 Okay so very good morning. It is Tuesday the 4th of June. Hope everyone is well. I'm gonna go over a couple of different things here to talk about as we can see here the close on Wall Street. Why did that happen? Why is the technology sector so heavy? Although we were here commenting on this live at the time we'll have a bit of a review of exactly why that is happening, where potentially we go from here. We're also going to talk about the 10-year US yield. We're going to look at oil prices and all coming under the umbrella at the moment of the fallout from the the ongoing trade war situation. We're also going to have a look at Donald Trump, what is on his agenda on day two of his UK state visit. Definitely important because meeting with Theresa May so on the back of that we're also going to have a look at what does Trump think about Brexit and what is the prospects of and likelihood of a US-UK trade deal as a few things I wanted to cover on that front. Then we're going to look at the RBA. They cut interest rates as expected but does mark one of the first cuts we've had in many years so we'll look at the implications that's had and then the review of the calendar and then Sam will come on and look at the market's technical point of view. So quick look across the asset classes though this morning and actually it's a fairly tame open on what was a quite a negative close on Wall Street all things being equal particularly on the tech sector and that did feed through into largely negative trade overnight in the Asia-Pacific session but I guess it kind of goes round in full circle and we kind of go back into the the UK European swing and now it's about really just reevaluating how does the land lie and have we priced in now the latest developments on the trade war. Certainly as I'll go through there's a number of big banks just adding to the calls about prospects of recession and also cutting of forecasts on corporate profitability particularly in the US which is kind of just continuing to feed this this this growing narrative of global growth concerns but overall pretty flat for the moment at least I'd say very marginal risk off trade US index futures European having already opened slight negative T notes have been creeping up gold also the same up about $3 the Dixie's pretty flat and that's largely reflected in the currency pairs and as is the case as well for oil just finding some resistance around its pivot in the futures for the time being so let's get straight into it why did the likes of Google as you can see on the the left hand corner here fall over 6% if you think about it these are some of the largest companies on planet Earth in terms of listed Google down 6% Facebook down 7.5% Microsoft down 3 Amazon down 4 Apple down 1 in total if you take the Fang names on their own they were down 137 billion dollars lost in valuation yesterday alone now what did this happen well again it's a very coordinated and specific sell-off in the major technology company names the larger ones so Facebook Amazon Alphabet Apple those companies appear set now to undergo antitrust probes after the US Justice Department the DOJ and the FTC the Federal Trade Commission agreed to set up oversight of technology giants so to give you more detail after 41 billion dollars was wiped off Facebook yesterday person familiar the matter said the US FTC will oversee antitrust scrutiny and whether the firm's practices harm competition in the digital market under an agreement with the Justice Department that added to early morning losses after reports that the Justice Department was preparing antitrust investigation into Google so this is I guess there is a sense of inevitability about this type of regulatory change because of the fact that these companies becoming such dominant forces there actually is quite a strong political will on both sides of the house if you like in in Congress or both chambers to address this problem about the increasing monopoly that these types of firms have on the consumer so definitely this is one of the big tail risks to otherwise what arguably is you know are companies that do hold longevity for the future in terms of how embedded they are now into various different consumer behaviors I guess in purchase and transaction and services but it's going to be this slow grind if you like of regulatory change that could provide a bit of a headwind I would say that what happened yesterday is kind of a knee-jerk reaction probably exacerbated by the overall context of the conditions in the wake of the ongoing breakdown in the trade war situation although I think regulatory burdens will provide a headache for these firms I think that they will be surmounted quite comfortably I think yesterday was almost a perfect storm was coming with a lot of the other news flow that was coming out of the time and it kind of became almost self- fulfilling and exacerbated the price movement to some degree on the trade war side though what certainly is happening and well before I get to that this is just a quick look at technically well this is going by size and valuation if you remember we had the Q4 route in markets we had the awesome Q1 recovery as the Fed kind of turned dovish OPEC plus cut production China's authority stepped in you know everything else in between the markets recovered and you can see that child valuations