 Okay, very good morning to you. It is Wednesday 24th of February. Hope you are doing well just as a heads up We have our regular weekly masterclass happening on Amplify live at 6 p.m. This evening London time I'm going to be joined by Bilal Hafiz from the macro hive team He used to be the head of global research at the likes of Deutsche Bank for the best part of 13 years and Nomura for I think three or four years so a guy of an incredible experience and Just given some of the conversations of late that we've had about yields and the impact on equities and you know Fed timing and taper tantrums. It's going to be a really great time to talk to him. So Can't wait for that conversation again for the community and just check out Amplify live comm if you're interested in being part of it Otherwise, look, let's get straight into the the market and what's going on It's very much a what I would classify digestion of What was said yesterday and we did see some increased selling pressure as we went through the session in the end Then as that and our performer as has been the case given a lot of those tech Related names are most susceptible to a high yield environment So that as that was lacking once again down to 10 to 1 percent actually the S&P and now finished positive albeit just by a touch of around 0.05 percent to 0.13 percent if you're looking at the S&P so as we were kind of alluding to yesterday on the live feeds that You know the the lower the these equity markets go We were quite confident in our view that power was going to come out and just essentially Recycling the normal fed stance again He said quote the economy is a long way from our employment and inflation goals And it is likely to take some time for substantial further progress to be achieved. So essentially pulling the idea of Pulling back their support for the economy was just pushed against and so very much So irrespective of this reflation view and the improved gross prospects that we're seeing Which has been then a key driver behind some of the recent cross asset class moves pal Resisted at this point to make any change as we were expecting as I said So yeah quite a strong reversal that was seen in index futures Really into the clothes on Wall Street last night to finish basically flat A couple things to be aware of on that front on the calendar today We do have pal speaking again So if anyone knew to markets he now speaks to the house delivering his testimony This is always the routine Senate first then followed by the house This one though is not expected to be market moving at all. He essentially just Repeats what he said to the other chamber of Congress to now the house. So it's not new information So to speak but do be aware that you've got feds brain art and Clarida speaking throughout the afternoon This is normal tactical kind of planning from the Federal Reserve They like to put in some senior speakers voters in and around big Kind of keynote events just in case that the market requires some kind of re-guidance if it misinterprets the The kind of message that was intended to be sent But I think the message was loud and clear from power yesterday, which is at this point There's not going to be any change in policy for the for the time being On the speaker front, I'm just going to quickly mention You've also got Bank of England's how they the chief economist speaking at midday now He's speaking off-topic speaking about changing world of work And then Bailey the governor speaking alongside a few other NPC members in front of the Treasury Select Committee That's kind of a routine update for Treasury officials not expecting anything really from these Speeches today from the Bank of England. However, one thing I thought was quite incredible I was reading this morning is that option bets are now targeting around a hundred basis points of tightening by 2024 If you think about it was only a few months ago, we were talking about negative rates Are the Bank of England going to be adopting negative rates in them near term? however, just given the dramatic kind of Turnaround in the fortunes of the UK economy in terms of the general outlook from going from probably one of the worst Responses to initial onset of COVID-19 to now one of the real leaders in the successful nature of the rolling out of a vaccination program has really flipped the whole scenario on its head and Given the road map that's been outlined with the final step for to be completed by kind of mid-summer on 21st of June the market at the moment seeing that as a bullish kind of situation to be reflected in The rates market for what the second half of this year looks like so yeah Not expecting much from those guys, but just something to be aware of Going forward sticking with the pound one thing we did have overnight was a very explosive move in the sterling currency These moves actually happened. I had it written down at 103 AM London time so three minutes past 1 a.m. And at 122 a.m. There was two phases where it just popped higher and then popped again at 22 minutes past one Now there was no fundamental Headline that came out check the news wires. There's nothing you've missed anything of that nature So a couple of things I'd say when I when you see a price movement like that. I mean for one I was just having a look at This trend line going back to the 16th We've had a couple of retests here back on the 22nd 23rd So really this week's price activity and you can see we kind of just got above that came back to the line And then bang at your shot higher So perhaps a little bit technical perhaps more due to the illiquidity overnight which exacerbates price movement You know sterling futures. I'm looking at here is particularly thin during Asia pack trade The Asia region really not that interested in trading sterling With just general much more domestic focused narratives driving markets few people looking at a telegraph headline And it basically was saying that restrictions could be lifted sooner than June 21st If data shows a large improvement According