Nikola shares tumble (again)

Volume leaders today include Apple as normal, as well as Peloton after a blow-out earnings report – EPS of $0.27 almost treble the street consensus of $0.10 indicating the stay-at-home Covid trend is playing out well for the brand. A new cheaper version of its bike should help, too. Apple shares were flat, with Peloton up just +1%, well below its highs.

Hidenburg Research slams Nikola, shares tumble

Nikola shares fell about 15% on high volumes after the Hindenburg Research article. Whilst shares had fallen yesterday following publication, it seems investors have taken fright at the lack of any detailed refutation by Nikola.

A statement today from the company only said the allegations are not accurate and described the report as a ‘hit job’. If it is a hit job, it’s been a very well timed one with the stock having jumped only a couple of days prior on the tie-up with GM. But the lack of detail from the company so far has left investors unimpressed.

Without being able to comment on the details of the report, short attacks can and do happen, and more often than often there is rarely smoke without fire.

Equities move higher into the weekend

Elsewhere, the S&P 500 ticked higher after testing yesterday’s cash close at 3,339, with the 50-day line offering further support untested at 3,321.90. Yesterday’s tap on the 21-day SMA at 3,425 looks a long way off. Nasdaq also higher as risk is catching some bid into the weekend.

European equity markets are closing the day out with some decent weekly gains in the bag. Overall we have seen a real divergence between the US and Europe this week with equity markets this side of the pond doing better. Partly that is down to the rotation out of tech, but also we need to be aware of election risk that will play an increasing role in driving sentiment over the next month and a half.

Crude oil found some bid as the risk sentiment improved as the US session progressed.

Listening to the usual talking heads it seems there is more appetite for value after the three-day tech rout saw the penny drop for many that valuations had gotten out of hand. Let’s see how that goes with Ocado and Next on stage next week.

Brexit headline risk keeps pressure on GBPUSD

In FX, DXY ran out of gas at 93.38 as it tries to make another stab at the top of the descending wedge. GBPUSD tried three times to break below 1.2770 today but the level has just about held for now – sterling remains exposed to Brexit headline risks and bulls may be thin on the ground.

Post fix it looks pretty meek and liable to further downside into the weekend with UK-EU trade talks next week in focus. The current consolidation range looks pretty bearish and flaggy but we should always caution that sellers can get exhausted into the weekend just much as buyers can and there may be some profits being taken.

Sterling stabilises after Brexit furore, equities steady

Sterling stabilised after testing new six-week lows yesterday following the testy exchanges around the internal market bill, but the pound remains highly exposed to negative news around Brexit talks.

The EU Commission said the bill has damaged trust and would, if adopted, represent a serious breach of the withdrawal agreement and of international law. The British position remains resolute. The UK government legal opinion is that it remains a sovereign matter of UK domestic law.

This is serious brinkmanship, and trade talks appear close to collapse. Moreover, it is opposed by the devolved regimes in Scotland and Wales – if it passes and there is no deal, the relationship between Westminster and Holyrood will be close to breaking point and it could accelerate and heighten demands for Scottish independence.

The EU wants the offending bill pulled by the end of the month or they may launch legal action – but stopped short of saying they will walk away from the trade talks. The EU doesn’t want to be the first to walk away. Nevertheless, there has been a material escalation of no-deal risks, which was reflected in the pound’s price action yesterday.

The clock is ticking and whilst we continue to stress that a deal will always look further away than it is due to the nature of the posturing and public statements, the move on the internal market bill comes somewhat out of left-field (although it was actually reported back in Feb that the govt was working on it) and it does not pertain to the talks themselves.

We should also note that it is not guaranteed to pass both British chambers in its current form. Europe’s finance ministers are gathering today so expect a lot of headlines criticising the British – plus ca change. The good news is there is UK-Japan trade deal ‘in principle’ – hopefully that means cheaper wagu steak.

Euro up after ECB meeting, UK GDP disappoints

GBPUSD dropped under 1.28 but has found some support at this level and pared back losses a touch. Against the euro, the pound plunged to its weakest since March, as the single currency also found bid after the European Central Bank sounded a bit more optimistic on the economy and a little less dovish than the market had thought.

The ECB indicated it would not overreact to the appreciation of the euro, which was a green light for the currency to rally. ECB sources suggested they don’t think the euro is overvalued and don’t want to start a currency war – let’s wait and see what happens when 1.20 gets tested again.

Meanwhile, Britain’s economy faces even greater uncertainty from Brexit as it tries to rebuild in the wake of the pandemic. GDP rose 6.6% in July, but this was short of expectations and still well below pre-pandemic levels. All areas of manufacturing, particularly distillers and car makers, saw improvements, the ONS said without a hint of irony.

