 Okay, very good morning. It is Wednesday the 6th of January of 2021 and first actual video briefing of this year. So apologies for the audio only up until this point, but I have a special guest, our head of training, Piers Curran. Good morning. Good stuff. So what I thought would be a good thing to do here is to really get your opinion on a couple of key themes but incorporate that around what I'd normally do for a briefing, which is focus on some of the major themes that are happening. So they're important for markets at the open this morning. So we've got a little bit of discussion about COVID, both in the UK and Europe. I'll get up to speed what some of the latest headlines are and it'll be good to see your take on kind of vaccine rollout things of that nature. We've got the Georgia Senate runoff and that has had a meaningful impact actually on markets this morning because T notes are down about 16 and a half ticks, which is pretty decent move actually overnight session and the Nasdaq's a little bit underperforming comparative to, you know, the Dow is up 127 the Nasdaq's down 156 which is quite an interesting move which a lot of people are anticipating if the Dems win which we can discuss in a moment and then talk about a little bit about OPEC. And a surprise announcement out of the Saudis yesterday so that's what's on the agenda. So kicking things off then we're going to start jump straight into the Georgia Senate runoff because I think that's the most meaningful thing that's developed really overnight. There's been a bit of reaction seen in different asset classes here so to get everyone up to speed the Democrat Raphael Warnock edged ahead of the incumbent Senator Kelly Loeffler in one of Georgia's two Senate runoffs. It's looking pretty good for Warnock at the moment 50.4 to 49.6% is the space at the moment it seems awfully close but actually in this world for this type of subject matter that's looking fairly as specific as it can in the political world of 2020 and 2021. John Ossoff, the Democrat seeking to unseat David Perdue trial the incumbent by absolute whisker. It's kind of like a thousand votes at the moment so it's basically 50-50. What I've seen now is a couple of the agencies have declared actually the Dems of one, both. However, the final result is yet to be known and kind of like Trump and Biden as we know last year it could take a little bit of time for definitive confirmation. Some strategists have argued that a Democratic double win, this kind of goes back down to this blue wave idea, additional stimulus tax hikes regulatory change. And so really want to get your take on that and what you think about what this could mean going forward. Yeah, absolutely. I mean it's quite definitely key with that with that final remaining seat I think even though it's a whisker I think the counties that are remaining to kind of declare a kind of more Democratic leading which is why am I saying right actually we are going to get this this this blue wave so to speak. I mean, yeah, let's look at the charts because I think the most important chart I'm just going to bring up chart T notes here. And we'll have a look at the NASDAQ in a minute. It's really important for me I mean as you can see quite another kind of extent we had a big move lower yesterday, but actually that was still within the ranges of the kind of Christmas slash New Year week, but real stretch lower today and as we break down below that low that we had on the 23 December then you can see is a massive level here this key key level is the November low and the other thing we're looking at price here. The other thing that's really important is that this is 1% on on yield so as price prices drop yields are rising so we're, we're hitting the 1% handle just to get this in perspective because this looks incredibly negative here. But if I just go to a longer time period. Do understand that this is actually just the, this is the bottom of the sort of relatively tight consolidation phase that we've had since the big explosion higher that we had earlier in the year off off the obviously on set the pandemic and so this is really key because it's not just that you got this low from back in June as well. And this is really important and if we get a break here then, then, and this will get interesting and it get interesting for a number of factors. And the reason why we're getting this, this move is that whole idea of the blue wave it's as you were saying it's the biggest stimulus package that the Democrats will be able to get through Congress without the Republicans being able to block it. And other issues about perhaps some regulatory factors coming in and maybe, maybe higher taxes further down the line to kind of pay for all this stimulus of course this means more borrowing. There'll be more supply of, of tea notes this is helping to push prices lower but with with regards from the yields point of view is that whole that whole inflationary story comes back to the fall right people were talking about this around the election time if there's a blue wave Biden win then this with with a bigger stimulus. This will help to fuel a reflation story as we go through 2020 and 2021 and indeed actually the the tech year break even inflation rate at the moment has just gone gone to a new two year high this morning so you're just getting a little bit of a re sort of attention back on this re inflation story now why is this important because if that's true then yields will will rise okay. If yields do rise, then if I look if you look, look at, look at, look at Tina, sorry, look at the S&P here. The S&P is kind of right up at the top of, of, you know, all time highs the all time highs were set. Let's start this week, another little print higher, but we're kind of up around here so you've actually got flat on the day so far on the future it's got a nice sort of doji here but if you look at the Nasdaq, then this gets a bit more interesting because the Nasdaq actually is printing down