to a government source, but that came out more like 11 p.m. Last night on the telegraph an exclusive piece, but timings don't work out But it doesn't lend its hand to the general upside bias you know, you've got a combination of power reiterating the kind of Ultra accommodative stance of the Fed is to is here for the time being that helps keep the dollar generally fairly depressed around this 90 level in the Dixie and then all of these improving kind of Fundamentals stacking up for for sterling creating more bullish views About what the economy is going to look like and how quickly we're going to recover so Directionally it definitely fits the trend of course because sterling has been a real out performer of late You know if we look back to even just To 8th of February when we broke out over some of the peak of Consolidation of price we had at late Jan I mean we've gone from a 137 handle up to a mid 142 handle where we're trading at the moment So it's not an unusual thing. I think to see just further Kind of breakouts like this and I just think all in all I wouldn't over interpret it It's just a continuation of the trend that has fundamental substance to it in that respect Otherwise quick look at a few other things overnight in Asia pack trade Although we did Recover on Wall Street. I'm a little bit mixed in Asian trade Hong Kong equities with down actually an underperformer in Excess of 2% the city planning to raise stamp duty on stock trading to 0.13% from 0.1 Chinese general equities a little bit softer for the third day in a row and a lot of people looking at Obviously the incoming Biden administration. How are they going to deal with China? I would say China is definitely on the list for for Biden But it's probably perhaps a little bit lower down the agenda behind things like Stimulus the COVID vaccine program rollout and things of that nature which should obviously have more acute immediate impact on the economy But one of the things we've been seeing here and I was reading was that these tensions between the US and China Definitely haven't gone away irrespective of the change of leadership at the helm of the US Reports suggesting US senators are eyeing legislation to curb Beijing's unfair practices and tackle Chinese censorship of US companies individuals So at the moment they're going through a process of the Treasury deputy nominee Adi Adi Amo I'm sure I've said that wrong, but I will work on that Also indicated that the US are open to using a Trump era investment ban to punish China for its trade violations So again anyone who is looking for a slightly more perhaps passive approach That's not materializing at this point in time and if anything I would say as I have done Since the beginning when Biden came in actually I think a slightly more uniform approach from other Western developed leaders Coordinating a strategy against China in particular on many different levels, but trade being one I would say that's a worse situation for China and likely to aggravate them more than even what we had for more outspoken vocal Trump So it's interesting to see how that obviously plays out. I'm not pinning that on The reason why Chinese equities were down overnight, but it's definitely something to to be aware of Overnight as well. You had the RBNZ rate decision really nothing too sexy going on there Unchanged as expected at 0.25% and their bond buying program at 100 billion Kiwi dollars They did say that they stated the outlook ahead remains highly uncertain and prolonged monetary stimulus is necessary So if you think about it, although markets are having a bit of a wobble of late about what high yields means for in some respects highly valued companies in certain sectors IE tech and some of these kind of fad names that have been really driven and outperformed their underlying fundamentals you could argue The point being is that we've had Christine the guard Jerome power The RBNZ they're all coming out and basically saying the same things at the moment is that as much as there is a degree of inflation Expectations rising that they're not looking to make any substantial changes of late. So Again, one of the things I was looking at with equities Yesterday with Tim we had a good conversation and we were looking at a few things and it was this idea that look equities fine, they can come off but At lower levels, I think you're going to attract a decent deal of buying This is looking at the Nasdaq and if we were looking Well, let's just I think it really helps to put in the full pandemic picture because then you get a real sense of perspective and This is pre-pandemic This is March 23rd when we hit that loan and the Fed came in with their unlimited QE pledge and an ultra-loose policy and then look where we are at the moment having traded record highs here in the nasdaq 100 future So I do think perspective is key We have sold off for consecutive days now. I think it's six in the case of the nasdaq 100 It was so interesting I know even I was getting messages people saying what's going on the stock market and people have just been so Caught up in this kind of race to all-time highs and beyond That a little bit of a pullback. It's got people panicking which I do think at this point is unwarranted now Am I saying that this is the bottom? Not necessarily. I do think we could potentially come lower And you know looking here in the S&P you've got strong levels that the market reacted to in the Session yesterday, which was around those loads we had in mid and late Jan I'd say an even bigger level would be down at 12 461 Which starts to incorporate the kind of late summer high of last year the retest and rejection that we had on the night of the day of the Pfizer positive Vaccine story and then that's actually there's a bit of a platform for price as well toward the back end of last year Ultimately though, even if you look at the S&P Which I'll just bring up here on a daily Sorry, let me just reshape my chart So I'm just gonna clean up some of these. I was having a discussion yesterday with