of some of these companies particularly likes of alphabet Google got up to near that trillion mark again but you can just see over the month of May how influential the trade war destabilization that's happened from the fallout from the escalation against China and the latest on Mexico the last two days certainly has had a real shift in valuation and that of course is fed through into elsewhere the US 10-year Treasury yield now below 2.1% for the first time since 2017 so bond markets continue to remain well supported and the other thing obviously that's being impacted on the global growth concern is crude oil WTI crude edging lower so far today after plunging 10% in the last four days and this does come after comments out of Saudi Energy Minister al-Fali yesterday who said that he is committed to doing whatever it takes to stabilize markets obviously referring to quite an infamous phrase adopted by the likes of draggy in years gone by I think when he initially ushered that during the sovereign crisis but I think I'm sorry it was yeah it was Mario Draggy that said that phrase I was posted the 2011 kind of blip from the ECB the point being is that that despite that fact a necessity of Saudi really wanting oil higher unless there is some kind of supply shock at the moment that the kind of tables have turned and what was quite an equilibrium between growth concerns outweighed by supply risk or shocks coming from Iran to Libya to Nigeria and so on that now seemingly has become overweight by this short-term investor focus on the negatives for the time being so definitely fundamentally I think it's still some downside buyers potential for crude oil what this is inevitably leading to and this is what we were kind of inferring yesterday is that bets on a rate cut from the central bank have really shot up over the past two days so the implied yield on January 2020 Fed funds futures you can see here getting ever more divided or away from the current Fed funds effective rate so this of course coming towards the the June meeting markets now starting to price in ever closer and impending rate cut to come from the Federal Reserve we did have on that note a comment from James Bullard he is one of the Fed members said that a rate cut may be needed soon now not to spook anyone Bullard is a dove and so these comments aren't massively surprising but certainly does put it out there on the table most explicitly that Bullard said the yield curve may signal the Fed policy is too tight and just given the risks around the trade war maybe a rate cut will be needed soon a few other things to be aware of Bank of America city group of lowered their US corporate forecasts whilst pointing out the risk of recession amid the trade war JP Morgan have said yesterday the chance of US recession and second half of the year has risen to 40% from 25% just a month ago so as I said the kind of shift if you like from the general herd in where markets now and forecast being cut quite aggressively definitely this can feed through into you know further playing out of what we've had from yesterday I think yesterday a little bit more unique perhaps a little bit more pronounced given the fact that you had that layering in of the antitrust probes coming for the likes of the tech majors largely that I think probably would be priced in so my eyes I'd say on on balance to see another sell-off of the magnitude of 6% 7% in Google on Facebook today I would say is unlikely unless there's new unexpected news that develops okay moving on let's have a quick look at Trump obviously Trump had his first of three days well let's have a look this is the agenda of the UK visit timeline yesterday was very much ceremonial meeting the Queen having tea with Charles and Camilla having a banquet in the evening really today is the most interesting from a potentially markets point of view because he's having a working business breakfast with Theresa May at least for now the Prime Minister until Friday that is but also with various business leaders I think there's someone from Glaxo obviously all the US banks are there JP Goldman's a few other leaders of industry are going to be there within that meeting and then in the afternoon the president and the Prime Minister will hold talks at Downing Street followed by a press conference and obviously the things that the people are eagerly anticipating and is highly probable is that Trump starts talking about how he's going to cut and the most amazing deal for Britain and how Britain should not be bullied by the EU and how we should send for Arjun to lead negotiations and how the US will be there to make sure the UK comes out okay on the other side in the end now on that point we know what Trump's political kind of goal is obviously he can almost validate his own domestic policies by getting Brexit delivered kind of fits that more populist narrative but a few things I just wanted to share with you to dispel any notion that Donald Trump could do anything close to supplementing the gap if we were to have a hard Brexit or a no-deal revert back to WTO rules let me go through in 2017 I'm showing you a chart here of UK trades with the EU so to give you an idea of the colours here the two at the top kind of teal colour in the blue that is imports from the EU and exports to the EU the bottom two are exports to the US and imports from the