In July, monthly GDP was 11.7% lower than the pre-pandemic levels seen in February 2020.

The good news is that because of the way the UK measures education in GDP numbers, means things should pick up as the number of pupils returning to school rises. It also means the decline in GDP might not be so bad compared with peers as it looks.

Among the service sector, accommodation & food services remain worst hit, but we know it got a big – albeit temporary – boost in August from the Eat Out scheme.

Impasse over US stimulus continues

European markets were flat on Friday after US markets pulled back on Thursday, declining for the fourth day in five, with the Nasdaq down another 2% and the and the S&P 500 falling 1.75% on the back of the previous session’s rally.

The resumption of the downtrend came as Senate Republicans failed to pass their $500bn stimulus package, with Democrats complaining it does not go far enough. The impasse has doused hopes Congress can agree a package in the near-term and could give a tailwind to bears who have the bit between their teeth.  US futures are higher.

Concerns about the US economy remain. US jobless claims just aren’t heading in the right direction. The total number of people claiming benefits in all programs for the week ending August 22 was 29,605,064, an increase of 380,379 from the previous week. In the week to Sept 5th initial claims hit 884,000, unchanged from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 881,000 to 884,000. US CPI numbers out later today are the main eco event to watch, but the furore over the internal market bill is not going away.

Moody music around Brexit sends sterling lower

Sterling took  a bit of a kicking as the mood music around this week’s Brexit talks took a decided turn for the worse. The EU came out with some pretty stern words for the British government over its internal markets bill. Less Ode to Joy and more Siegfried’s Death and Funeral March.

The EU Commission has come out fighting, saying the bill would, if adopted, represent a serious breach of the withdrawal agreement (perhaps) and of international law (more dubious, since the EU cannot hold any sway or sovereignty over UK domestic markets, laws or affairs after the exit from the EU).

Anyway, the British position (on paper at least) remains resolute. The UK government legal opinion is that it remains a sovereign matter of UK domestic law, which of course, it is, regardless of what the EU may think.

Brexit talks under threat as EU warns UK has ‘seriously damaged trust’

The EC called on Britain to ditch the problem elements of the bill by the end of the month and warned that the UK has ‘seriously damaged trust between the EU and the UK’, adding that ‘it is now up to the UK government to re-establish that trust’.

This is real brinkmanship. It is one of three things: it is either a cynical masterstroke in negotiating a deal. Two, it is a cynical move but a miscalculation on the British side, as it may fatally undermine the good faith basis discussions. Or three, it is simply a genuine good faith step based on the British desire to main the integrity of its own internal market, just as much as the EU insists on maintaining its own single market.

Either way the language and tone coming out of everything today would suggest a material increase in no deal risks – more no doubt to follow later this afternoon.

Pound sinks on heightened no-deal risks

GBPUSD sank to fresh six-week lows under 1.2860 with the road to 1.280 clear after breaching the 50-day line, which had offered the support yesterday. EURGBP surged to its strongest in 6 months above 0.92, boosted as a hawkish-sounding ECB put a firm under the EUR.

The euro was sent spiking against the dollar before easing back a touch after the ECB left rates unchanged and indicate it was all very pleased with itself and doesn’t think it needs to do a lot more. Christine Lagarde seemed far too relaxed about the appreciation in the euro, which helped send the currency back up to 1.19.

All in all she did beat a dovish drum and seems to have got her communication rather muddled, again. But after this spike, a bit of dollar bid came back as risk assets soured following the US open.

Stocks slip after Wall St bounce (bull trap?), FX markets tune into Brexit and ECB

Fear casts a long shadow. If the virus doesn’t get you, the fear might. It’s almost a trope in economic and trading circles: it’s not the virus causing the damage to the economy and businesses, but the twin enemies of a chaotic government response and worst of all, fear.

Fear is what gets you in the end. Fear is what cripples the recovery, be that fear of the virus (I won’t go out) or fear of arbitrary knee jerk responses (why bother booking a holiday abroad). Fear of tax raids is another we might add for many investors looking at how public policy may affect their returns.

Dunelm warns over Christmas lockdowns, IAG announces rights issue

There is a fear stalking some companies. Dunelm this morning warned off a ‘severe but plausible’ scenario in which there are further lockdowns over Christmas. Sales might not recovery fully until 2023, management worry.

Meanwhile IAG has warned demand has eased and now expects capacity to decline this year more than previously thought. Available seat kilometres are forecast to drop by 63% in 2020 and still be 27% below 2019 levels in 2021. Previously it had forecast declines of 59% and 24% respectively. The forecasts came as IAG announced a €2.75bn discounted rights issue to strengthen its balance sheet.

Even Morrison’s, which has seen sales surge, is nursing a drop in profits because the new order means more of the lower margin online business is required.

