 Okay, very good morning Tuesday 10th of March. Let's get straight into the briefing I'm going to start with this shot you can see so the side of me which is the Kind of scoreboard if you like of the individual sectors and companies of the S&P 500 And as you can see an absolute Bloodbath of a day US stocks falling around a mid 7% region for the worst day since December 2008 I mean if you're looking at the Dow it was down just over 2,000 points S&P itself down 7.6 One thing I just quickly wanted to have a look at here was a couple of things one is obviously quite broad base selling but there is a little bit of Deviation between different stock sectors and if you haven't seen it already There was a really good video that my colleague Eddie Released on our YouTube channel on the weekend if you go down on the channel and it go into the Playlists you can see there. There's one there toward top Sector stocks to keep an eye on and he explains a little bit more about this But overall to give you an overview as a summary what's particularly interesting here is basic materials our basic materials was Almost the oil price was the catalyst to feed into the coronavirus story given the breakdown in the OPEC plus Situation on Friday where prices were down 10% they fell as much as 30% at one point yesterday and that puts the question marks obviously on the Longevity if you like of whether or not see smaller independent oil firms in America Related to shale production can survive and whether these types of lower Price points of crude oil and what's quite interesting here was I was having a look at the basic materials here You can see the likes of Exxon Chevron those types of companies actually were trading down quite heavily about 1215% in the case of Chevron However, if I just flip this over and go to independent oil and gas firms look at the losses there comparatively So Chevron was the worst of the majors down 15 But if you look here Occidental petroleum were down 53% I've got EOG down 32% Conoco Phillips down 25% You know some of these names really getting hit hard marathon oil down 50% and I think that's particularly interesting and I wanted to quickly just jump in and obviously Sam's gonna look at the Charts and have a quick talk about this particular sector first because there's a couple of Interesting graphics that we can have a look at and this is about shale's new reality We see a lot of people talking about this and it's about this idea of If oil remains down at these suppressed levels, obviously there's a real tangible risk of companies going out of business and couple things I was looking at was Wells drilled by the likes of Exxon Ocelental Chevron and a company called crown quest operating They operate in the Permian Basin Which is the biggest of the kind of regions of where shale production is in in North America and they can turn profits at $31 so we're right on the kind of break even if you like But the point here that Bloomberg are making this article this morning is that over a hundred producers cannot so I named just four There's hundred that that basically can't and when we start looking at this in a bit more detail America's largest show oil fields are Unprofitable to drill at these these current levels and I was looking at you know These are the other major areas of Permian as I mentioned the largest back in and equal Ford But just to give you a kind of a reference point of where oil needs to to trade in order for the price needed for a 10% profit and blue on the bar chart in the Permian This is for all companies who operate within that area and then the black bar for 30% profit So remember here is what we're talking about yesterday. There's available free cash flow in order to deal with the kind of the debt risk Associated to how leverage these companies are Given the amount of money borrowed to make as much production as possible to take this North American Value up to record territory that we've seen in recent times Now this goes into it even further. I did tweet this out if you wanted to see But it gives you a bit of an idea then if we were to look at the majority of US drilling locations are definitely Unprofitable at these current levels so you can see those three companies or four companies I mentioned they're the three right on the left hand side here But you can see scaling up going from left to right from this point onwards where my mouse is now going right all of these Areas it's Unprofitable at those levels, you know some areas need to trade even as high as plus 60 At that point so the reason why I'm kind of walking you through this is because I just wanted to explain here Why these independence in the oil and gas space were down so significantly? You know the losses at around 50% were not uncommon yesterday despite the market in itself only being down From a broader index perspective about seven and a half percent So tech firms in comparison. I mean this these are sizeable Obviously percentages it but nothing in comparison in that respect the other thing then on the oil front before I move on was Well, what's the break-even point for countries? So the level of which oil US oil produces break-even on their own oil production is still though lower than that of which exporters balance their budgets So if actually if you're looking at countries as a whole You know this graphic kind of explains a little bit perhaps the strategy behind Russia Not looking to play ball with Saudi Arabia because Russia down here their break-even is at just around 42 dollars So it's still offside by about nine bucks at the moment oil is trading at 33 in WTI this morning But Saudi need it up at kind of north of 80 at that point Just given their hefty amount of government spend in order to diversify and fulfill that vision 2020 plan that they have and the other area of course when we look at this heat map From an individual equity sector basis is check out the financials down here in the bottom right Bank of America JP Morgan Wells Fargo City Ranging from losses of 14 to 16 percent So that double the the kind of loss that was seen by the actual broader market now one thing here