so far today. And in theory what will happen here if yields do continue to rise then this is potentially much more negative for the Nasdaq than it may be for the S&P so it might be odd that people are thinking well hang on if you've got the chance of bigger stimulus shouldn't that be positive for stocks and it certainly is for some stocks. But then it's not for others and this is the thing about the tech sector particularly that's been on fire as we've been through this COVID 2020. And one of the reasons is that yields hit rock bottom now yields are rising again. One key thing here is a lot of these big giant tech firms are carrying massive cash stock stockpiles and the van so we're talking about future cash flow here. When yields are really low the value of this cash in the future is higher and that's helped to fuel this Nasdaq rally. What's going to happen now if Biden wins and you get this free inflation story and you get high yields is these future cash piles become less valuable, which will negatively impact on the Nasdaq plus on top of that, you've got the concern about increased regulation in the tech sector. And these two things are particular are why you're going to get the Nasdaq underperforming. If this story kind of plays out obviously we still need to wait for that second seat to be declared in the Senate for officially that to be a kind of blue wave scenario. Do you think there's much. When we're looking at the politics specifically let's say the Democrats pick up both the Senate seats as a blue wave. It is still relatively tight and within our own political party that can obviously be left and right leading members and if there is quite a left leaning that wants to be adopted by Biden wouldn't take a lot for it to be blocked so it's there a little bit of there's obviously a very important technical area you just showed on the T note which in itself a breach would likely create a fairly meaningful there but if you do you think there's any kind of short term reaction to oh wow this has happened to then the realization that well perhaps it's not going to be crazy levels of types of policies because we have to still push through even with full control of Congress or yeah I know what you mean I mean that that control of the Senate is or would be on an absolute knife edge and you only need one literally one to center and then of course that that that majority go and it's not even a majority right it would be 5050 and the Vice President carrying the overriding vote so it couldn't be a more slender sort of majority so if I was a democratic kind of young gun in the party looking to make a splash myself for the future I would see this actually quite good opportunity for myself to cause perhaps a little bit of confusion to make sure that I can kind of secure what I want yeah but I'd say for the I'd say for the short term. Yeah. Look we weren't expecting this if you go back a month right like in that kind of post election post presidential election sort of aftermath. It was like oh God this this is closer than we thought we turned out all right Biden's driving away with it but for a period we thought hang on this is a lot closer and then we're worrying why there's no chance of this blue wave I mean no one's been talking about blue wave for ages right so actually the mindset shifted back okay this is happening that is positive and I think that you know certainly in the early weeks and months as Biden you know kind of goes through is an operation in a couple of weeks and then we actually get this democratic machine kind of in control then I think I don't think you're going to get many dissenters to start with. I think sure as we get further into 2021 that might become a risk but I think the parties are so divided at the moment. Politics is so bipolar at the moment but for a democrat to go actually you know what I'm going to vote with the Republicans because of that divisiveness that's a big gap to jump and I think that's another important thing to put into the mix there. Okay well look let's leave these charts for a moment and let's move on then to a different subject matter and let's talk about COVID. There's obviously been some significant developments particularly here in the UK where we're based but let me give you an up to speed on what some of the data there is and then in Europe and then it'd be good to get your kind of comment on that so the acceleration we've been seeing in case rates in the UK obviously very sharp post Christmas New Year and so on so likely to move even further north resulting in this tier five status at the moment one in the new strain has been a key culprit of that mean that one person in every 50 now in England now has COVID-19 that goes down to one in 30 if you're looking at London. 1.3 million have had vaccine shots that includes about 20% or so of over 80s and this is in context of one of the things that I was talking about a lot yesterday's briefing was about the kind of ambitions that governments not just the UK but Europe in the US and how they've kind of moved the goal post several times on the speed of the rollout of these vaccines on the program so Johnson's goal here is to vaccinate almost 14 million people the highest risk and carers by mid February and that's the kind of timetable then I think it's this half term then the weeks around 22nd when they'll look to hopefully loosen the restrictions as to planned but we've obviously been here many times before when the dates kind of her rolled over a couple of things here the the Guardian have reported this morning that COVID vaccine rollout might not hit target pace for another fortnight for a start, whereas over in Europe at the moment. If you look at someone like Germany, for example, they've only immunized 0.3% of the population. So people have criticized the UK and US for being slow. They've done 1.4% Germany have only done 0.3% and Germany yesterday prolonged their lockdown. I think it's the end of this month. So yeah, what's