Names like Azhag the Slaughterer and Gorbad Ironclaw are designed to strike fear into people’s hearts, but investors in Games Workshop have had less reason to be afraid than many. Today’s trading update shows continued strong progress despite the pandemic – indeed staying indoors for long stretches is something their customers are not afraid of.

Shares jumped over 10% after the company reported a very strong three months to August 30th, with sales up to £90m from £78m a year ago. Online growth has been strong. It also declared a dividend of 50p. Peel Hunt raised its price target on the stock.

Global equities rebounded – a classic bull trap?

Yesterday saw a big risk rally as global equities recovered from a 3-day sell-off led by US tech shares. Wall Street – equity markets bounced strongly. The Nasdaq added 2.7%, while the S&P 500 was up 2%. The Nasdaq held its 50-day moving average, with this level offering the major support for the rally. The S&P 500 ran into resistance at the 21-day line. There was some selling into the close though, which makes you wonder if it’s a classic bull trap before the next swing lower.

Vix futures (Sep) broke the rising trend line to trade at 28.50, having taken a 37 handle last Friday. The FTSE 100 climbed over 1.3% to recover the 6,000 level, while the DAX added 2%.

Europe soft as markets await ECB decision

European stock markets turned lower this morning as investors look ahead to the ECB meeting today. The meeting comes amid a sharp rally for the euro that has left policymakers concerned. The line in the sand for the central bank was 1.20 on EURUSD – a level that prompted chief economist Philip Lane to comment that “the euro-dollar rate does matter”. Traders should pay attention to any nod to currency worries from Christine Lagarde.

Whilst the consensus is that the ECB will take no further policy action, policymakers may choose to act, albeit any action at all would be around the PEPP programme rather than slicing interest rates lower. As noted earlier this week, the sharp decline in inflation could force the ECB to take swifter action than the market is anticipating. Eurozone inflation turned negative in August, declining to –0.2% from +0.4% in July.

Sources yesterday indicated the ECB is more confident in its economic projections – it was not entirely clear whether they meant they are more confident that they are right about the , or more confident they will improve.

However, even here the ECB probably doesn’t need to push its PEPP envelope, given only €500bn has been used out of €1.35bn available. I think Christine Lagarde may seek talk up this being a target, rather than a ceiling.

In summary, on the balance of probabilities the ECB will not make any monetary policy changes but will lean hard on jawboning the euro lower and talking up the unused room in the PEPP programme and that it will do whatever it takes to support the recovery and stand ready to expand it if required. EURUSD trades at 1.1820 in a steady pattern ahead of the meeting.

Pound up but Brexit remains key risk

The pound rebounded yesterday afternoon and held gains after the EU said it would not kybosh talks because of the U.K. threat to rip up the withdrawal bill – the internal market Bill. This removed the immediate risk of a collapse in trade talks, which appears to have driven the aggressive move lower in the morning with cable hitting a six-week low. This sent cable hard back to 1.30 in a sharp risk reversal that many newly minted shorts firmly on the wrong side.

But we should caution that sterling remains very exposed to further negative headlines and risks appear still skewed to the downside for the time being and we can only say that sharp moves lower – in the region of one big figure – are to be expected. The EU this morning is said to be considering legal action against the UK over the bill. GBPUSD just traded a little under 1.30 again as morning trading got going in London, possibly with this news weighing on sentiment – again highlighting the headline risk.

Today sees the talks wrap with the usual order of service involving the two sides giving separate press conferences. The focus on the EU side will be to what extent the internal market build has undermined trust.  Remember a deal will always look a lot more distant than it may be in reality.

US jobless claims numbers are also due later. These have become a useful barometer for the US economic recovery and tend to show that the momentum from the initial post-lockdown snapback is waning.

Last week, the initial jobs claims improved but the methodology changed somewhat and the only stat we really cared about was that the total number of people claiming benefits in all programs for the week ending August 15th was 29,224,546, an increase of 2,195,835 from the previous week.

Pound at 6-week low, European stocks stabilise but risk sentiment fragile

Tech stocks bled heavily again for a third straight day as trading resumed on Wall Street following the Labor Day weekend. Tesla slumped a whopping 21% to notch its worst day ever. The other major tech giants also dropped heavily as the Nasdaq fell 4% and entered correction territory – down 10% from its recent peak.

Whilst this began as more of a technical correction within tech following the astonishing ramp in August than a broad risk-off move, it is nonetheless bleeding into the broader market and dragged down the majority of stocks. US benchmark yields have retreated and oil prices have rolled over.