Obviously this big shake out in the market is doing is it's meaning the investors are having to re-evaluate What type of course of action from a monetary policy perspective the Fed and other central banks are going to have to take Now if you think about that and the practicalities of what that means to say the banking sector the likes of Jan has yes if you've not heard of that name He's the chief economist of Goldman Sachs and he said yesterday He expects the Federal Reserve to reduce race rates twice Both in March and April so rather than just going for a 75 basis point direct cut at the next meeting He's anti anticipating a cumulative a hundred basis point cut to come to take rates basically back to zero And it's going to be a 50 in March or 50 in April now the fears here are about the impact that lower rates has on Bank profit margins combined with these credit worries of course as well With these types of loan obligations that they've made to these other areas of industry And hence the reason why those particular main mainstream kind of Wall Street banks got hit as well so hard yesterday So a couple of different things there just to explain Because actually when you know, although this looks like a big board of red when you actually start drilling it down There are some nuances to it and and there are some good solid reasons behind why that has occurred and why it's important going forward If you're looking at the sector kind of plays Moving on then a few other things obviously yesterday A lot of the fear on the coronavirus side was driven out of the idea of Further quarantined areas in other major areas across the globe And so the latest that we've seen in the overnight session Is this coming out of Italy where the population of 60 million people has been Extructed to stay at home except for urgent health and work reasons So the entire nation rather than just that That northern part of the country now has gone into full Quarantine, however, you know, this is what Can be slightly frustrating about the media is you look at that picture There's a woman with obviously a very strained face and they're going against police with their shields And you would think that there's some sort of zombie movie or something But I'm not trying to downplay this but this kind of extreme imagery that the media are putting out Obviously doesn't help the whole fear over the situation that obviously has a large Part to play in these kind of episodes of volatility that we're seeing but to be clear under these new rules Italians will be able to travel to work still. They will be able to go to shops for food still And they can leave their house for medical treatment Meaning that businesses can and will continue to stay open. So Yeah, I mean this I guess also I think for me plays into a little bit of Why I think China Perhaps have you know, if you actually look at the Chinese numbers at the moment numbers are going down And obviously they were a little bit ahead because that was where the apparent origination of the virus first came from several weeks ago but you know the the kind of the Well, I don't have the right word to say but the the application of the quarantine measures I would imagine And obviously I say this with it with no real credible evidence But I would imagine there are a lot more stringent than what you're going to see in a lot of Western Cities and for me then that does mean that there is a greater risk of further spread of the virus In a in a potentially a quicker way of which what we saw In terms of the containment process and it's now tailing off of these new cases Emerging in China. So this is what the markets are quite fearful of I saw a good comment out of the chief economists of UBS actually this morning, and I'll read it to you. He said this is more a demand shock People are told to stay at home Italian services will be worst hit Supply and demand shocks combined to damage company financials because of importance of cash flow So small businesses are often said to have one or often said to be one bad month away from closing So a general rate cut then What we've seen from various different central banks were expecting from the ECB perhaps to come on Thursday You know that buzz that's one mechanism to help support the economy But what you need then is something more targeted to help actually small businesses then operate And then that's when your man Donald comes in because he's come out Overnight and there's a couple of things because if you've seen markets this morning We have somewhat stabilized and the first point on that I would say is don't read too much into the short-term price activity. Remember last week We were up Multiple percent then we were down multiple percent and then we were up multiple percent and we fell another thousand in the Dow again So I don't think you can you should really get into this habit of curve fitting too much These kind of headlines around these kind of these these pivot movements I think you've got to trade what you see a little bit rather than the kind of force your view and tie it to Pin it on any of these individual stories But importantly for Trump and to follow on about that more surgical approach to trying to Mitigate or offset the impending economic downturn on the virus spreading Trump has come out and he's basically making more commitments about proposing a major economic relief package Including a possible payroll tax cut and measures to help hourly wage workers And you know, we were only about two weeks ago talking about you know Will there be any forthcoming kind of political will to implement these fiscal packages? Just given the individual agendas that these parties have whereas now I think the we're the episode of volatility being so continuous I really don't have a choice and you know the likes of Japan overnight talking about further Economic stimulus as well to supplement what they had already put into place a couple of weeks ago And this is the type of thing as well That's like to come from the UK in the budget which we've got tomorrow and it's this kind of coordinated effort That markets are going to be looking