US so in 2017 the US accounted for 18% of UK exports and 11% of its imports while the EU in comparison accounted for 45% and 53% respectively trade talks experts they link the extent of trade to three big forces and this isn't just trade talk this is just common knowledge in regard to how trade intrinsically works there's three big factors the size of the trading partner so obviously you talk about the US economy but not just Europe's individual countries but as a single marketplace the distance and then the depth of trade arrangements the distance of course we're only over the channel compared to across the Atlantic and the trade arrangements we are very much embedded into the European Union not that so closely to the US by being closely aligned with Europe means that there's a closer regulatory alignment which means easier and more flexible and more higher volume of trade if Britain's imports and exports to the block dropped by just 10% it would require a 37% increase in trade with the US for any significant UK US trade deal to be possible hard Brexit must take place in which Britain leaves the EU's custom union and diverges from regulatory alignment of the block single market so points quickly on this front the point being here is that in order to have this kind of trade deal with the UK we need to initiate then the most disruptive worst economic case scenario for the UK at least in the short term that means a reversion back to WTO a complete in-access then of any regulatory alignment to the single market leaving of the customs union the most negative in terms of its implication of the UK economy only then could we go into these trade talks and the point being for no statistics I've just shared the US in itself doesn't do enough trade with us to even fill half of the gap that we would have missing with the EU so quite frankly I think Trump is full of hot air and I think this is an absolute farce in my opinion I think Trump purely playing a political card in order to strengthen his own political agenda and that just so happens to fuel the flames of then the kind of likes the Brexit party the Brexiteers who would try to convince people that the UK can recover and have a better future trying to break these deals with with the US this circles back all the way to the point that you know it was supposed to be easy to deliver Brexit and you're seeing that play out I can assure you the US will not give the UK the type of deal and that they're promising because technically they can't that's the point the other point here is don't forget public opinion is highly resistant to signing up to US food and animal welfare standards different between the US and Europe and UK and also Trump in order to cut a deal has also been making some pretty strong noises about the fact that he wants the NHS to drop controls on the cost of medicines once more US pharmaceutical action on the drug market in the UK this would be highly detrimental to the NHS existing structure and something that you know when you get beyond this kind of ideological view of that Britain can be stronger on its own again and you know breaking these trade deals on the on the ground it's gonna be far from it so again I've tried to be unbiased in all of these briefings but I thought about time that you know I just talk about the facts and the facts are that you know I think it's absolutely pine-sky thinking that that Trump is doing anything other than just self-serving his own political agenda by what he will be doing today which is talking up a great deal that he can offer the UK anyhow next thing and final thing I'm gonna talk about and I hand you over to Sam Australia cuts its key rate to a record low so interest rates were cut to 1.25% a cut of 25 basis points this was as very much expected by the market but economists and markets still foresee further rate cuts in the months ahead definitely I'd say at this juncture although fairly equal balance of commentary that came out to supplement this rate decision of the cut in rates economic data is probably going to be quite key to monitor going forward as to whether or not markets are right to anticipate further rate cuts to come in the future okay quick look at the calendar what do we have you've got UK construction PMI coming out at 9 30 again this is I'd say the lowest tier down to the three PMI readings that we'll see out of the UK this week services one coming up later this week is going to be more important but even then the conversation we're having in the chat room with the new traders yesterday was that UK data really is inconsequential at this point has very little meaningful impact on the price of pound or UK assets given the fact that you know the political factors are such dominant driving forces for the currency at the moment you've then got probably the main economic data point of the morning being the eurozone flash PMI we are anticipating a decrease from 1.7 to 1.3% a range of 1.1 to 1.6 this quite interesting of course because it comes just two days before the ECB meeting where we're going to be looking out for a couple of interesting things actually not that we're anticipating any rate moves the ECB but we're looking out for clarity on the parameters around their targeted long-term refinancing operation part three and we're also looking out for the latest projections as well from