SPX not far behind after Nasdaq enters correction territory

There was some rotation going on – Disney, Nike, McDonald’s, Ford and GM rose – but the S&P 500 still declined almost 3% and is not so far off correction territory itself. On the whole there is a sense that this selloff represents that sentiment has become too exuberant and needed to correct.

We may expect the US market now to chop in W-pattern over the coming months and follow the path taken by European equities since June with the loss of momentum in the economic recovery and US election risks likely to become more visible in equity markets.

Asian equities fell with the weak US handover. European stocks opened a little bit higher in early trade but risk sentiment appears very fragile. The FTSE 100 is enjoying the pound’s distress with heavyweight dollar-earners like BP, Shell, Unilever and British American Tobacco among the best risers.

In dollar terms the market is flat. The index got a confidence boost as Barclays raised their call on UK equities to ‘market-weight’ from ‘underweight’.

Increase in coronavirus cases weighs on recovery outlook

Nevertheless, investors are becoming worried again about rising Covid cases across many developed markets which threaten the trajectory of the recovery and may well weigh on demand in a number of sectors.

The evidence is evident in a couple of markets. Oil prices have rolled over with WTI dropping under $37 to hit its weakest since the middle of June. Another tell that this tech-led selloff is more than just a simple technical correction are bond yields.

US 10-year Treasury yields logged their biggest drop in a month, sliding from 0.72% Friday to 0.682%. Despite the move in yields gold prices remain resolutely stuck to the $1930 anchor having tested $1906 and the 50-day SMA yesterday.

There is also some negative headlines around work on a vaccine which may weigh on risk a touch, or at least provide algos with a sell signal. AstraZeneca shares fell after it was forced to pause clinical trials of its Covid-19 vaccine candidate after a participant in the study was taken ill.

Such are the problems with pinning hopes on a vaccine for a return to normal to be possible. The worry is that while we have all kind of assumed that one company will come up with vaccine later this year, it’s not going to be plain sailing.

Tesla tumbles after S&P 500 snub

Tesla shares got well and truly smoked after it was not added to the S&P 500, to some surprise. Tesla stock hadn’t traded below its 50 day average price since April 13 and closed the day at this level at $330 – this level needs to hold or we could see further declines for the stock.

The market was surprised by Tesla not being included in the index. At the time, we talked a lot about how possible inclusion in the S&P 500 was a big driver of the stock’s rally earlier in the year and therefore being snubbed will force some funds to rethink whether they need to hold such a high beta stock if it’s not part of the index.

Pound sinks on Brexit worries, strong dollar

In FX markets, sterling is finding the going very tough, sinking to a 6-week low with the dollar catching a bid and Brexit risks weighing. DXY has advanced to clear 93.50 and test the top of the descending wedge, while EURUSD dropped further under 1.18 ahead of the ECB meeting which might be a lot more dovish than the market thinks.

This is not a pure dollar move by any means – the pound was also at its weakest since the end of July against the euro, too. For cable this has meant the build-up of downside pressure has blown out the stops at 1.30 and GBPUSD is running south with not a lot of support until 1.28.

Brexit risks are a major factor – the UK government admitted it will break international law in order to fix the withdrawal agreement should there be no deal by October 15th. Talks continue today between the UK and the EU and there are clear headline risks as traders see a higher chance of no deal emerging.

However, we should caution that a deal will likely emerge at the last moment after considerable brinkmanship from both sides that makes it seem as though a deal is impossible. Nevertheless, with still 5 weeks to go before the deadline imposed by the British government, there may be a very rough ride ahead for the pound.

Chart: Stops are out as GBPUSD trades below 50-day SMA

Chart: Having pushed clear of the 21-day SMA the dollar tests top of the descending wedge, 50-day SMA above

Royal Mail shares pop, equity markets seek direction from Wall Street

Equity markets are attempting to stabilise after the tech-led sell-off at the end of last week, but the lack of direction from the US on Monday means we are waiting on the Wall Street cash equity open to get a true feel for sentiment. European bourses traded a little lower on Tuesday morning after a strong bump up on Monday.

US futures are a little bit positive, but the Nasdaq was weaker, pointing to ongoing concerns in the tech sector. We need to see whether yesterday’s European rally was something of a free pass thanks to the US holiday and whether there is another tech volatility bleed into the broader market.

Rising case numbers hamper recovery prospects

Worries about rising case numbers are once again an area of concern. Whilst there is not any appetite for a general lockdown, if cases trend higher we can probably assume at least three things: local restrictions in hotspots, a choppier recovery nationally as a result and the ‘fear factor’ back in play limiting the amount people are willing to go out and about.

Economic indicators seem to be pointing to a slow, uneven recovery and the speed at which things initially bounced back in the summer is not sustainable. There is a loss of momentum which may call for additional central bank and fiscal stimulus.