for in order to to put a flaw on this recent Downturn that we've seen in global financial markets. So this morning. I don't think it's too much surprise then to see after such a monumental down day Treasuries have slumped. We're off about a point and 23 ticks at the moment And the Japanese yen is weakened considerably as fiscal stimulus comes into focus as what Bloomberg are talking about But also, you know put into some respect just a natural movement of markets after you have such a big day Generally a little bit of a pullback and perhaps a period of consolidation before the next push in either way is normally the case The other thing overnight then to help this general if I switch over to the charts I'm not going to call it risk-on, but I would say that this kind of pause for a breath and a slight Kind of relief if you like after yesterday US index futures are up a Decent amount the DAX is up 87 at the moment oil prices have also seen a significant bounce of about two point or two point three dollars Which is percentage wise still though relatively small if you put into context the near 40% collapse We had from Friday to yesterday's low that continue to keep an eye on that as well overnight in Asia the Chinese CSI 300 stock index was up about two percent and actually President Xi Jinping made his first visit to Wuhan and if you think about that from a symbolic political Kind of point of view. This is totally done on purpose to kind of show that they've been there in control of the situation Things are returning to normal Someone and so forth But is it a sign of confidence? Well, yes, perhaps in the mainland, but as I said, I still don't feel Holy confident about trying to call the bottom of this market I've had a lot of people asking me that on social media. I mean I was looking at the SMP here You remember this target down here. I put a rectangle on the price movement That was the level at a rich around that 27 30 which was that those those lows You can see from March and May of 2019 was the level of which a number of big Wall Street banks were calling for as a level to buy the dip but Getting in at that point Would have been incredibly Nerve-wracking to try and manage your trade. I mean the actual volatility It would have gone through in the SAP Decent 32 odd points before the market actually did come back But you know, we're up a hundred ticks from that level now already. So that was a big level We knew that already. I think a lot of people were eyeing that on the downturn yesterday when we were chasing the momentum on the sell-off But yeah, let's see if that's the bottom or not to be quite frank I Don't really have a bias either way at this point So I'm kind of just continue to monitor continue to objectively reanalyze each day And then make a decision accordingly on how to approach the short term Of which we are looking and trading at this point in time Final few things on my side. This was some Chinese data. You had overnight Quick look at what that looks like So here you've got the white line is CPI The blue line is core CPI sex food and energy and the PPI So producer price index is into the deflation essentially Whereas food CPI has rocketed higher once again So continuation of really that divergence where obviously manufacturing activity being impeded in China as we know Ever since the Lunar New Year holiday is this outbreak began and and the consequences that's had on their economy Whereas food prices continue to remain incredibly elevated They rose twenty one point nine percent the most since April of 2008 pork prices still the key element In the country CPI basket and obviously the mass culling of pigs causing pork prices to rise 135% is what's chiefly underlying that big Pop that we've had in food price inflation But here lies quite an interesting and tricky challenge for the central bank in China You've got consumers under the pressure of rising food prices Whereas you've got then Actual manufacturing activity suppressed still in actually in deflation And that's probably going to reverberate across the kind of global supply chain into other countries as well So how do they deal with that? It's going to be an interesting thing to one is going forward Okay, I think that pretty much covers everything from my side Let me just quickly have a look at the calendar wants to come for the day ahead This morning relatively quiet from a data perspective that is at least Not too much. You got the GDP revised figures, but going back to Q4 for for Europe So not anticipating much out of that in terms of the actual reaction You get the API crude oil infantry numbers as well coming later. Do not forget If you're based in the UK then US time differential between London and New York is four hours Chicago five hours And that's going to be in place literally for the next three weeks until the end of the month when UK clocks change to British summertime So all of you US sessions going to be a little bit earlier if you're based in the UK And that's pretty much it so with that I'm going to hand you over to Sam See what he's got to say Maybe perhaps he can be a little bit more definitive on the equity call Because I know he has been trading some of the indices, so I'll hand you over to him. Thanks very much guys Yeah, cheers and Like I buy today to be honest, I think We'll believe the Trump hype and least until we get confirmation of that it feels if we look at the way things move from the clothes Well, what's the date today? Yeah, the clothes last night last sort of hour or so Trading and then into the beginning. We've seen now been an hour earlier It just sort of reminds me of the The buying we got before The rate cut on the third you can see we pushed higher so I think we we can we can drift on today. I think How far we do drift is obviously the question some decent levels obviously hit yesterday on those lows and You know we were talking Yes, there's bits on the daily here You know just this this whole area 2750 was you know talked about a lot and you know that failure to close below the level So that we head back in in June last year and March before that Obviously, what's