 The trade war is over. Just kidding. That is literally what's happened in the overnight Asia-Pacific session. Really volatile session. I'm going to run you through some different graphics and charts, but essentially overnight we've had a situation where it looked like for a brief moment in time that the trade war was in fact over according to the trade adviser Navarro in the US and that caused an immediate spike across assets showing how markets continue to be super sensitive to what's going on with the trade deal. Despite the focus we've had elsewhere on COVID. However, shortly after, I'll talk you through the narrative. Markets have reversed. He said those comments were taken out of context. Trump has tweeted to kind of say as well how he thinks that the trade deal is still on and China will commit to their pledge and so on. So let me just show you the overall sentiment this morning. Before I begin, don't forget to like the video and subscribe to the YouTube channel. Plenty more content coming your way throughout the entire week. But looking at the charts here this morning and as you can see, you've pretty much got these extreme kind of pops reflective across every single different asset class. So in the equity markets here, for example, you can see we've had this extreme kind of V shape where we fell down toward what had been quite a key technical area actually, which was around the low point that we had in yesterday afternoon session, the overnight session as well and then some previous data points going back to the 17th or the 16th and the 18th. This might make a little bit more sense though from a timings point of view. The guys on the squawk, New Squawk did a fantastic job in the overnight. I've gone back through and just kind of gone through and looked at the headlines and when the comments actually came out and the Navarro comment came out roughly at around three minutes past 2 a.m. London time and there was a good couple of minutes there to get on that move before then it started to get kind of circulated and broadcasted across other major newswires and then obviously we saw a pretty spectacular move and somewhat exacerbated of course by the overnight conditions. The liquidity obviously pretty thin at that time of night and you know for anyone who's new to market sitting there thinking well you know could you have gone on that move and I mean the answer is well it depends. It depends if you're really lucky and what I mean by luck is you just happen to be up in the overnight session. Sometimes if you've got various different chart alerts or you've got for me I get the guys on the squawk desk to actually text me but that's because of the relationship I have with them. So if there is something big that happens like that you know if it was super big they would give me a call even in the middle of the night so having some mechanisms like that certainly helps but yeah you definitely had timing on that first one to ride some of that move back down. The Navarro attraction came and the markets were obviously fully engaged at that point because most people were aware of the overnight developments and so you had this extreme pop all the way back to reverse the entire move and then Trump came back with a tweet to basically say that the trade deal is still intact and then we reversed the entire move. So net of the volatility overnight we are pretty much at scratch from where we were before the entire episode of volatility that had been seen. So as you would imagine with that move in equities what did that mean for T-notes? Well T-notes spiked and fell, gold spiked and fell and let me just give you a run through then of some of the headlines and other charts to to kind of summarize the move. Well here here is some of the other movement that we did see the the VIX July futures rose more than 8 percent before then dropping back. If you're looking at this is looking at the orange line is the dollar spot index and then the black line is dollar yen but inverted just so that the two are kind of in sync and you can see here immediate kind of risk-off reflection so flight to quality into the dollar and then completely reversed when the rebuttal came out about the comment taken out of context from Navarro. The Australian currency as well given the close trade ties to China very sensitive to the trade war developments and the Aussie dipped quite sharply overnight but again fully recovered but has been slowly just grinding a little lower as we've gone into the European open. So what exactly happened? Well trade advisor Navarro responded basically to quite a lengthy question on Fox News where he was interviewed and he was asked whether aspects of the trade deal was over and he basically replied saying it's over yes and it took the market I think a little bit of time perhaps you know if you think about the trade advisor Navarro he's not a chief architect of the trade negotiation on going between the US and China that is the trade or the Treasury Secretary Stephen Mnuchin and then the trade secretary Robert Lighthizer they're the two like main guys who are involved in these discussions not Navarro and so perhaps not a lot of people were tuned in at the time and certainly at that time of night and in the US in the evening it takes a little longer for it to gain a bit of traction for it to circulate accordingly then for action to be taken and then it to be reflected on the chart so hence that little latency with the actual kind of move or reaction on that initial phase. Then what happened was basically this Navarro came out he walked back to his statement implying that the trade deal between Trump is over is over he basically said that his comments were taken wildly out of context and this came within the