here. This is looking at US stocks This is the S&P 500 and as you can see Overnight through the Asian session We've been tickling higher and we've now pushed up and moved above that high point that we have last week If we just quickly move to a daily chart here You can see we've got a little bit of work to do in terms of getting back to the all-time highs that were set back on the 3rd of September if I just draw a line in there, you know, that's upper I just you know, we did move above that 4500 handle for a few days for about a week or so Then that really the momentum just look at the number of doji's through here indicating that that momentum to the upside was Was really running out of steam and then we've come off of course and we sold off off the back of Evergrande and But as we were talking about in the podcast last week, that's kind of you know The S&P's recovered the sort of let's just call it the Evergrande sell-off And now we're kind of back to square one and it's kind of where do we go from here this week? And whilst yes, we're you know positive sentiment here this morning You know without you know getting too excited about anything But it may be that we kind of now see this S&P just Push on towards the the kind of upper end of this range and that being up above the 4500 handle And we just check in on the NASDAQ because the NASDAQ very similar pattern here Of course with the high all-time highs back at the start of September and then the Evergrande sell-off and we kind of recovered that so These two markets they started the week reasonably polished positively other than the German election stuff not too much to really discuss on the sort of international front by way of Major major moves. I mean obviously here in the UK from a domestic point of view. We just drill in and have a look at the pound here Let me zoom in on a slightly shorter term Lots of I mean if you're in the UK then but a bit chaotic over the weekend with massive queues outside petrol stations as the nation panics that we're going to run out of of petrol and this is all due to a HGV lorry driver shortage and you know, it's turning into a bit of an emergency whilst, you know fuel supplies Perhaps weren't anything to get worried about they kind of are now because everyone's panicked and bought all the oil Sorry all the petrol so Boris Johnson thinking about emergency measures about bringing in the army and the military He's kind of waving visas on the you know to get people from outside the country to come in and drive these lorries and so it's been a little bit of a Funny weekend on that front but as you can see here from the value of the pounds point of view You know, we've opened pretty much where we closed on Friday We came off a little bit during Friday session, but actually markets don't really care So it's one of those things that whilst you're out there on the streets You know in the economic system if you like and you're seeing stuff happen and you're like wow Okay, this is something weird kicking off here But but actually from an economic point at this moment in time at least Not too much concern now, of course, we need to monitor that You know can the government Implement some emergency action to make sure that petrol stations don't run out while obviously we'll see but at the moment markets Are reasonably sanguine to that But if if if we do have a fuel crisis then obviously this will start to have a genuine negative economic impact But it's only ever likely going to be very short term and maybe won't happen anyway So for now markets are Reasonably calm the other thing then to talk about is what's going on this week and actually let me just bring up the the weekly calendar And we just can have a look through and we can talk through and I'll come back to the charts in a second I'll just increase the size of that for you so Here we go today with regards today It's probably the least interesting from a kind of data point of view You got some money supply figures out of Europe Right right now as I speak actually these hitting the wires, but not I don't think these will have any impact not much from the US this afternoon either these data releases durable goods Never really moves the needle You got Lagarde talking, but you know what's going to happen this week It's got we got a huge amount of monetary policy speak and this is because of the Cintra Forum which is due to kick off tomorrow by the way, so we'll see we'll get a text release On this today at 1245 Well, that's from her parliament. So this is Lagarde talking at the European Parliament Economic Committee I should say but I would say she's gonna probably hold back It'll be interesting to see what's in this text release, but she's giving a big speech tomorrow to really open that Cintra Conference and what are we expecting her to say tomorrow? I mean She's been quite vocal in recent weeks So she was on CNBC last week and she said that volatility in energy prices could persist for longer than Existing COVID related supply issues So just perhaps hinting towards how she expects maybe that inflationary situation to be less transitory than we had originally hoped She went on the then she she was In a press conference on the last ECB meeting back on the 9th of September She said that the euro area economic rebound was on was in an increasingly advanced stage and output is set to exceed Pre-pandemic levels by the end of this year She was talking about how You know whilst we got a reasonably upbeat and I guess this is one of the interesting things at her Her speech at the start of the Cintra conference. She used she used that opening Speech last year to to definitely cover an economic update and it will be you know interesting to hear Certainly, there's some positive noises about Europe. I was talking on the podcast a couple of weeks back about how Morgan Stanley particularly have gone quite bullish on Europe They're expecting Europe to I perform the US and that's just because Europe a little bit behind the US from that Covid recovery Perspective so whilst the US have gone through that accelerated rebound post unlocking Mainland Europe haven't really had the full stint of that yet So we are expecting an acceleration in growth in Europe And then when you're looking at the valuations between things like European stocks and US stocks Well, actually they're at the largest ever divergence with Europe looking cheap and the US looking expensive Also, you're getting a nice tasty yield on European stocks these days of north of 3% if you're looking at the euro stocks 600 And