WTI retreats – further downside pressure ahead as demand outlook weakens?

A choppier economic recovery globally – the W-shape – is not good for oil prices. Saudi Arabia’s decision to discount remains the main driver of sentiment as WTI retreated back under $39, whilst Donald Trump’s comments about ‘decoupling’ from China is another weight.

Whilst it may be too early to call the start of a new trend lower, my inclination is that demand will not come back as quickly as expected and this will force prices lower over the autumn, which may force OPEC+ into further action.

EasyJet capacity down dramatically, Royal Mail pop on parcel surge

On that note, the capricious quarantine regime makes planning travel tricky enough for us punters, so imagine trying to run an airline in this world. EasyJet says the constantly evolving government restrictions across Europe and quarantine measures in the UK is negatively affecting customer confidence to make travel plans.

In other words, demand is not as good as expected, and management now expect to fly slightly less than the 40% of planned capacity for Q4 2020 which was highlighted at the Q3 trading update. There is no return to normal when there are constantly changing, arbitrary restrictions on our movement. The longer this persists the slower the recovery for airlines and the great number of jobs may be lost. EasyJet shares fell 4%.

One thing is for sure – the parcel business is booming. Royal Mail reported a massive surge in parcel volumes, whilst DS Smith, which makes the cardboard boxes that clog up our recycling bins, says it’s enjoying positive year-on-year growth again. Shares in RMG rose 14%, whilst SMDS was up over 5% on the open.

Royal Mail delivered 177m more packages in the five months to the end of August compared to last year, as parcel volumes rose 34%, with revenues up 33.1% year on year. Addressed letter volumes were down 28% as it delivered 1.1 billion fewer letters. Total revenue was up £139 million but Royal Mail is still set for a significant loss and it warns it cannot become profitable without substantial business change, which is management speak for more job cuts and more automation.

Royal Mail is not fit for the job, but management knows what medicine is required and that is needs administering quickly: ‘Currently, too many parcels are sorted by hand and we are failing to adapt our business to fundamentally lower letter volumes and are holding on to outdated working practices and a delivery structure that no longer meets customer needs.’

Brexit headlines keep pressure on Sterling

Sterling is under pressure on some Brexit-related headlines and is exposed to a further onslaught of negative news as round 8 of the formal negotiations gets underway. Boris Johnson says the withdrawal agreement never made sense and is drawing up legislation to bin parts of it should there be no deal on the table by October 15th.

David Frost and Michel Barnier, the top negotiators on the UK and EU side respectively, have both said the other side needs to get real. Monday’s foreplay got both parties a bit hot under the collar, but the main event starts today.

GBPUSD retreated to 1.3125 this morning to test the weekly multi-year descending trend line. Double rollover on the MACD as occurred in November indicates bearish momentum may build. The euro remains bottled up at the 1.18 level with the ECB meeting ahead on Thursday.

The consensus remains firmly against the USD but it’s notched its highest close above its 21-day moving average since July and the crowded short dollar trade is at risk of reversals. An ECB that could surprise with additional easing this week is another risk to the anti-dollar consensus.

Primark sales recovering, sterling eyes Brexit talks

Is there a better guide to the health of the high street than Primark? The cheap-as-chips clothing jumble sale is about as good a barometer as any for what’s happening, with Next going increasingly online and M&S not what it once was in clothing and more of a grocer than ever. Primark also doesn’t do online so we get an unmuddied view.

So, it’s good news that AB Foods reports Primark sales have bounced back strongly since reopening. Sales to the year-end since reopening are due to hit £2bn, but in the UK sales are still likely to be down 12% from last year on a like-for-like basis. Shopping centre and regional high street stores are trading broadly in line with last year.

Large destination city centre stores, which rely on tourism and commuters, have seen a significant decline in footfall. Exclude the big 4 city centre stores and the LFLs are only -5%. Perhaps there is life in the British high street after all? A lot of this will be pent-up demand, but Primark’s low-pricing model makes it very resistant to cyclical downtrends.

ABF shares rose 4% at the open before paring gains to trade around 2% higher.

European stocks move higher, US markets shut

Stocks in Europe were broadly higher on Monday after a pullback at the end of last week seemed to run out of steam. US markets are shut for Labor Day, which will keep volumes thin. The FTSE 100 notched its weakest close since May on Friday, a whisker under 5,800. Early trade on Monday took the index back to the 38.2% retracement at 5850 and we are looking for this level to hold for the market to build any upside momentum.

Tech shares led the worst two-day decline for US stocks in some time, but the bulls fought back late in the day on Friday. The S&P 500 closed down 0.8% at 3,426 but this was some 75 points above its lows. Futures show weakness though at 3,400 on our indicative cash market.