kind of hour or so after he initially delivered that because he'll know full well what the stock market reaction would have been I say the stock market the futures reaction would have been and so he quickly walked that back not forgetting as well this is the same guy when asked about John Bolton's kind of memoirs that he's written quite negatively about the administration and their handling over China he did say he basically blasted Bolton and said that what he's doing is the equivalent of swamp revenge porn so this guy certainly got his way with words in that respect but not only did he walk it back but then Trump came out and he basically tweeted shortly after as well pretty quickly this that the trade deal is fully intact hopefully they'll continue to live up to the terms of the agreement so yeah for me there's really there's really two points I want to make here now just going back to the chart here first point is the way of which the market tends to react to this type of information and what I mean by that is well where is the kind of opportunities when you're trading this type of news driven event and the real opportunity comes with the first first bite if you like if you're not in that one then it can get a little bit tricky now I know what it's like when this type of situation develops in real time because in in hindsight in the rear view mirror it looks like obviously quite easy short but at the time it can be a little bit more nervy than that because he says a comment and you think you know what you heard and you want to get short but actuality the market's not really moving so you're thinking well it's almost like your interpretation is too quick and you're too you're too on the ball for the rest of the market and you kind of second guess it a little bit so you've got to have some pretty strong conviction of just following through on what you thought you heard perhaps then the actual trade entry point for me I mean I'm just looking here on a on a very tight time frame just to kind of give the example of of execution for me the trades opportunity would have come you would have heard that news you would have been a little bit second guessing yourself going why isn't the market reacting this is definitely negative the market then does react it breaks that previous low there which then trades a little heavy and as you can see there's a cluster of price activity that we had at the end of wall street trade this is looking at the s&p future the reopening of electronic trade and and here then that was your opportunity to get short the break and the what we call the classic entry to then play that market back down accordingly so that that for me would have been how to have played it but one of the other things here you can see if I put it back on a 30 minute you see how the market as I said before respected some of these previous lows so whenever you get a fast money move like that you want to be thinking well I need to be booking this trade scaling out of it to ensure then that if the market turns on itself and there is a rebuttal that I'm not going to put myself in harm's way in that respect these trades by definition a very short term and you know whenever you do get that type of move in the Asian session it does tend to be over exaggerated to a certain degree and as I said reflective the fact that there's not a lot of bid and offer in the liquidity in the market at that point in time so here you can see as soon as you got down to around that that kind of pivot level you can see that the fast money traders were just booking some of that profit we go back down to those previous lows and I looked out in the 30 minute chart and then you're out of that trade I definitely would say that at that point you know you'd have your stock trailing pretty tight to then try and avoid this type of situation and you can see from the characteristic of that candlestick when the Navarro retraction came out and he basically said his comment was out of context how fat that green bar is on the upside and that's what you want to try to avoid in this situation you know particularly when it comes to commentary from the Trump administration you know you can almost guarantee then that there's going to be some type of response in that and particularly when there's been a pronounced move in markets in a negative way if you think about it that's definitely what they don't want really to happen they want to talk tough on China but they don't want it to have a meaningful lasting impact so by that point you really want to be out of the market you know these are short-term trades in that respect Trump comes out and obviously you get another little bump higher as he kind of says the trade deal is fully intact and then the whole thing is reversed so for me there's kind of a couple of different phases to the move the one that's most harming is the retraction but the same thing can happen often when you get a news wire source report you know like saying the ECB room or sources say the ECB are going to do X the euro might move really you want to be able to that trade pretty prompt because usually with the processes what happens is Bloomberg source says this the Reuters source says that the market flips on itself so just a couple of words of warning there for anyone new to trading things have steady dough and this is kind of the second point that I wanted to make and if I just I'm going to use this picture just to give me a bit of a backdrop as I discuss it this to me you know when you're coming into the market this morning I don't want you guys to be kind of somewhat influenced by the activity that's happened overnight for me it's really important now that you hit the reset button and it's almost like well if you weren't part