Dave Lutz, head of Exchange Traded Funds at JonesTrading, has a super-quick guide to what traders are talking about right now.
- Treasurys are selling off, as traders contemplate the possibility that President-elect Donald Trump’s economic plan would trigger growth and inflation. The yield on the 10-year Treasury note jumped Wednesday to 2.07%, the highest level since January.
- Silver and gold are also rallying on higher inflation expectations in a Trump administration. US stock futures are adding to gains as well; the Dow crossed its closing high during trading on Wednesday.
Good Morning! Pain Trade continues. ES Higher, Treasuries Lower. The Russell continues to outperform, climbing 1.1% as Biotech is marked up another 2.2%, while Nasdaq adds 80bp and the S&P 60bp. Over in Europe, a big sea of green — with the DAX up 90bp with aerospace and defence ripping higher, and Euro banks hitting a 8month high. The FTSE is up 60bp, Miners and Banks leading in London — but continue seeing selling in those “Yield Proxies” across the continent, with Staples and Telecom firmly red. Volumes are very strong, with most exchanges traded double their normal turnover. Strong overnight in Asia, the Nikkei ripped 7% higher, after falling 5% yesterday. Names with ties to Mexico lagged including Nissan +1% while broader autos jumped +6% – Aussie jumped 3.3%, the biggest 1day gain in 5years – Hang Seng gained nearly 2%, while Shanghai added 1.4%. All of EM Asia closed higher in good vols.
The US 10YY is getting upside yesterday’s peaks early, as heavy selling in Bunds propels the German 10YY 9bp higher to 30bp — this followed big moves in Asia, which saw 10Y JGB Yields move towards 0%. The Dollar remains well bid, with Euro, Pound and Yen all getting hit against the Greenback, and that Peso remains weaker. Despite the $ bid, metals remain on FIRE, with Copper hitting a fresh 15-month high, ripping 4% as Ore in China squeezed 6%+ higher, hitting the daily limit. Even Silver and Gold remain bid on the inflationary implications of Trump Policy. Only Energy Commodities are in the red, with WTI off 60bp and Natty gas hit for 1.2% after a whipsaw day yesterday. Softs are strong across the board.
Quiet day of Catalysts today ahead of tomorrow’s Bond/Bank Holiday in the States. We get Weekly Jobless Claims at 8:30 – Fed’s Bullard Speaks on U.S. Economic Outlook in St. Louis at 9:15 – Natty Gas Inventory data hits at 10:30, and at 1 we have the Auction of $15Bln in 30-Year Bonds. We will continue to get headers speculating Trump’s appointments, the markets soothed thus far as rhetoric demanding Janet Yellen’s resignation is rolled back.
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