Why we are lower

Both Governors of Florida and Pennsylvania have issued some type of Stay at home mandate.Florida has been dragging her feet do to for political and Financial reasons but it appears that the growing number of cases have forced Governor to take these measures. Reports are saying that another wave of virus cases are showing up in a different province in China ,obviously if true this is not good.Gov Cuomo press conference again filled with Dread ,honesty and possibly disaster so Spoos naturally turned lower.

Livestock,Cattle and Hogs limit down as the Run up in supply these last few weeks is finding less and less takers.Talk of Slaughter plants running with less staff and now with States issuing lock down orders slaughterhouse might be processing less meat and thus backing up supply in feed yards. Boxed Beef prices collapsing these last 5 days as is Spot values for hogs

Trump says he will be meeting with oil Execs. to find solution for low oil prices

In Case you missed these Headlines

Headlines taken from News wires and Twitter Thanks to everyone for sharing!

  • China Concealed Extent of Virus Outbreak,
  •    TSA said 146,348 passengers went through a TSA checkpoint on Tuesday. That’s a 10-year low. For comparison, 2 million people were screened on the same day one year ago
  • United States EIA Crude Oil Stocks Change was reported at 13.834M in 27/Mar from 1.623M in the previous period. It was expected at 3.997M   
  •  Pence Says time frame for Virus Pandemic is June 1st  
  • Surgeon General Jerome Adams says he believes the federal government’s social distancing guidance will extend past the end of April
  • Stoxx 600 Sectors Year to date Autos -41%banks -42% tech?? only down 19%







CRB commodity Index

Below is the Traditional CRB commodity index made up of Futures priced Commodities.This is a weekly Chart and it is not pretty Dis- Inflation or deflation on the horizon being priced.Multi year lows

Now the next chart is the RIND CRB index made up of Spot prices of of raw Industrials it is better reflective of true supply and demand as actual users of Commodity dictate price action. Trend is down but no where near multi year lows as the Futures driven CRB. So industrial metals used more on production side of Economy whereas CRB is made up of all Consumer and producer commodities I will monitor as Futures driven CRB maybe more to do with negative Sentiment then actual Supply and Demand worries, we shall see.

ISM Headline Better then Expected??

Headline ISM 49.1 vs F/C of 44.5 a shocker for sure. Talk that one of the Components,Supplier delivery time, may have had an Out sized positive impact on Overall Index , regardless hard to believe in validity of Headline number. Commentary from ISM regarding Employment

Orders and employment at U.S. factories
contracted in March at the quickest pace in 11 years as
producers grappled with pandemic-related demand destruction,
Institute for Supply Management data showed Wednesday.
The purchasing managers group’s gauge of bookings tumbled
7.6 points to 42.2, the lowest since March 2009, while its
employment index slid to 43.8, the weakest since May of that
year. Readings less than 50 indicate shrinking activity

price paid or Inflation dipped to lowest level since 2016 .I will say that the Services sector has been hit a bit harder and we can see how hard in tomorrows non Manufacturing ISM. The problem with Economic releases is that if they are better then expected hard to believe and if Worse then Expected no suprise, thus very little reaction in markets when Numbers are released.

morning 4-1

News and Notes:

  • According to bespoke Investments March, The Most Volatile Month ever for SPX
  • UK Banks measured by the FTSE350 Bank index down for 5th day in row off 7.5% today as UK joins the EU in demanding banks stop the payment and stock Buybacks.
  • Reserve bank of India Announced another Stimulus Package, they cut rates 75bps last week
  • Dollar, Not good For Risk, Higher today by .6% Both CAD and AUD down over 1% Surprisingly JPY Unchanged vs Dollar but JPY stronger vs. Most G-10 Currencies
  • Italy Extended Lockdown till April 13th 
  • In U.S. Corona virus task Force Dr Brix and Dr Fauci both said that 100-200 k Deaths from Virus might be near the lower side of expectations. America bracing for a “painful” next couple of weeks (IFR)
  • No takers for the Feds Overnight Repo operation this are expected as Quarter end Month end passes. The Repo Operation are not where the problems lie as of Late Use of this facility has been decreasing daily.


 Risk OFF   as Quarter end Activity pension re balancing completed the true Sentiment of market shows through. Spoos -100 handles, NKY closed down 4.1% Cac -4% Dax -3.8% Bonds +3 handles, Bunds only +43 .Gold little changed.  Some top tier Economic Data today and Markey is waiting to see how ugly it is.ADP report was less then Bad then feared but markets believe worse is yet to come so little reaction from release. China PMI data overnight better than expected, but Focus Has moved away from China to the US and Europe.

Steps towards Normalcy

As vix Touches 50 long way from the 110 & 120 calls being in the money markets are taking the small steps back towards normal functionality.I like the volatility and chaos I like when markets are inefficient,oh well.Some metrics that indicate steps back towards normal markets:

First Cross currency basis swaps between JPY and USD the more negative the swap moves the more expensive it is to acquire dollars.This is is a smaller graph but you get the idea the swap spread is almost positive !indicating ample dollars available, whereas at the apex of Crisis the index was greater then -150 intra day.

This is the IBOXX Investment grade corp bond Index, a proxy for the IG corporate bond market.Quick eye ball test show this index has clawed back roughly half its losses

Now this one is a bit tougher for me to understand,but this is a Graph of the spread of 2 year cash notes linked to the futures complex and A cash bond that is not linked.It shows the strains or abnormalities in the Basis trade , spread spike out of its normal range but now has found it way back to pre crisis levels. this is from BBG
lastly the Spread between 2 year Overnight interest rate swaps minus 2 year treasury yields the higher the spread the more worries about Financial stress in markets and concern about counter party lending risk This is another BBG spread that has returned to pre crisis levels.

Stock Sell off

Once the daily press briefing From New York Gov Cuomo started Stocks started to give back Daily gains some of his comments:

Virus is more dangerous then expected Cases jump 14% OVERNIGHT

This ends when we get a face track test -kit

Unemployment hotline has 1.2 million calls in a week usually have 50K

Also UK Minister Gove with some sobering comments regarding virus right around same time Cuomo was speaking so a double dose of bad news.On the good news front, Italy reported a small uptick in Cases today they are at a 2 week low.

Today’s Economic data surprised to the upside but I don’t think we should believe it.Both Chicago PMI and Consumer Confidence was less bad then feared ,probably best to ignore it then read too much into it.San Francisco president Daly says that “U.S. likely already in recession,She expects things to get worse before they get better” uplifting

Below find the Morgan Stanley,G7 currency “vix” dormant for months but not for long