Spoos have a 7 handles range since 8:30 Cash open ,currently sitting sit 2 Ticks off the highs.Energy related companies the worst performers and utilities and real estate sector your best.Hmmmm..These sectors perform well when rate expectations move lower.BB telling us that “eurodollar calls richer then puts for first time since may” and “the 1m risk reversal went positive for first time in 5 months”.Less of a play for higher rates? or Month end adjustments? Rate hike probabilities for December little changed at 71% subsequent months also show little change .Dollar is higher today but stuck in the 98 handle.To really shake things up we need to see the dollar challenge the 100 handle until then just noise.Too much event risk on horizon to get excited about today.
This past weekend Europe “fell back” with her clock so european market will close an hour later then normal.
Oil at a 1 month low.CFTC data did show a reduction in Net Longs so some of weakness can be explained by long liquidation.Today is the last day to trade November Rbob and HO. Nat Gas continues to trade lower as weather forecast still are absent of any lasting cold weather.
10’s have an 8 tick range 30’s 13 ticks since option pits opened.
peso still trading higher so Clinton fall out over done?
Majority of Stock Indices lower overnight. All European Bourses are steady to lower. Most EM Indices closed lower as well. Bunds and treasuries steady to higher. We see some Weakness in Italy as 10 year Btps are lower resulting in 4 Bps move higher in yields due to latest polls showing majority of Voters will reject Prime Minister Renzi Referendum. Weak German Retail sales causing some concern in Europe. Latest US election poll show that new FBI investigation is having an impact on Clintons numbers as her lead is now 1 Point over trump according to ABC .Also 1/3 of likely voters said “rekindled scandal meant they probably wouldn’t back her”-Bloomberg. What is surprising is that The Mexican peso is higher by .4% this move is telling less concerns about FBI scandal, for now. Plenty of Event risk this week starting with BOJ and Australia Rate decision tonight. Both expected to leave rates unchanged. FOMC on Wednesday, Bank of England on Thursday, Payrolls Friday and Month End activity today. No one in a hurry to make any “Bets “today so thus sideways markets. South African Rand+2% as Charges against her Finance Minister will be dropped. Dollar +20, Euro -33 and Yen down 30 ticks. Japanese retail sales and Industrial Production missed expectations.
Oil is trading heavy, again as production cuts/freeze discussions are not going smoothly. Oil down .6% and trading at a 1 month low. Base metals are higher as Steel was +1.5%, and aluminum +1.9% in china. Same story as last week, Hope that Chinese demand picks up.
A few US economic Reports today maybe some focus on PCE core but for most part month end activities and Any Clinton headlines will drive the action.
FBI says it is reopening investigation into Clinton Email server,it may have found new pertinent information amongst emails. FBI cannot say how long it will take to determine if the information is relevant or not.Spoos ,peso and Dollar did not like the headlines. Spoos down 16 handles and peso down 1%.Suprisingly bonds didn’t care too much.This is a preview of what may happen on Election night.Oddds of Clinton victory have shrunk according to betting site Betfair
Just a few thoughts/reasons about soybean rally. Rolling out of November into January as First notice day is Monday.Continued strong export demand . This demand is so strong that it was mentioned as the main reason for the increase in US exports in the just released GDP report.Soymeal has been higher this week as well due to Unwinds of meal/Oil spreads .As soy meal goes so does beans.Also anytime soymeal makes a decent move some issue in South america has to be cited.Argentine weather may be issue for Soybean crop.Lastly prices traded above the 100 D MA for first time since July and this provided a little extra umphh to prices earlier this week.Soybeans +10% over last 2 weeks.
Just a reminder that next week we will see FOMC ,Bank of England,Bank of Japan and employment report.Today shaping up to be a low volatility sideways trade.
By Richard K Breslow
(Bloomberg) — It’s Friday and asset prices have spent the
week either on the move or raising questions, if not. Too bad
month-end doesn’t happen until Monday. It would have been a
home-run opportunity for the tech people. Because everyone
really should be following the charts. They’ve certainly been
more helpful than the commentary.
* Given the recent dominance of technical methodologies over
their analytical rivals, perhaps, if the Cleveland Indians
mascot does get banned, they might consider changing their
name to the Chartists. Which seems oddly fitting, if equally
controversial, given today’s populist mood
* If the markets are really in the process of reversing, or at
least meaningfully correcting, the long-term, big picture
trends we’ve experienced, keep track of overbought/oversold
indicators. They won’t work. And that will be a valuable
piece of information
* They won’t make it easy to get involved. It’s the definition
of a trend. Trends lead, not follow news
* An additional thing to consider is context. When you look at
short-term charts there are prices galore to be mindful of.