your take on that and how markets are kind of mean equity markets, although they've shown a bit of weakness since the beginning of this week, particularly on Monday. They're relatively high still so yeah, what is this a cause for concern or is it something you're looking at. It is it's a really difficult one isn't it because you know on the one hand you've got the vaccine rollout starting albeit some might argue false starting in terms of the speed of the initial phase. On the other hand, but still the vaccine being rolled out and so the idea of great perhaps this is the beginning of the end of this kind of COVID situation, at least for now, which clearly is a positive but but just as you're getting this started you're getting lockdowns because you're getting cases ramping quite aggressively higher, you know in the UK and now across Europe and this new variant and how to play these two conflicting factors when it comes to thinking about how stocks might perform I might bring up a chart here whilst I'm talking I mean you mentioned Germany, who are way behind the UK although I say way behind I mean 0.3% of the population vaccinated in Germany compared to 1.3 in the UK. I forget that both of those numbers are tiny. Alright, these are these are minuscule numbers alright fine point 1.3 is higher than 0.3 but let's be honest both are really small. And, but look at this is the DAX, and the DAX, you might say where you got Germany literally announcing an extension of their lockdown last night, plus the fact that, as we've just said their vaccine program has got off a lot more slowly. And yet here's the DAX I mean literally this morning yeah, or well so this is a little bit of this, no this is on a weekly chart, let me go to a daily chart. I just wanted to get the, but that high in place. So on a daily yeah we're not printing you actually did yesterday but let me go back to the weekly because this is more important because technically we've got this big top and back in February and so you know we have seen the DAX make you all time nice this week despite all that negative news and I think what people are now, they're happy to look through this latest surge in cases and unfortunately then the associated follow on ramp up in death rates that we see. They're prepared to look through that on the belief that by the time we get to the spring, there will have this vaccine, you know you have a double positive which is that the vaccine roll out hopefully should have gathered momentum and we're getting millions of people vaccinated per week. And then number two the weather improves. And as we saw in the summer of 2020 of course that helps with with the virus and and then you're going to be able to see in the spring and through the summer. You know a significant enough portion of the population being vaccinated to avoid another winter spike in the end of 2021 so people are looking through this current what looks to be, you know aggressive exponential increases on the belief that it's going to be short. So now you're going to get negative impact, we're going to get a worse economic growth situation in quarter one of 2021 than we had previously thought and previously thought literally just a month ago, and that's because lockdowns have obviously come in. But people are willing to look through that now it's all going to be about clearly the vaccine roll out and, and the reason for some of the delays I mean, you know, to be fair to politicians, this is an absolute, you know hook your lean projects that they're trying to get underway here and you could argue well there should have been planning for this for for for months and months and months and months and months and of course they have but you know some of the reasons for the slow roll out stuff like you know the little glass files that the vaccine actually gets put into well now there's a global shortage of those. Of course there's because suddenly you've got all these big, you know, healthcare companies, you know, creating loads of so you've got so you've got several issues that are several bottlenecks that's called it. What I would look at is the testing as a kind of case study the testing, the speed of testing in the UK was really slow as we went through the summer and then actually suddenly it ramped up quite aggressively once they've got there. They're act together and once some of these bottlenecks were shifted it did then actually rapidly increase and I, and I would say we're going to hope for them see a situation like that so I think mostly traders are looking beyond this current uptick in cases they're looking beyond the slower than expected roll out the vaccine. I mean, on the understanding that things will sort itself out and by the spring we really will be able to see these global economies opening up or at least the developed economies opening up you know you've got to remember the emerging markets are kind of further back in the queue when it comes to getting these vaccines but I think the developed economic world should open up as we've come through spring and summer. And that's why markets are still priced at the highest. And I'm wondering here, is there, at the moment Europe have been really focusing on the vaccines from Pfizer specifically and buy in tech, not so much AstraZeneca which obviously the UK with the first to kind of push through. And that's been rolled out since this week on Monday but shots in Europe mainland Europe from Astra not going to be available for a number of weeks at the very earliest. So does that, I mean, I think that is a factor because obviously the Pfizer one obviously it's going to be stored at a much lower temperature which just clearly makes it, you know, really difficult to roll out rapidly because there's another massive bottle net right there. I mean how many, how many vaccination facilities have got refrigeration equipment that's capable of storing this stuff. So there's going to be another big bottle neck with the Pfizer one. So, even