going to be very important is almost where we reach actually an early trade this morning 28 53 for S&P I think if you get above that, you'll get a bit of a relief rally through there as well Of course, it's all about the closing time But yeah, the 4th of October low, which was also that the original low that we had the last day of February Second last day of February, but if we can get through that 2850 then we could well see a further push to the upside So that's something I would be be focusing on there You can see we're sort of knocking on that door in in early trade this morning and then really I think You know another 50 points on top of that towards 2900 could be the opportunity To get in for that market on the S&P decent push higher obviously You know had a little breather not too long ago But we're looking to at least have a go at trying to continue above that got some intraday resistance 2834 but then the next above that with the highs of the day and 2853 that kind of point is is what I'll be looking for So the moment I'm favoring the bias to the upside then you know if I'm looking at oil Rather than maybe getting in right now to try to beat the market and get a better entry I'd rather just wait for the price to get above its it's higher from yesterday and then look at some of these levels from Obviously a long time ago. That could be decent profit targets to consider. You know here looking You've got the low from April 2007 2016 before we then start getting back towards the $40 area. So I prefer, you know pushes higher I think there's a couple resistance level that need to go before maybe you want to pull the trigger If not already long from yesterday But yeah, that's how I'd be looking to play it Having a look over a goal. It just wasn't interested yesterday This is what we're saying at midday. The fact that it's not higher just shows that it's not gonna go right now 1700 though was obviously a big big target for that So you know the way to look at this I guess we just have a markup of that low that we made in early trade That's your your rough line in the sand I'll probably have it more as a zone to be honest You can see it's the higher the 27th and we failed to get above it in the first few trading days of March And obviously spike lower on there on Friday, but again closed above Before hitting 1650 yes in early trade this morning. So as long as that holds up then fine We can start to drift on and it'll be interesting to see what happens And then to the upside. I know it's there's gonna be opportunity in between here But for me really unless we get above 1670 I'm not too interested in it in looking for a long. So those are my areas as such 1650 1670 for a Cleaner trade should we say on a break above or a break below those points? The dollar is up for the day at the moment, but just weakening a touch recently It's gonna bring on the old daily chart on the euro as you can see we are down and I got in short last night So let's all know say a prayer for Sam Hope it continues to go down Reason being just that 38.2 fib failure to on the futures to close above it It also got a bit of resistance around here from June last year. So my trade is as long as that holds The day below there then I'm gonna be happy I know we were just retracing up a bit more, but that's fine. It's all about for me where it closes and you know I would really actually be looking to hold this down towards The lows that we had of the year again So for me quite nice little risk reward trade if it comes in of course the way it's been pushing higher There still be some appetite for buyers as you'd expect we haven't quite filled that gap But we've got to the lowest closing for well lowest sort of price on that open on Sunday evening And and that's found a good support good area for the bias to come in And then the pivot as well would be an area that if that was to break Well, hang on a minute. We're gonna get back to that thirty eight two point two fib and those highs from yesterday where there's gonna be stops My mind and so yeah, that would be something to to look at there The pound sort of following suit this morning and drifting lower of a bit of weakness going to that lower price that we had a Monday Before pushing higher Just really following the dollar dollars being the driver here. I would say rather than anything else this morning It's you know, all the other pairs the Aussie dollar doing the same thing really drifted lower this morning before Recovering a bit and the yen was the same So yeah a bit of dollar weakness right now, but we're across the ball got some nice resistance levels here You can see in the pound Let's just put this on a 15 minute just to show and it's a good a line You can have really 130 82 some decent price action in early trade this morning was a half decent level yesterday as well Consider a quick look over at the decks which actually did push a tiny bit lower this morning But we're just coming back to it's our one I wouldn't necessarily say it's a great level to to get to involve But certainly if we can get above there again, you might help it might help those Your US stocks have a go at trying to break through some of their resistance levels For example, like the Dow because he's just having to go at trying to close above this point Which is pretty key for me as well So my bias today is looking for buyers for stocks until Trump comes out and neither confirms or denies or whatever package We're sort of looking at euro. I'm positioning at the moment for for a short But that's not to say can't continue in this trend, you know I put that question on question on to Twitter and and some people are looking still for this to continue higher So I guess that's what what makes a market oil same Sort of processes S&P and and what not trying to get longs but above those highs from yesterday because we're a decent resistance level For now as usual any questions guys, please do do let me know be interested to hear your thoughts on Stocks today, but also what you think about the the euro itself But I hope you'll have a good trading date, you know, and I catch you all later on