Primer: UK PM Johnson no-confidence vote at 18:00-20:00BST/13:00-15:00EDT today – Link Courtesy of my friends at NewsquawkOverviewUK PM Johnson is expected to survive the no-confidence vote, according to current betting odds, which gives him a 12-month pass from being subject to such proceedings again.
However, surviving the vote is not always enough; previous PMs, including Johnson’s predecessor, were out of office shortly after such a vote, despite attracting the support of a Conservative majority.
To recap, at least 54 Conservative MPs had to write to the 1922 Chair for a vote to take place. To remove Johnson, a majority of 180 Tory MPs is required from a secret ballot.
Voting on the ballot occurs between 18:00-20:00BST/13:00-15:00EDT today, votes will be immediately counted though the announcement time is TBC; but likely within an hour or so of voting concluding.
Majority in favour of Johnson

If Johnson secures the support of 180/359 or more Conservative MPs then he will remain as PM and is exempt from being subject to a formal no-confidence vote for a one-year period.
Note, it is theoretically possible for the 1922 Committee to change this rule, though the mechanics/feasibility of them doing so is unclear.However, precedent shows that PMs who survive confidence votes are sometimes irreparably weakened. With Johnson’s predecessor May, a prime example. Additionally, the divisions generated within the party – even though voting is via a secret ballot – can substantially complicate the intra-party politics, to the detriment of the existing cabinet/government.
As a side note, recent reports indicated that Johnson was mulling a cabinet reshuffle, following the May local elections, with indications that it would occur prior to the July 21st recess.
Majority against Johnson/he resigns

If Johnson does not secure the support of 180 or more Tory MPs, then he is no longer able to remain as leader of the party and by extension PM.
At this point, Johnson would essentially serve as a caretaker until a replacement is determined.
A process which commences with candidates putting their name(s) forwards, and requiring the backing of eight MPs to do so. Assuming there are more than two candidates, sequential rounds of voting occur with 5% of the party (18 MPs) initially needed to move forward, then 10% and so on.
Generally, during this stage, candidates will tactically drop out and give their endorsement to ‘rivals’ in exchange for a high-ranking Cabinet position, or similar.
Once the field whittles down to two candidates, an eventual winner is then determined by a postal ballot of all Conservative party members. A winner that then leads the Tory party and, by extension, becomes UK PM.
Note, any replacement would not be required to call a snap general election to cement their position, though they may be placed under pressure to do so; the next scheduled election is before December 2024.

The guys at Newsquawk, with the always awesome US Market OpenFull note: US Market Open: Risk-on with fresh catalysts thin and focused on APAC developments and UK politics

6
Things You Need to Know

 

European bourses are
bolstered in limited newsflow as participants recoup from post-NFP pressure
amid multiple China-related developments

US futures in-fitting with this performance and aided by the
incremental China COVID developments alongside a pick-up in the regions PMIs

GBP is bid, but off highs, going into the no-confidence vote for
PM Johnson between 18:00-20:00BST/13:00-15:00ET today

DXY downbeat as such, to the broad benefit of peers, but still
holding above a cluster of recent lows

Core debt is pressured, with Bund downside lifting EUR, though
BTPs outperform on FT source reports while the US curve flattens incrementally

Crude is contained with gains of circa. USD 1.00/bbl, caught between
Saudi lifting OSPs, El Sharara’s partial resumption and above China-related
factors

Worth flagging the odds on Boris Johnson still being PM when the Tory Party Conference starts (2nd of October) have increased since news of the Vote of No Confidence broke.

– Was 1.90s this AM, now 1.5s choice.A classic of the ‚Buy the rumour – Sell the fact‘ genre. 

I wonder how much of the £650k matched in this is Brady (the only fella that really knows what’s going on Re the vote etc)

As has become (nearly) traditional, when I’m on the ForexLive desk, I get my good friend and Nat Gas expert Andrea Paltry to give us a little report.So here you go…Henry Hub natural gas prices are currently trading up almost 30 cents with the most traded July ’22 contract (N) at $8.82 MMBTU. The entire forward curve is strongly up, with two different trends to stress (see the graph below): (1) the strong backwardation we have, if we consider all the Cal’22 (calendar’22) compared to the Cal’23. Indeed, April’ 23 trades at $5.64, with a huge ‘widow maker premium’ (March’23/April’23 spread of around $1.82; (2) the backwardation we have within the Cal’22, with July’22 contract currently trading over November (X), that is at $8.754

In the Henry Hub market, those conditions have not been present since the pre-shale era, with the prices skyrocketing each week passing (last update here, one month ago, we were $1.5 below the current price), and the Supply/Demand balance overall not changing a lot.

