US Open – Brexit Deal Rally seems short-lived, Earnings, Oil, Gold, Bitcoin

It was not expected to happen today, but a Brexit deal got hammered out.  PM Boris Johnson got the job done and now he needs to survive the Parliamentary arithmetic.  Johnson needs 320 votes to get his deal through the House of Commons.  Johnson will have just under 259 votes in the bag as Conservatives are expected to vote for him, that number is however lower since Johnson expelled a few in September.  Johnson’s math has him needing 61 votes from a possible 85 and that will be a tall task as he is still seeing resistance from Northern Ireland’s DUP, the party that holds what many consider 10 critical votes. 

The Brexit news triggered a risk-on rally across all the asset classes, helping S&P 500 futures recapture the 3,000 level.  If voted through by Parliament on Saturday, this Brexit deal will remove a major geopolitical risk for the whole world.  A good chunk of the gains however were erased on news that the DUP still will not support Johnson’s Brexit deal. 

Earnings

The third day of earnings season saw Honeywell raise their guidance in what is a sign maybe the global industrial slowdown is showing signs of easing.  Consumer staples giant, Philip Morris delivered strong results that saw an earnings beat that topped the highest estimate.  Finishing up bank earnings, we saw strong results from Morgan Stanley. After yesterday’s close, IBM third quarter revenue miss sank shares, while Netflix delivered a robust performance internationally.  Netflix has been beaten down recently over rising competition concerns and shares were ripe for a short-covering. 

Oil

Oil prices are still below the lows that were made after yesterday’s API report that showed crude inventories jumped 10.5 million barrels.  The EIA report is expected to see a build of 2.5 million barrels, but if we see inventories match the API reading that would be the largest increase since February 2017. 

Oil initially benefited from the Brexit news but has since washed away those gains as skepticism grows that PM Johnson will be able to get enough votes in the House of Commons. 

Oil is still trying to form a solid base around the low $50s but if we see rising inventories and no geopolitical fireworks, we could see a brief test of the summer lows. 

Gold

Gold fell on the news PM Boris Johnson got a Brexit deal done with the EU, but that price action was short-lived.  Gold is seeing buyers emerge and it seems it is only a matter of time before we see another run towards the $1,500 an ounce level. 

With earnings starting to come in more mixed, the lack of fresh record high with US equities will likely see flows come back to oil. 

Bitcoin

Bitcoin traders are breathing a sigh of relief after the plummet below $8,000 seems temporary.  Today’s rise is significant as the past few days saw many investors join the bearish camp.  If Bitcoin can finish out the week above the noted $8,000 level we could finally see it consolidate back towards the $8,750 region. 

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