Morning 7-22

News:

  • Probability of 50 Bps cut now stands at 15%, per Bloomberg(BBG) as a result DXY, Dollar index pushing to 1 month highs
  • As expected Boris Johnson is the New British Prime Minister, he has a little more than 3-months to figure out a plan for Brexit, GBP and gilts little changed. The Former spitting distance from 2 year lows vs Dollar
  • Stocks in focus: Auto sector in Europe having a great day +4% Daimler +3% after a Chinese firm takes a stake and BMW  +3.5% after Morgan Upgrade. Banking stocks  also performing well +2% as a sector  as a result Dax  +1.7%,Spain’s IBEX +1.3% all of European Bourses in the green  .U.S. not to be outdone as earnings from  Coke, Lockheed, Biogen all beat  as Earnings the driving force for higher stock markets. Spoos +11 handles, Nasdaq +34
  • It appears that Trump and Congressional Leaders have struck new spending /debt limit deal, now it is up to rank and file members to vote yes. Congress leaves on Friday for a Month long recess so a deal needs to be struck before they can leave.
  • Other Markets show Treasuries a touch weak in front in end as rate cuts get pared back, long end small bid. Bunds little changed, Gold steady to lower, And Silver up a handful of ticks. Copper trading below yesterday and Fridays lows, goes to show you that Fridays Ramp higher was a fake out. Oil steady to lower

Via Zero hedge, trading desks suffer worse first half of year in a decade

With Morgan Stanley reporting Q2 results yesterday, the first half earnings of all “big 5” US banks are now public, and when it comes to sales and trading they are nothing short of a disaster.

With the S&P at or near all time highs, institutional traders have, paradoxically, been increasingly moving to the “sidelines” for much of the second quarter as Wall Street trading desks posted their worst first half to a year in a decade, according to Bloomberg calculations. David Solomon, CEO of Goldman Sachs, made note of this over the last two quarters, and other major banks like JP Morgan and Citigroup have followed.

The slowdown in trading revenue has been due to uncertainty about trade war politics and global Central Bank policy. However, in the past, these types of uncertainties have spurred more trading, not less. This has raised the question of whether or not the slowdown in trading is permanent, instead of temporary.

Morgan Stanley CFO Jon Pruzan said in an interview Thursday: “It’s more of a subdued up than sort of the animal spirits you would generally characterize in this type of environment. We haven’t seen some of the traditional things in a market like this — we haven’t seen a lot of people repositioning their portfolios, we haven’t seen leverage increase.

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