of the action overnight then for me this activity these comments given the source is Navarro I think are absolutely redundant I don't think they mean anything there's a couple of things that you will know that are happening at the moment in various pockets of the United States of America COVID-19 cases are rising quite rapidly you know we've seen record levels in the likes of California Florida Arkansas Carolinas you know there's some key areas here where cases are rising very sharply and so this is put out questions then about the impact of the US debate of reopen we obviously saw the news about Apple for example not the Apple stores of the beyond end all that is that you know a sign for example of what could be then a delay in these over optimistic expectations about how quickly the economy can reopen so at the moment Trump is in full assault to try and spin and frame the narrative that this is the the con flu you know this is the Chinese virus as he did in his weekend when he was in Tulsa I think it was in Oklahoma when he was having his first kind of main physical rally again you know so here he really needs to try and pivot away that as these cases get worse which undoubtedly that they will they've probably not quite hit their peak yet in the second phase wave that we're seeing in some states then he knows he's got to start talking this in a certain type of way and so what I feel he's doing here and I would not be surprised at all because tactically I'd probably be thinking the same that Trump and Navarro have probably coordinated this type of scenario where what they're trying to do here is send a little bit of a political message to China as to say look we are willing to end this trade deal completely and and we know that that's not the case but they just want to put that out there on the table and soon as the markets react like they do it's kind of like well no actually that's not what I said that's out of context and then Trump comes out very quickly suspiciously quickly and then tweets yeah actually the trade deal is still on but that they've already achieved their objective there markets have recovered we're flat now from where we were but that warning sign that gun has been put on the table now as far as the the US tactical approach politically is concerned so yeah for me this is all just politics you know Trump also following it up as well saying that a second stimulus checks for Americans are going to be coming for the COVID-19 aid package details are coming in a few weeks so it's a full on assault at the moment as far as Trump is concerned it's a Chinese virus we can end the trade war but actually no the trade war is going ahead the agreement is in place and actually American citizens don't worry if you are losing confidence I'm going to swing you another stimulus check your way it's all gravy at the moment so yeah it I don't think you should get too spooked by what's happened perhaps I will end up being wrong but I don't really think it's a big deal quite frankly despite the severity of the the volatility that was seen in the overnight session of course so yeah that's my my take the other thing here as well that as a proxy and I've mentioned this a couple times before but it's always interesting how correlated it is to these these kind of bumps if you like in negotiations between US and China and that is that North Korean provocations raise fears of military escalation where Kim Jong-un is using threats against Seoul to reset negotiations with the US according to analysts are warning you know this is the sort of thing where again Trump doesn't want to look weak in his control in other geographic regions around the world as well remember he was the one who was really pumping it that he had brokered a historical peace agreement only what probably less than two years ago when the North and South literally crossed over the the DMZ line and to shake hands for the first time with Trump being the main instigator of getting that that deal done and now any any the way that China tends to respond here geopolitically is by unsettling the Korean Peninsula now we know that there's no direct obvious communication but we know the strategic alliance that these two countries have so if Korea North Korea starts making sounds against the US allied country which is Seoul in South Korea that makes Trump look a little weak in his control and what otherwise was quite a key kind of you know badge of honor if you like of his administration and what he had achieved in that peace agreement so all of these things are definitely connected in a geopolitical sense and that's what I think this is this is purely just a strategical or strategic moves on on the political side so for an intraday trading basis what I want is for you guys to kind of almost come to the notion that look if we're all square again now the only one final thing I would say is that what you can evidently see is that markets do remain very sensitive to trade war news you know headlined reaction to a certain type of trade war comment from a certain type of individual can have to propensity to move the market quite sharply as you've seen so hence the reason why you always need to be kind of semi-engaged listening to the squawk keeping an eye on Twitter and a news feed just in case but hopefully my explanation about the execution side you know it was a little bit over pronounced because of the overnight session but there's definitely a method to how to trade that type of kind of headline driven event all right a few other things I just want to cover off and then I'll wrap things up this is talking about the UK and what we have here is Boris Johnson today reject or will reject misgivings for some leading scientists and press ahead of with