During last couple weeks, we had a US lower 48 production increase, up to reach year to date high readings around 96 bcf, but it seems like we are not able to keep these levels, since at the start of this week we are again 1 bcf below these highs. What’s impressive, though, is the demand side. Indeed, power burns last months reached ‘off the charts’ value for the period and, even last week, with peaks around 36 bcf, the weather adjusted reading was astonishing. If we keep this path, we can easily see well over 50 bcf/d power burns during the peak of summer demand. This pattern clearly shows the fact that the classic gas to coal switching is not a factor anymore, even at prices close to double digit.

Then, finally the exports. Indeed, last week we touched LNG exports record, at 13.6 bcf, before falling into the classic spring maintenance (right now we are below 12 bcf).This is important for several factors, but here I want to highlight 2 points: (1) if we keep an average of 13 bcf/d for the summer, this will have a huge impact on End of Season storage number; (2) the potential issue of TTF cap in Europe.

About the first point, even if last week EIA printed a relatively looser (and personally unexpected) injection of 90 bcf, the trajectory of storage in my model is not safe at all, pointing to a relatively dangerous level of 3.18 tcf EOS (with the market being comfortable around 3.6 tcf). Obviously, it’s pretty important the weather, and below we can see that during the weekend we gained some demand (3-6 cooling degrees, CCDs) in both most important models, GFS and Euro Ensembles, with a hot upper ridge building in South-Central in the 8-14 day period. Moreover, we need to carefully watch at the start of the hurricane season (see below as well the first tropical storm, Alex, not affecting Henry Hub market).

About the second point, it’s even more important for worldwide natural gas market. Indeed if we watch the charts below (the sources are NGI, EIA ICE and ACCC), LNG exports have a lot of implications, for Asia and Europe. On the one had, we can easily see the path of LNG exports for the next couple years (we will almost reach 20 bcf/d in 2025, more or less 1/5 of the overall US production). On the other hand, we see that for now there is an aggressive delivery to Europe, where TTF price trades around $27-28 MM BTU, compared to the ASIA JKM trading $4-5 below.Right now the spread TTF-JKM favors the former rather than the latter. What if Europe decides to put a cap on TTF? Let’s say at $13-14 MM BTU?….

Andrea Paltrinieri
Associate Professor of Banking and Finance, Università Cattolica del Sacro Cuore
Natgasweather and Energy Working analyst

Bitcoin rose 3.1%
over the past week, finishing near $30,000. Ethereum added 0.9%, while other
leading altcoins in the top 10 showed mixed dynamics, ranging from a 10.7%
decline (Solana) to a 23.2% rise (Cardano).

 

The new week is off
to a promising start. BTCUSD has added 4.6% in the last 24 hours, more than 4%
since the start of the day and is again testing the $31.0K mark. Cryptocurrency
investors were not spooked by Friday’s market decline, as key stock indices
were above the recent local lows and had been adding in recent hours.

 

The total
capitalisation of the crypto market, according to CoinMarketCap, rose 3.8% in
24 hours to $1.28 trillion, with the Bitcoin Dominance Index adding 0.2% over
the same period to Friday’s 46.5%. By Monday, the cryptocurrency fear and greed
index rose from 10 to 13 points. For about a month now, this indicator has been
steadily below 20 – in a state of extreme fear. While at current levels, BTCUSD
remains below the consolidation area at the lows of the middle of last year. It
is worth paying attention to the change in the trend seen in the weekly
candlesticks. Last week’s lows and highs were higher than the week before. The
intraday charts show that the price is being pushed up in the absence of
investors in the USA.

 

However, one must
make sure that this demand is global. Retail investors may try to promote the
start of the rise by feeding them an abundant supply. BTC was climbing to
three-week highs but lost almost all its gains by the end of the week. The
first cryptocurrency has been trading in a sideways range around the $30,000
level for more than three weeks. The bearish trend in the market has caused
long-term investors to capitulate. This factor signals that the price has
reached a multi-year bottom, according to CryptoQuant. Reserve Bank of India
Deputy Governor T. Rabi Sankar believes central banks‘ digital currencies could
completely displace private virtual currencies, including bitcoin.

 

May proved to be a
bad month for BTC and ETH miners. Bitcoin miners‘ earnings fell 21.9% for the
month, while miners of the second cryptocurrency fell 24.1%. The market will
draw its attention to The annual Consensus 2022 this week. This year’s Crypto
Industry Excellence Expo will be hosted in Austin, Texas, in June 9-12.

 

This article was written by FxPro’s Senior Market Analyst Alex
Kuptsikevich.