Vix futures (Sep) have come down sharply from the highs hit last week in the depths of the sell-off, but are holding the rising trendline and the October contract remains solidly in contango implying election risk remains a problem.

Is the European economic rebound losing steam?

On the data front, Chinese exports rose a healthy 9.5% in August as its trading partners reopened their economies and pent-up demand for goods fed into the figures. However, imports declined 2.1%, indicating softer domestic demand.

Meanwhile German industrial production rose in August but at a much slower pace than July. Output climbed by just 1.2%, short of the 4.7% expected and the +9.3% recorded in the prior months. There are clearly signs that the bounce back in the Eurozone is running out steam – lots for the European Central Bank to consider when it meets this week.

GBPUSD trades above 1.32 despite Brexit focus

Brexit talks also resume this week (The Week Ahead: Brexit talks resume, ECB frets over exchange rate contains a full preview). Of course, we remain a long way from getting a deal done – at least if the pessimism from Michel Barnier is to be believed.

A lot of the chatter and commentary is very downbeat. But this should be expected – the nature of the brinkmanship means a deal always seems further away than it may be in reality. News that the UK is drawing up legislation to override the withdrawal agreement’s requirements for new Northern Ireland customs arrangements is likely to set a fire under the EU.

To me this looks like the Johnson government’s brinkmanship designed to show they mean it when they say that no-deal is an option. Expect negative headlines to weigh on sterling; although this morning it’s put in a decent opening trade, with GBPUSD finding bid north of 1.32. However, the near term downtrend remains in force unless bulls can regain the rising trend line at 1.3250 and push clear of Friday’s swing high at 1.33190.

Crude prices continued to slide after Aramco said it would cut prices in October as the pandemic keeps a lid on demand. WTI (Oct) declined towards $38.56 before paring losses to hold the $39 handle after a letter on Saturday said Aramco would cut its US-bound crude by 50-70 cents, with pricing for Asia discounted by 90 cents to $1.50. Gold remains a very narrow range at $1930.

Adelanto semanal: reanudación de las negociaciones del brexit; el BCE se centra en el tipo de cambio

Esta semana se retoman las negociaciones en torno al brexit en lo que supondrá otra ronda de tiras y aflojas que, a día de hoy, apenas ha dado frutos. ¿Conseguirán ambas partes salir de este impasse o harán mella los últimos acontecimientos en la libra esterlina? Entretanto, el Banco Central Europeo se reúne tras un considerable repunte del euro, que ha inquietado a los legisladores.

Negociaciones del brexit

Se prevé que esta semana comience la siguiente ronda formal de negociaciones entre la UE y el Reino Unido en Londres, e introducirá un riesgo eventual tanto para los cruces del GBP como para el FTSE por implicación. Los ánimos subyacentes no son muy optimistas. La última ronda de negociaciones, que tuvo lugar en agosto, concluyó sin apenas avances.

Posteriormente, Michel Barnier, el negociador principal de la UE, afirmó que parece «improbable» alcanzar un acuerdo y mostró su preocupación ante la situación. Su homólogo británico, David Frost, declaró que las negociaciones eran útiles pero que se habían hecho pocos avances.

Las charlas informales de la semana pasada también resultaron infructuosas, puesto que Barnier confirmó que se encontraba «preocupado y decepcionado» ante la postura británica en las negociaciones.

El grueso de las negociaciones se vertebra en torno a lidiar con la incertidumbre de la competencia relativa a la soberanía (Reino Unido) y la integridad del mercado único (UE). Ambas partes deben hacer compromisos filosóficos antes entrar en compromisos prácticos. Empiezo a creer que este será un importante escollo a la hora de alcanzar un importante acuerdo integral.

Reunión del BCE

El Banco Central Europeo (BCE) se reúne con un euro en acusado repunte como telón de fondo, algo que suscitado la preocupación de los legisladores. Aparentemente, 1,20 era la línea roja del banco central, un nivel que hizo que el economista jefe del organismo, Philip Lane, comentara que, aunque el BCE no tiene en cuenta el tipo de cambio, «el tipo euro-dólar sí es importante».

Este supuso un intento del BCE de intervenir en el repunte, ya que un euro más fuerte dificultaría un aumento de la inflación, lo que mermaría el crecimiento. Lane simplemente hizo saber al mercado que el tipo de cambio sí que importa. Lo último que necesitamos en este momento es una guerra de divisas, pero parece que el BCE está a punto de declararla. Quedamos a la espera de la valoración de Christine Lagarde al respecto.

Mientras tanto, también deberíamos estar atentos a si el BCE sigue la estela de la Reserva Federal (Fed) y deja entrever su intención de no dejar que la inflación (en caso de que llegara a materializarse) se interponga en el camino de la recuperación.