If you think this is merely a correction, they remain valid
for your strategy
* But when looking at long-term charts, you begin to be
reminded of just how far some of these things have come. And
how far and for long they can go without actually nullifying
the underlying thesis
* The sovereign yield back-up is on everyone’s radar. And
they’ve had very tradable, and not all that difficult to
capture, moves. But look at the absolute levels before
concluding that hawkish central banks have been priced in
* USD/JPY has retaken 105 for the first time since its end-
July smack-down. It could go to 115 before entirely negating
this down-move. Or it fails here and everyone says “I told
* Of course, if prices correct to true long-term support or
resistance, people will be extrapolating a move that will
never stop. If only someone would tell us not to sell when
we’re supposed to be buying
Economic data and Earnings driving the trade overnight. European Consumer confidence beat expectations, German States CPI were higher than last month and this should lead to a Firm read For the Country’s Number.UBS and RBS reported better than consensus earnings. UBS higher, RBS is trading lower after the release. European Stocks opened risk off then caught a bid after the Data and earnings release. Also helping the Risk on Bid was comments from ECB’s Couere who said”Unconventional policies remain necessary “European Stock markets are mixed. Denmark??! Her stock Market down 5% due to bad earnings. Speaking of bad Earnings Amazon reported some after the close yesterday. At one point stock down almost 6% as its forecast for holiday sales missed estimates. No worries though Spoos +4 handles and Nassy +10
The real driver of action this week higher bond yields. So far today Bunds little changed but they have had a nice range .The 2-10 Spread in Germany touched the widest levels since April 29th(market news).Italy also in the market sell both 5 and 10 year paper. Bunds did bounce after the Auction but trends is still down or for higher yields. Italy, Portugal and Spain show yields higher by at least 7Bps.A strong US GDP number today will only provide more impetus to sell bonds. WE may see some Month end activity today as well. Volume in US treasuries real good overnight as more and more focus/ conversation turns towards higher yields and lower bond prices. Something I have talked about all week. Currencies in a tight range overnight and stand mixed.
OPEC /Non Opec meeting this weekend in Vienna. Watch for tape bombs. Oil down 30 ticks. Nat gas continues to trade lower as No cold in sight. Nat Gas down some 16% in 7 trading days.
Above we have the Feds and ECB Favorite Inflation expectations metric,the 5y5y inflation swap(white FOMC, dotted=ECB).What it is supposed to predict is in 5 years what will Inflation look like 5 years after that , got it??Both Central bank chiefs will reference this metric in discussions. The trend is higher , moving left to right ever since this summer. More evidence that the Bull run in the long end is coming to a close and the steepning of the yield curve that Central banks want is starting.
- 30 year yields 2.59% Highest since early June
- 10 year yields 1.84% also highest since early june
Futures contracts on Both have traded to multi week lows as the pressure from the Sell in European bonds is too much to ignore.Current rate hike probabilities stands at 71.5 % little changed from yesterday.The move higher in Oil due to OPEC comments about cutting supply is also a negative for bond prices this morning.One day Sell off who cares,A 2 day sell off the beginning of a trend?
I ‘m curious to see how long Spoos can stop positive with sell off in Bonds?
2 day theme from Morgan Stanley:” Traders compounded supply pressures by adding to shorts and steepeners and reducing duration, as speculation about not as easy global monetary policy looking to next year and beyond also was picking up again.” Both DB and Barclays reported better than Expected earnings and this giving banks and risk a lift.UK GDP came out higher than expected and this has also caused Selling in the Gilts. Let’s think of this a second UK inflation expected and encouraged to move higher, Growth Not being impacted as severely as thought by Brexit yet. Growth and Inflation does make us Bullish Gilts does it now.10 year gilt Yield +9 Bps. And at highest level since June 23rd. Bund yields +6.4 Bps, France +5 Bps.,Spain and Italy +4 Bps. 30 year yields Buxl +8 Bps,France +7.5 Bps, and UK +5 Bps.Similar to yesterday outlook ,More sellers than buyers in the Fixed Income complex.
Other Stock news QUALCOMM is buying NXP semiconductors for $47 billion. Overwhelming majority of Companies that reported earnings this morning beat expectations. Yesterday tesla and Biogen beat.Spoos+7 handles but European Bourses are mixed due to lower bond prices.
Currencies in no hurry to do anything metals are enjoying a slight bid and oil is sideways. Yesterday’s hero Nat gas is up A touch but fireworks could still emerge as Storage number and contract expiration is today.
Peso down on the day as some polls have trump leading in Florida.
Below is a Graph of Nat Gas longs .This is one metric to measure the speculators position,The managed money category.They are (were) the longest(most bullish) they have been in over 2.5 years.It seems everybody running to the exits at one time as prices collapse for the 4th consecutive day.Simple Example of a trade getting too crowded(everybody getting long) and when the Liquidation does come, it comes quick.
November was sold Aggressively on Monday( expires Tomorrow) and the last two days it has been December.Today is different then the prior 2 days in that the Weakness is more pronounced in the Deferred months then the front .