the European Central Bank and you know how weak or not inflation is could well dictate how dovish those projections in the accompanying commentary is from the central bank so that's going to be quite key and I'd say you want to have any positions cleared euro related in anticipation of that number going into the US afternoon pretty quiet no major 130s but you do have factory orders and the regular API inventories coming out later in the afternoon but there is a whole slew of Fed speak so it's all very much afternoon based Fed's Evans Williams Powell it's so the Fed share is speaking as well a lot of these members Powell included he himself giving the opening remarks before the Fed listens to a conference on monetary policy strategy tools and communication practices so this as per the briefing yesterday is about a two-day meeting talking about the current methods of which to find the framework of Fed policy particularly this idea and notion of having an inflation target which historically is being quite good at looking at the rate of unemployment and how that calculates then into potentially inflationary conditions to then subsequently have a target the point being is that now we're almost in an unprecedented area where that connection that classic Phillips curve is kind of broken at this point so does that need altering this could be quite interesting to hear from these guys later on today okay that is it from me I'm gonna leave it at that hand drive to Sam so overall a little bit of stabilization in markets after the equity market route led by the technology sector from yesterday I really don't really personally foresee a continuation of that move at least in the magnitude of yesterday in those particular Fang names I think largely this regulatory news was the driver and that now priced in so unless we get new trade war developments which might not be the case because I think Trump's going to be focused more on Brexit and kind of talking that agenda for today given the schedule that he's on and then we look to the US afternoon Fed speak factory orders coming out as well from the US all right I'll catch you guys in the chat otherwise have a good day head thanks very much thanks and hi guys hope everyone doing well and quick look over some of the currencies as you can see we're bringing the euro to the pitch about quite a few of them certainly the dollar pairs anyway under a bit of pressure this morning the euro just pushing on and continuing in its it's push higher yesterday the levels just having a quick look obviously above where we're trading if we were to push on your 113 on the future is just a bit above where we're trading which also has the high back from the 13th obviously quite a key level to keep an eye on that as well if you remember from the weekly strategy report you might not be able to see the initial start of this trend line there you go because of the camera and that looks to sort of come through and already broken I'll be looking for an area of this sort of retest down here to eventually get back up to to 113 and you can see the importance yesterday of this area from where we go back to the 13th and then the 15th of the month now broken through in its acting as that sort of level support so while the the trend line if you like slightly shopped up just this morning could well be that just for the the further push on up to that all important 113 handle you're gonna want this trend line to hold basically so zooming in you can see a tiny bit of a false break early as this morning on the low liquidity but this morning it's held all all that time so you want to align in the sand to know whether there's gonna be continued dollar weakness I think this this trend line is as good as any even the pound finally catching a bit of a respite so we hit that 126 on Friday the pivot acting as good support and we pushed on now to that R1 quite a bit of resistance above where we're trading though going back here you can see just from these highs all from the 28th would be quite key and hard to get to and even on that that longer term just looking here for hourly while you could argue with we're starting just to break through some of these these trends that have been containing price to the downside you can see late yesterday we got that break through and a decent first test of that yesterday before the push into the the afternoon I wouldn't be too getting too carried away about you know saying this is the the beginning of a further push higher for the pound I think there's still see quite a few factors in play and the Aussie pushing on this morning despite the the rate cut of course that was priced in I think with with this market the way to probably look at this if you do feel where you know should be coming down is is looking for these trend lines and effectively like that euro just the the line in the sand what area will the sellers come in or will the buyers continue to take over of course yes so we came back to test the top end of the range technical market and the first real test of you can see what was the low double bottom low that we had back on the the 6th and the 9th really strong so acting quite technically for now key level above where we're trading other than the higher the day you could have just on the handle at our one and we've also got the high there of the 12 so the Aussie I