a plan and will basically push ahead with a plan to cut England's two meter social distancing rule he'll also add cinemas and galleries and museums to list the premises able to reopen on the 4th of July pubs restaurants hotels hairdressers will also be given approval to reopen their doors with coronavirus precautions on the 4th of July this comes the day after the death toll from the virus in the UK had risen by just 1515 that is the lowest in fact since mid-march so yeah definitely Boris in a similar situation of course to what we've seen other areas like the United States of America where these politicians who are in charge are definitely under pressure to kick start the economy again and part of that would be helped along by a reduction of the social distancing rules to what I think they're calling the one meter plus rule rather than two allowing then some of these other types of sectors to reopen to some degree of normality and obviously that means people get back to work and the economy can start somewhat functioning again whether or not though that comes at risks of course of a secondary virus that's the tail risk that we'll be monitoring the other thing is this and I'm covering it really more again for anyone who is relatively new to monitoring this type of information so basically Iran backed Houthis have been well Saudi has intercepted ballistic missile headed to Riyadh from Yemen now one of the things here is that that sounds like a quite a punchy headline you know you would see that you'd think hang about what there's a neighboring country where there's Houthi Iran backed militants firing ballistic missiles on capital city of Saudi Arabia that sounds quite worrying the problem is here is that this happens frequently the Iran backed Houthis have been fighting Saudi led military coalition since basically 2015 it's about the last well over five years now they have repeatedly claimed responsibility for attacks on targets in Saudi Arabia they try to also disrupt the aramco network particularly in the infrastructure basins south of Saudi Arabia and this is all part of the kind of ongoing proxy war that is then the underlying tension between Saudi Arabia and Iran in the Persian Gulf so yeah I just wanted to really stress that you know you see a headline like this context is definitely important because as you've seen in oil it's not interested and quite rightly so you know as as nasty as this headline might sound it's not a market mover because this is this is actually the normal status quo what did move the market overnight was a momentary blip on the Navarro comment but obviously that's been reversed like every other asset has all right a few other things to look out for for today there are some meaningful data points coming out momentarily this morning so I'm just wrapping this up it's just coming up to half 7 a.m. this morning now but as we go through 8 15 8 39 we're going to get the French the German and the Eurozone manufacturing and service PMIs and these are indeed the flash numbers the UK numbers will also come out at 9 30 so all of these are important the PMIs always are they're forward-looking so it does give us a little bit of a kind of a barometer of how confident people are about the the future one thing I would say is that most of these data points are going to reflect quite sharp bounces from their previous numbers but I think I mentioned this in my my macro menu I issued on Sunday my kind of look ahead I wouldn't read too much into that and and the point being here is that you're coming from a very low base you know the PMI has got absolutely decimated as a reading during the the midst of the lockdown so as we start to reopen albeit in phased and gradual approach then we are expecting this kind of almost v-shaped movement that we've seen with payrolls that we've seen with retail sales the PMI should follow suit the problem that we have is that when you start looking at some of the underlying activity in the economy on in the real terms rather than these soft sentiment-based indicators is that the economy still is quite far away from functioning anything like it was pre-covid-19 so if we go back to sort of January February time so this is a diffusion index it basically means is how confident are people either are or they aren't and to what degree then we'll dictate whether this figure is over 50 and expansionary or below 50 and contractionary so yeah confidence is going up does not necessarily mean that confidence can't come back down all the time before then reality actually takes place so yeah when it moves the market I mean if we get a spectacularly strong number sure it might but what I'm saying is that it might be a fairly short lived response because I think other people will be looking at a similar way that I've been explaining otherwise going into the afternoon you get the US equivalent from market the data provider otherwise it's relatively quiet in the US session you've got the new home sales data you get the weekly oil infantry numbers coming out the API there is a Chinese Russian Indian foreign ministers meeting happening no set time today but just given the context of what's just happened with some of these US related comments you know the relationships being forged between China and Russia is always quite interesting so maybe worth keeping the air out for that and in Bank of England Governor Bailey is speaking at an event women in finance event at 945 this morning and that's it so yeah any questions feel free to leave me a comment on the video absolutely happy to to engage and help if I can hopefully you found that session useful PMIs this morning definitely warrant monitoring quite closely but with that I wish you guys a good day ahead thanks for listening