when you compare that to a German bund yielding minus 2, that's a 5 Percent spread there, which is again a record high and that's that that delivers real value in the equity space So it'll be interesting to see how upbeat Lagarde is a back quarter for and of course going into 2022 And whether that marries together or not with that view of people getting a little bit more or having a bias towards Europe With regards to stock asset allocation, you know, rather than the US which is looking overvalued a little bit We'll see also we want to hear about how they're going to be winding down their pet program This is the ECB that the pet program was the pandemic Emergency purchase program so obviously as we come through the back end of that lockdown phase Then clearly it's time to step that down and what we want to hear is how will they you know return back to their asset purchase program You know in order to bolster, you know, what is the kind of infancy of that kind of economic post-covid economic rebound? So it'll be pep winding down pep. What does that mean for the APP program and last year? Lagarde at this Sintra forum. She did use it as a platform to definitely talk about policy So we're expecting possible, you know interesting comments from her Also, it's not just Lagarde either and actually if I skim down, sorry, and let's have a look Into where are we Tuesday session and and this will be when the Sintra conference starts on Tuesday. Let me just scroll down so you can see here. We got a load of News they're expected around about 2 p.m. Okay, so that will be the time to kind of get on to the news wise and see what's going on But this is a two-day conference And it's not just as I said not just Lagarde that's talking will also have a panel discussion It's the the most heavyweight Monetary policy panel you can possibly imagine because on the panel will be ECB's lagarde will be Fed Chair Jerome Powell will be Bank of Japan governor Caroda will be Bank of England governor Bailey So you got the kind of the four the big guns if you like now that sounds really Exciting and wow, we might get some fireworks and we might get some really interesting comments and maybe markets are going to be volatile But I just kind of rein in that expectation because these guys lined up on this panel last year And they didn't really use it as a platform to talk about their own individual policy Specifically But you never know right so we got to be make sure we're monitoring news wires through this week when it comes to all things Sintra and monetary policy Let's go back to the charts here. Let's have a look at the some look at the commodity complex Because you certainly need to be keeping your eyes on crude oil. So what's happened overnight? Well, we've ticked on and we've ticks higher and this has been a theme Certainly over the last few weeks as you can see Let me just draw that line in from from Friday's high there that we've taken out technically and this has taken us up and kicked Us up above 75 bucks very briefly just tailing off a little bit. So another step higher. It looks like this upward trend Has legs to go the really important thing about this move from a technical point of view at least is we're right up here testing the July highs and Also importantly is looking back at the very long-term chart 2015. So we're up above the 2015 highs up here as well and You know, technically, this is quite important I'd say and if you know, we do get the continuation of Covid fears reducing for example case numbers in India over the weekend were announced at the lowest levels We've seen for six months So really positive kind of trends downward trends starting to form in in some of these, you know, hugely populous areas So if that happens through quarter four, then on the demand side things might pick up a little bit And this could well help to push oil onwards and upwards and you know, as I said technically what really key areas here The summer's high around here the 2015 highs and we can push up above Let's say 7550 and sustain that then really, you know, you're kind of starting to look up to numbers like $80 even Which are kind of price points. We haven't seen for years So, you know, expect this to feed through quite positively to the energy sector stocks, for example So keep an eye on oil that's broken again higher and continues this upward trend Gold's been a funny one It's been a bit lackluster Even during the Evergrande events last week gold really didn't take much interest to that and it kind of just languishing around that 1750 area this morning If I go to a daily chart, you can see it a bit more broader context We had a big sell-off back at the start of August But that kind of then stabilized and what what's been a great kind of resistance area was that kind of triple top that we had in In July and then into the start of August And that really capped the upside of this rebound that we saw so that September high bang on those levels So really powerful sort of technical area here around 1837 So that hell firm and we kind of drifted off But yeah goals kind of been drifting to the downside We'll see I mean if we flick back and have a look at the euro dollar Then the dollar's been strong, of course Which was certainly is one of the key things that's driving that gold price or keeping it under pressure and Preventing it from moving higher off any of these kind of safe haven events like Evergrande But once we're here on this euro, you know do make sure you're aware of these technicals the low We had in August at 16 at 1 16 86 is key We managed to kind of just stay above that all of last week although flirting with it on a couple of occasions So just keep an eye on that today and obviously when we go through into the Cintra events With Lagarde's opening comments then obviously the euro is of course potentially sensitive to any of that What else is going on then this week if we flick back to the calendar? We've got data-wise US consumer confidence figures that are coming at Tuesday afternoon at 3 p.m In amongst all the monetary policy speak you can see Lagarde there is at 1 o'clock live Beyond the pandemic the future of monetary policy is the title of her speech So that will be the key kind of moment I guess for the conference as well as then that panel discussion with all the kind of big Central bank speakers coming together. So yeah, lots of ECB chat lots of Fed chat Also, Yellen may be talking about debt ceiling issues. So that's going to start to rumble on Concern of course that we might go through another debt ceiling