though the AstraZeneca one, a couple of weeks, I mean, we've been in this pandemic for 12 months, right 52 weeks, almost. So, another two weeks, think about it from an economic point of view, another two weeks. All right, you wouldn't, it's not ideal, but in the grand scheme of things, it's not that big in a matter of time. And anyway, in another two weeks, some of these bottlenecks that's holding back on the UK side, hopefully will be alleviated. And that will help, you know, have a more rapid uptake and roll out the Astra vaccine in Europe. So that's the way people are thinking. But it could turn and it could be wrong. So this is one of the monitoring obviously the big stories now. Forget, you know, I know we've been obsessed about cases of COVID and deaths of COVID. Clearly that's been the focus. I think actually 2021 big focus isn't going to be that it will be now that the new big figure is number of people who are going to have to be vaccinated each day. Yeah, of which I'm pretty sure I read that there's going to be a Monday weekly update on that. Yeah, which I guess is a bit of a double-edged sword because from a public perception, it's kind of, it's transparency, it's up to speed, people know where we're at but from a markets perspective, you kind of then, yeah, you're on the hook a little bit there, you've got to start with vaccinations, I guess. So let's move off that point and let's look at a different area now. Let's talk about OPEC Plus. So as we know, then they've moved now to, instead of semi-annually given the fluidity I guess of the global environment at the moment with COVID, they're going to be every month and they had that meeting yesterday. And what we saw was a surprise decision from the Saudis where they surprised the oil market with a large reductionist all output by one million per house per day for February and March. Most people were just kind of going into this just, okay, yeah, there's a bit of disagreement between Russia looking for a 500,000 increase, but all in all, we think that they'll get put down and they'll just hold Pat as where they are. And then Saudi come out with that information, oil prices, WTI moved up to 50 bucks. Russia, Kazakhstan, meanwhile, were allowed to bump up their output by modest 75,000 in February and a further 75,000 in March. So no, there's numbers incredibly small in the latter, but obviously Saudi are doing the completely opposite. So what do you read into that from an OPEC perspective? Well, here's the chart. And as you're saying, you know, an explosion high yesterday off the back of this news and we, and we kind of took out this key top that this is just a one hour chart, by the way, sorry, so just looking over the last week or so, we hit this little top start of the week just shy of this $50 handle. And then the big news and then we're up here and we're above, you know, we've been trading above 50. I would say to put this in perspective. This is the most surprising OPEC meeting I've seen since November 2014. In terms of the actual outcome, compared to kind of what we were expecting. When I say 2014, if you go, I'm going to go back way back on the chart here. So to kind of bring that in, I know just kind of ignore this crazy negative print that we have back in April, but let me just kind of get that out of the way actually just to. And so back in 2014, you might remember, this is where the Saudis and OPEC decided right we need to take on the share industry in the US and to do that we need to we need to drive prices lower and to make oil production the more expensive oil production from from the sale economically unviable. And so Saudi flipped and actually said, even though price was dropping sharply, they said, you know, we'll come out and we're going to increase production. This was a big surprise and it caused a big move. Okay. I can't get my I just can't get my head around what's happened here. I don't get. Let me go back to the one hour chart. I'm really shocked. I'm trying to understand Saudi's kind of strategy here because on the one hand, this is definitely negative for them and positive for everyone else because they're kind of saying, all right, look guys, we'll take the hit. We're going to cut by a million to prop up prices, which will benefit all you lot because you're not cutting production on Russia. Yeah, we don't mind you can increase production. So far removed from some of the decision making we've seen in recent years and so it's almost like the best Christmas present the best sort of New Year present that Saudi could have given it's interesting because I'm at the same time the Saudis have also kind of re-engaged with Qatar. So that politically there seems to be I don't know it's almost like they've woken up at the start of 2021 and said, you know what, let's change. Let's just kind of change our direction here. And let's actually go now in a different direction and that might kind of contribute to their decision here on oil but so I'm really really shocked as you can see the market is so what happens here on price again is slightly difficult because you could there's always those glass half empty analysts who will say, well, hang on a minute, why have they done that? Surely they know something we don't. Right, at that point, Goldman Sachs last night, right exactly that. They see the surprise move as a signal oil demand is to weaken and subsequently GS have cut their oil demand forecast for January February. They also said the transition to probably less friendly US administration might also have led the Saudis to adopt a more supportive stance toward other Middle East producers. Right. So, look, you've got, look, you've got surprise extended lockdowns in Europe. Okay, that wasn't in the equation a month ago and clearly from an oil demand point of view. That's definitely very negative for the short term. Okay, so it kind of makes sense from that point for Saudi to go. All right. Yes, demand in the first two months of 2021 is going to be a