La gran pregunta gira en torno a si el BCE pugna o no por mantener un doble mandato similar al de la Fed. De hecho, ya ostenta un mandato más amplio: además de su principal objetivo de respaldar la estabilidad de los precios, tiene la misión de apoyar las «políticas económicas generales» de la UE. Si no es este, ¿qué otro mandato podría darle vía libre para respaldar el empleo?

En Jackson Hole, la Fed anunció un cambio de política que repercutirá en gran medida en las expectativas en torno a los tipos y a la inflación. El organismo estadounidense ha adoptado un enfoque más racional. En lugar de declarar que los resultados económicos deben adaptarse a sus modelos —algo que siempre ha sido una mera valoración—, dejará que los resultados sean los que guíen la política.

En opinión de algunos, esto supondría un paso hacia la completa adopción de la TMM, aun si Powell se ha mostrado reacio a seguir esta postura en el pasado. La cuestión es que la crisis ha lanzado a la TMM del seno de la teoría económica a la práctica sin que realmente se haya sometido a debate. Powell se ha adscrito a un principio fundamental de la TMM: ¿por qué el precio a pagar para conseguir una inflación baja debe ser dejar a millones de personas sin perspectivas laborales y en paro?

Considero que el BCE seguirá este derrotero y que su reunión se antojará muy interesante.

Datos económicos fundamentales

Además de los acontecimientos anteriores, lo primero que debemos tener en cuenta es que, con motivo del día del trabajo en EE. UU., el lunes será festivo por lo que los mercados al contado permanecerán cerrados. Ese mismo día, Halifax publicará su índice de precios de la vivienda británico, justo antes del informe Sentix relativo a la confianza de los inversores de la zona del euro.

El martes, estaremos atentos al informe de confianza empresarial del NAB para Australia, así como de los datos del gasto y del PIB japoneses. El miércoles, conoceremos la decisión del Banco de Canadá relativa a los tipos de interés, así como los pedidos preliminares de máquinas-herramienta de Japón, un interesante indicador avanzado de la demanda. Además de la reunión del BCE, el jueves verán la luz las cifras de la inflación del índice PPI y los inventarios de crudo semanales. Por último, el viernes se despide la semana laboral con los datos del PIB británico, los de la inflación del IPC estadounidense y darán comienzo las reuniones del Eurogrupo de los ministros de economía europeos.

Informes de resultados fundamentales

Esta semana, entre los informes de resultados de las principales empresas, encontramos Lululemon, Oracle, Richemont y Slack. No obstante, la atención puede que se centre principalmente en Peloton, una de las grandes beneficiadas de la Covid cuyas acciones han repuntado en las últimas semanas hasta alcanzar cotas históricas.

La semana pasada, JPMorgan aumentó su precio objetivo de 58 a 105 dólares e incluyó a la empresa en su lista de selección de valores principales.

En palabras del analista Doug Anmuth, «En nuestra opinión, el principal reto a corto plazo de Peloton es mantener la elevada demanda, con unos tiempos de unas 6 a 7 semanas de media desde el pedido de bicicletas hasta su entrega en las 20 principales áreas de mercado designadas estadounidenses, según constatamos el 1 de septiembre».

En la plataforma, encontrará un completo calendario económico y de acontecimientos corporativos.

Lo más destacado en XRay esta semana

Descubra toda la programación de formación y los análisis del mercado financiero.

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FX Strategy: Cable drops after stalled Brexit talks get nowhere

Sterling fell back to session lows with a view to the week lows being tested after Brexit talks seem to have gone nowhere. The two sides are still too far apart. Specifically, the EU wants to agree on fisheries and state aid rules before making progress on anything else. EU demands for a level playing field are non-negotiable if there is to be more than a low-level agreement.

Michel Barnier was not upbeat and whilst reiterating that a deal is possible, he said an agreement seems ‘unlikely’ and is concerned about the state of play. David Frost, his British counterpart, said talks were useful but little progress had been made.

The next round of talks take place the week commencing September 7th. Whilst the market was not positioned for a breakthrough this week, it’s getting closer and closer to the crunch point – the longer we go without a deal the more pressure comes onto the pound.

The two sides are still a long way from agreement on key terms. We should note that Barnier as the EU mouthpiece will always be pessimistic right up to the moment a deal is done. Nevertheless, on certain fundamental principles it looks as though the chasm is too great to bridge.

Grappling with the competing concerns of sovereignty (UK) and integrity of the single market (EU) goes to the very heart of the talks. Both sides need to make philosophical compromises before the practical compromises can follow. This is where I start to become concerned about a big, comprehensive deal being done.