a few people So let me remove I'm just gonna remove these lines. So it doesn't give you any confirmation bias of for our discussion But again looking at the S&P here This was the March Kind of pandemic route that we had when we went into the global Lockdown On the spread of coronavirus pre vaccines Then we've you know, we hit the old-time high not that long ago We had to talk about the 16th of Feb when we were trading up At around 39 36 and a half and now we've drifted back down to a fairly interesting level We flirted and broke below there, but came back up, which was this previous kind of area 3862 which encapsulates some of the previous double top on the old-time high that we broke out of at the beginning of Feb The point being here is that you know on any pullbacks and if you look at the S&P here I do think there is room for a degree of pullback. I mean yesterday He talked about the 3800 level roughly, but I'm talking more about what if we saw Something more meaningful in terms of a correction in equity markets and if we go from all-time high down to say 3600 that's a 9% move if we go back to this level here of the pre-pandemic Highs that would be around a 14% move now these would all be technically correction based moves in this equity market But I think if you get down to these sorts of levels at any point in the future Whether here, but I think definitely if we start getting down to these levels or even more So if we start getting down to this kind of area here at thirty two hundred I just think you're gonna get tons of people coming in and locking in then what will be a Recovery trade in equities that could create them the next kind of push on and and we move up through 4000 as we go into the second half of the year I mean the important thing to understand here is that zoom out of this chart for a second and Apply a little bit of perspective once again if you actually look at this market and you look back all the way going, you know two years gone by a Little the market coming off back down to thirty six hundred really does not look particularly a frightening prospect when you start looking at the the incline of the S&P over these time frames, so Even if we did get there What could create that type of move well one thing that the market is obviously very Sensitive to at the moment as this idea of taper tantrums Which was that episode in 2013 when the feds first started talking about Speed or slowing down the speed of their bomb purchases and that caused a bit of a panic Given that we're still in the aftermath of the global financial crisis And that would be the first tightening post that initial response to the GFC Here I think we are going to have a degree of tantrum at some point because although Powell and other central bankers remain resistant And I think for good reason right now to push against any idea of tapering at some point that will have to happen and that will be a Very difficult situation to manage that will undoubtedly cause a degree of volatility when it arrives The question there is well, how big is the tantrum? But overall once that and the market normalizes to the idea of normalization of policy Then I do think then that the upside remains true Given the fact then that there will be an underlying economic growth narrative that is driving things So and that as the guys were talking about Eddie and Piers in their video yesterday, you know Yields are still in relative historic terms Low the Fed will be incredibly Cautious and slow to normalize policy whether tapering or eventual rate hikes None of that's going to happen anytime soon And if it comes in a backdrop then of a still relative low yield environment, albeit it's picked up with Economic growth. Well, that's your kind of perfect cocktail for further upside for these indices. So I Guess it's time frame, of course, you know, you're looking intraday short things have felt a little bit more Heavy, but I think in a broader context. It's important to understand not to Not to freak out and lose your head just yet. The show is the show is not over just yet All right Gonna have a quick look at the calendar and we'll wrap up So we've talked about the speakers of the day actually in terms of the calendar for today It is pretty quiet. There's not a great deal going on to be quite honest with you for this morning the really the early afternoon data I'm looking out for is new home sales and then you've got the DOE all infantry numbers And that's pretty much it on that front We did have the API's last night and we had a build of one million Expectations were for a draw of around five point three seven two million. So bearish cushing bearish By a large degree as was gasoline. So we did have a bit of a downtick in WTI crude last night. That's that rectangle. You can see here price is moving from around 62 down to close to 61 Actually overnight mild recovery being seen here I would not place a great deal of emphasis on infantry data for the time being Now on a couple of different fronts these numbers definitely bearish, but overall the markets trading I would say for reasons discussed in previous briefings a More tilted bullish set of narrative variables at the moment. They're underpinning this rise in oil Chiefly born out of this kind of growth outlook story narrative that similar has been driving some of the yield move So I don't think you could get too caught up in that and obviously over the coming weeks or so that infantry data is probably going to be a little bit skewed to Reflect some of the ongoing disruption that we have from the great freeze over The US last week as well, but that's it gonna leave it there Let you guys get on with the session. I will see you in the discord room Throughout the day to drop me any messages if you have anything any questions for me happy to help If you're watching this on YouTube, don't forget to like and subscribe Really appreciate it and if you want to join the chat with bill our later on just check out and find live.com All right. Thanks very much guys. Take care You