think you've got a favor the upside unless we were to you know really break the the trend lines the downside and I would say that is the same for the euro as well you can see price contain quite nicely from this trend starting on the last day of the month the previous month so the next step was to go you've got a favor a continued push higher having to look at another market help by the dollar weaknesses is gold really pushing on the R1 previous high of the day yesterday was a superb trade admittedly right on the data so you'd have to be quick to pull the trigger we're still looking to push on here and just looking here on the 240 chart you've got key resistance on the 25th 1335 on the futures and I want to stand in the way of gold at the moment and again it could be a case of well just you know identifying a level where will the sellers you know come into this market at what point can we start to see things turn around because you don't want to you know be getting in the wrong side of this market with equities obviously we had a bit of a topsy turvy day especially in in the S&P you see we pushed higher cash open came lower felt break of the the lower the day and we're now back probably you know not far off the middle of that I agree event I don't necessarily think certainly for those things you're going to get continued selling pressure but where to let the market agree with you I think the pivots not a bad place you've also potentially got this as a zone where the previous low of yesterday the high of yesterday evening which is also pretty much today's high can we get back above there and then you might see a further recovery in the NASDAQ let's have a quick look just to see if we've got any trend lines from these highs worth considering not really at the moment they might be that you know you start to get a bit of resistance here in that final push above the the hand as well 7000 but for stocks yeah I wouldn't be too surprised to see a bit of recovery but just the way things are you know traded here you can see the the Dow Jones finishing up for the day yesterday you know looking for that continuation above these highs is probably what I would prefer of course trade comments could come out but I hadn't mentioned unlikely probably today to do so oil is well had a an interesting day we pushed higher in the morning almost got to what would have been a really key resistance point you can see those I suppose we almost got the the previous lower Friday evening before that final push down which act as a really strong resistance a good line in the sand potentially for oil there stuck within a bit of a range this morning so I wait for the Tim to come on later to go through this in a bit more detail you can see just how nicely this trend line from yesterday's low to yesterday evening's low to today's low is is reacting so break of that you can further get a continuation through as well so I'm gonna look at the high worth keeping an eye on was almost tested a support before that break through but we've had decent price action around here 53 43 so my my bias will be waiting for price to come either way here and oil ideally in the afternoon is obviously in the morning less likely to be to filled with volumes it to get that that higher move and look at a T notes here it's continuing to push on worth having a look and I was looking at this yesterday morning just the the patterns and it might be worth again looking for this continuation to happen unless one of these you know breaks and you can get that that follow through just the the break of a high and comes back and forms a good trend line which is respected then through throughout the day and this isn't obviously the first time it happened yesterday you can see it acts once twice and then the day before break the breakthrough support once twice three four five times it's a really good you know just pattern to be aware of we say on the on T notes there so might be one not to happen today as we are a fair bit away from the height of yesterday but keeping an eye definitely on the level support which if we were to come down not for any time soon it be around the 127 hand or lower the day as well so would be a pretty key level to keep an eye on obviously just going through the the cash open in Europe have a quick look over how the DAX is trading because of course it can drag things around really key resistance yesterday finally got there just after four before the cash closer we had it marked up early morning it took its time but eventually did get there so I'm gonna quit look now key level obviously just below the pivot of the support from late last night we keeping an eye on that that was to go then sure you might get a bit of a follow through in US stocks but not something I would be looking to trade too aggressively until the volume starts to come in as well any questions as usual please do let us know the dollars having another leg lower here which is helping the the pound you can see have a go at trying to test this are one some interesting levels certainly for the afternoon and if you are looking for maybe a bit of Aussie dollar weakness those trend lines like with gold and T notes might be advisable as they are still pushing on just as the Canadian dollar is as well I hope you'll have a great trading date and I look forward to speaking to you in the chat