lot less than we expected. Right, let's cut production to make sure we're controlling price and keeping it up here. That makes sense. What doesn't make sense is that the rest of OPEC were particularly keen. So actually wants to hike and what what further doesn't make sense is the Saudis went all right, then fine, we'll cut you guys don't have to. That's the big kind of shift here in the kind of dynamic between these parties where the Saudis have said look, we'll take the hit. So look, it could be there's definitely going to be less demand in the first two months. That we had anticipated because of these lockdowns, that's for sure. Goldman's are saying, well, look, it's a chronic drop in demand way beyond anything that we were concerned about. That's why Saudi have been forced into this incredibly unusual move. And I guess I will tell, we'll find that but you know, in the meantime, if there is a crash and a chronic lack of demand and that extends or then, you know, maybe you're going to get the other OPEC nations, you know, on board with sending cuts. But I think for me from a price point perspective, look, we're up around 50 today is really important. What happens at $50 now we're here you can see it's created a little bit of a, you know, we hit 50 at 3pm yesterday. But if I, you know, if I go back to a weekly chart, you know, this is this is the highest price points that we've seen since February. You got key key bottoms throughout 2019 at this level I don't need. I don't need to tell you how important $50 is as a price. It's obviously massive. And so that's why today, and this week to a degree a really important what happens now we're at 50. If we get a break of 50 and does that become a key support level or is 50 a resistance barrier. And we kind of pull back in and I think personally I think we'll probably take higher. We're also getting dollar weakness to add into the mix. So as a result of this kind of Biden situation you're getting another extension of the dollar weakness situation which is a positive for oil if I quickly switch over to to the euro dollar here. So you've got this, this kind of key break of the trend that everyone's been talking about well where do I draw it you can draw it there really. So you've got a key break here and then people are eyeing up the 125 handle of course and that kind of top that we have back in 2018. Another extension of dollar weakness, which definitely also helps to support oil up here so my view is that really real surprise from the Saudis in in the short term it may well see us drift up above 50 bucks do we stay above 50 that'll be more about the vaccine role and how effective it is. And therefore how quickly economies open up again and then how quickly that whole whole demand story turns turns more positive. Well look, this just wrapping things up then just to summarize the rest of the day going forward we've got the UK service PMIs these are final readings are not like to be market moving you've got the German state CPIs anything there you'd look at I mean they were obviously negative previous months. So I think inflation figures in Europe. I think it's too early for Europe to really start to see any evidence of this re inflation story that I mentioned earlier I think you're going to certainly the US will be leading that. I think, I don't think you're going to see anything different in these regional German CPIs yet so I don't think this data will will cause any surprise. Okay, and then we've got factory orders this afternoon from the US the all infantry numbers following the API is last night, which probably parlance and if it can to the decision yesterday is discussing, and then we've got the FMC minutes this evening but one final question for you then Bank of England governor, Bailey speaking later, but this is just in front of the Treasury Select Committee about the financial stability reports as kind of an off topic thing that's not normally market moving. Yeah, we just had Brexit, and the rate rates market is showing a little bit of apprehension at the moment given the lockdowns and the UK specifically COVID situation, and this idea of negative interest rates kind of re emerging a little bit. Any thoughts on that at this point. Firstly, I don't think he'll talk about that today. So I mean, I don't know, still relatively new as the governor so I guess we're not quite as certain about that as it as we might have been if let's say colony was in the seat, but you know, these guys are professional he's not going to be, he's not going to be drawn into making comments on that today because that's not the topic so I don't think we're going to get any market moving events due to UK monetary policy information flow today, but yeah more broadly, you know, negative interest rates, I mean, I don't know, it's a hard one and I always go back to the point that for me now as a trader. Do I, do I care about whether the Bank of England go negative on rates or not. Do I care. And to be honest, no. That's because if they do go negative or on rates alright that could be a symbolic obviously clearly historic moment but does it really change anything. You know other European countries have had negative rates for for years. It's really changed anything at the short to medium term, not for me and for me with our shadow that is not in the UK monetary policy is not a big factor in when I think about how markets going to behave this year. It's definitely about. It's definitely about the vaccine rollout. That's it. That's the big ticket with the vaccine rollout you could. It's crazy to say but we've literally just had Brexit. And you know what doesn't matter. From a markets point of view, certainly quarter one of 2021 and beyond just it just pales into even significance alongside whether this vaccine is going to get rolled out. On that note, this current head of trading and by trading. Thank you very much. Thanks a lot. I'll let you get the rest of your day. Alright, thanks very much guys. Cheers.