crisis episode like we did a few years back So certainly expect to hear more from Janet Yellen In the coming weeks and that'll all come to the head to a head, you know towards the middle to end of October Okay, so we'll all like that that'll become a bigger and bigger issue But as a few years back, it's an issue that will get resolved and so may cause some short-term Worry, but ultimately shouldn't have too much of a long-term impact if we scoot through to Wednesday And have a look down here We've got some data coming out of the eurozone with consumer sentiment and consumer confidence And then yeah, the other big thing is then Japan and Japanese politics. It's not just Germany that are changing leaders Or indeed changing a party even in Germany in Japan. It's just changing leaders for now Suga's stepping down his Well his popularity rating post COVID collapsed and so he decided to fall on his own sword resign step aside So we've got a party leadership race. It's expected to be a guy called tarot Kono He's the front runner and he's the most popular back there amongst the public at least he's quite an interesting figure very experienced Interest that he speaks fluent English studied University in the US. He's a former defense minister for former foreign affairs minister So, you know incredibly experienced and certainly on paper would would fit the job very nicely in terms of his policy stance Well, he would probably well He said in the past that Japan cannot change monetary policy radically Due to the pandemic hit to the economy, of course Japan again a little bit behind the West in terms of Their recovery from COVID and unlocking you'll remember this from how it impacted the Olympics, of course in terms of his tax side He said we must offer offer tax exemptions to companies that boost distribution of wealth to workers Well any any new kind of ideas on stimulus packages He said that the focus would be on prioritizing 5g and renewable energy So that's that's coming on so we should we should hear results from the Japanese elections Sorry, yeah, the Japanese leadership race. This is there's then actually a general election in November So even though this isn't a kind of general election for Prime Minister Ironically, it probably whoever wins this leadership race will become the Prime Minister Because there they become the leader of the the government political party in Japan. So it's a pseudo general election in a way Excuse me. So as you can see here plenty of Monetary policy overload this week and pretty much every day Powell and Lagarde and Caruda and Bailey they'll be on that panel as I said that's kicking off at 445 London time on Wednesday, so make sure you're glued in on that. You never know. I'm not expecting big Fireworks from there, but you have to be tuned in just in case Scooting through to Thursday things start to get a bit more punchy on the economic data side here past Sintra now that'll be behind us and now it's squarely China And we've got some key manufacturing figures Coming out of China, of course concern about how the latest kind of Delta Impact Delta variant impact has kind of just slowed and damaged Chinese growth momentum Obviously, we've had the Evergrande saga, which is still rumbling on by the way And clearly that's knocked confidence and sentiment and certainly people got huge amounts of wealth tied up in property And they're really worried about prices now and obviously this is going to impact their Their their their desire to get out and consume as a consumer So certainly some as we head into the back end of 2021 China's definitely Becoming the biggest concern from an overall economic perspective and obviously ever grand being that kind of key headline story that encapsulates all of that, but we've seen figures out of China Worsening and so, you know, we want to see if that worsening trend on the data front is going to continue or not So really important data out of China on Thursday morning Probably topping that bill is yet here the kayak cayenne Manufacturing PMI which dropped below 50 last month and it's expected to stay below 50 But it'll be interested. It is expected to recover marginally from last month But any number let's say below 48.8 this month Dare I say below 48 and then really it will continue to stoke those concerns about China and then moving down Yeah, we've also got some key unemployment figures at Germany UK GDP figures as well Unemployment data then yeah on Thursday afternoon. We got German CPI figures Which will be key because if when I scroll down US GDP figures, this is the final reading for quarter to those so no real Interest here in terms of that moving markets Chicago PMI might be of interest But what will feed through obviously more speakers? but into Friday session The big tank hand surveys out of Japan that are always important but yeah, the big figure kind of from from the Eurozone of Germany will be the final kind of PMI readings here, but the key one is going to be this the European flash Inflation print we're expecting it 3.3% if I just show you the chart what's happening But it's a bit delayed as I said Europe's been lagging the US has been lagging the UK Terms of covert recovery and that certainly is the case for this inflation spike as well So once the US had this kind of inflation spike began a few months back And we've maybe even seen the peak of that and it's coming back down again The UK have gone through the the beginnings of that inflation spike, but we're similarly here the Europe We're expecting it to step up again here. And so Obviously, this will you know shape potentially Laggards comments, so it'd be interesting to see what she thinks about this Unfortunately, Sintra is coming just before This data we're expecting inflation to again push higher, but they'll be wanting to stress its transitory Of course And trying to you know calm market So that inflation figure out of Europe at 10 a.m. On Friday is really important And then we got the core PC readings and we got the manufacturing ISM manufacturing figures out of the US on Friday afternoon as Well, so some some important Data sets here You know at the end of the week so really just to kind of wrap then I guess it's it's kind of mainly a monetary policy focused First part of the week all eyes on Sintra Then it shifts to China in terms of data On Thursday morning and then key inflation data out of Europe on Friday morning And then some some big figures out of the US on Friday afternoon. Okay, so that's the week ahead Enjoy, that's it for today's briefing. Thanks a lot You