Meanwhile EURUSD has dropped under 1.18 after a weak round of PMIs raised fears about the pace of recovery in the Eurozone and traders are starting to show concern the recent ramp in EUR may be overdone. Net long positioning in EUR has become very stretched and the EURUSD is susceptible to a squeeze lower.

Chart: Weekly GBPUSD – trying to break descending trend line. A close under here opens path back to the roaring 20s. We’ve seen a lot more volatility in GBPUSD this week with larger daily moves than generally seen of late.

Chart: Daily GBPUSD – Competing forces at work. Last week’s MACD bearish crossover still points to lost momentum and near-term weakness despite the throwover this week. Golden cross acted as a bullish confirmation of the thrust higher this week. Bollinger starting to point to break out, with downside in favour following today’s Brexit briefing and generally risk-off tone to the end of the week favouring USD.

Equity markets eye European Covid count, US postal ballots become electoral flash point

Dog days on animal farm: it’s a very quiet start to the session with European indices trading either side of the flatline in the first hour as traders eye the rise in coronavirus cases across the continent. Basic resources, healthcare and tech were higher, offsetting broad weakness in the rest of the market with travel stocks leading the losses.

Europe’s rising Covid-19 cases cause investor alarm

As noted in the week ahead, the number of new Covid-19 cases across Europe is the number one thing to watch in the coming days as it has the potential to send nascent economic recovery into reverse. Germany has extended travel warnings to nearly all of Spain, which while making it easier to grab a sun lounger is taking the shine off travel and leisure stocks again this morning. IAG and TUI both fell another 3-4%, with EasyJet down more than 2%.

A sharp rise in cases in Spain, France and Germany will make traders nervous about new lockdowns and ensure that local equity markets remain volatile. Nevertheless, basic resources stocks registered strong gains in early trade to offset much of the losses elsewhere.

US stocks tried many times but failed last week to notch a record intraday high, falling shy of the Feb 19th peak at 3,393.52 several times. The problem is that this is not a simple bull market, with the split between growth and value plain to see. All stock sectors are equal, but some are more equal than others.

US data mixed, stimulus talks going nowhere fast

Last week, US retail sales were soft, although ex-autos the number was better than expected. Unemployment claims fell below 1m for the first time. However a stimulus bill has not been discussed by Congress and with the end of the $600-a-week stimulus cheques, there may be a tougher time ahead for consumers and companies dependent on them – 70% of the US economy is consumer driven, so the loss of this additional income will be hard felt.

Unless a stimulus package is agreed, stock markets may need to take corrective action. Even if bears don’t take control, a pullback from the all-time high to consolidate gains before bulls mount a fresh drive higher should also be considered.

Asia moves higher despite cancelled US-China trade talks

Asian markets were broadly higher on Monday but shares in Tokyo fell 0.8% as figures showed Japan’s economy shrank by the most on record in the second quarter, declining 7.8%. This works out at -27.8% annualised, which makes it the sharpest downturn since 1980 when such records began. It’s also the third straight quarter of contraction. We also note that Tesla’s new registrations in China fell to 11,623 units in July, down from 15,529, which may indicate a slower rate of recovery in the world’s second largest economy.

US-China trade talks slated for Saturday did not happen with sources blaming scheduling conflicts and a desire to give China time to increase its purchase of US exports. Meanwhile, in Washington developments around the November election are starting to heat up. Speaker Nancy Pelosi has called on the House of Representatives from recess to vote on a bill to ‘protect’ the US Postal Service, accusing President Trump of a “campaign to sabotage the election”.

Election officials are worried about delays that could mean ballots are not counted – a huge amount of extra demand this year because of Covid-19. Donald Trump doesn’t trust mail-in voting and has previously said he would block additional funding for the USPS. In short, Covid-19 has created a vast amount of extra demand for postal ballots and the White House recognises these are more likely to be Democrat votes.

Meanwhile the Democrat convention gets underway on Monday and lasts until Thursday, marking the end of the phoney war and start of the campaign proper. Watch for a speech from Kamala Harris, the VP candidate, on Wednesday, with Joe Biden to speak on Thursday.

GBP/USD in focus as Brexit talks resume

Brexit talks resume this week and the European Commission fired the opening salvo in the exchange, with executive vice president Valdis Dombrovskis warning that the City will have to wait beyond the end of the year for equivalence. Talks between the UK and EU resume on Tuesday. Last week David Frost, the UK lead negotiator, said that a deal ‘can’ be reached in September, and that the UK was not interested in threatening the EU’s single market.

However he also reiterated that Britain would never compromise on the jurisdiction of the courts nor on fishing rights. There is significant headline risk for GBP this week as August rolls on. Nevertheless, hope springs eternal as far as sterling is concerned. GBPUSD was trading above 1.31 with the dollar offered across the board and the dollar index taking a 92 handle.

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