Via Dave Lutz at JonesTrading, here’s what traders are chatting about this morning.
Good Morning! Global Equity Futures are all lower, driven by the sharp selloff in Bonds – Ten-year German Bund yields, whose surge last week arguably sparked the acceleration of sovereign debt selling, are up 10bp to 0.70%, while Australian 10-years are up 19bp to 2.97% and Japan’s benchmark added 7bp to 0.46% after a “weak” 10Y auction (our Asian traders note angst building into 30Y auction Thurs). I noted the reasons for the selloff in the chats yesterday: Greece IMF payment; Heavy Issuance; Technical Momentum; RBS “Short Treasuries” call; UK Gilt Selling on Election outcome.
Thanks to “Debt to Equity Ratio management,” these flows from bonds are not finding a home in Equities. Yield plays (REITs, Utilities, Staples, Builders) all under sharp pressure — Tech shares are getting hit on potentially less ammo for buybacks (Corporate Sales a big fuel) — while Banks, which should be seeing tailwinds, remain under pressure with only Regionals closing y’day in the green. Bloodbath in Bonds must have margin clerks very busy, potentially making any asset vulnerable to sales — while higher rates provide massive headwinds for Emerging Markets – India was hit sharply as the Rupee got drilled on EM FX Flight (higher yields), the latest sign of reversing portfolio flows into India.
US Futures are off 70bp early, mirroring the weakness overseas – S&P Futures have given back all of Friday’s NFP advance, and that “wall” at 2120 gets thicker and thicker — while Options traders provide downside momentum into Expiry Friday. Markets are bloody in Europe, with the DAX off 1.7% in decent volume, dragged down by Consumer Discretionary — but very broad based selling with every sector in the red. Asia was mixed, with Japan’s Nikkei 225 flat, while Hong Kong’s Hang Seng dipped 0.8%. Australia’s S&P/ASX 200 rose 0.9% as banks rebounded – China’s Shanghai Composite jumped 1.6%, bringing gains over the past three sessions to 7%.
The Euro, Aussie$ and Yen have all broken higher against the $US, smashing the DXY back below 95 and causing heavy tailwinds for commodities. The Oil complex is jumping, led by a 2%+ move in Brent and Gasoline — While Copper is popping over 1% as Aussie Budget shifts from Austerity to Growth. Gold is popping as well, despite higher yields making the metal less valuable. Ahead of us today — we have NFIB Small Business Optimism at 9; at 10 we get US JOLTS Job Openings and UK’s GDP Estimate. At 11 we get Federal Reserve Bank of New York’s Q1 Household Debt and Credit Report ahead of WASDE data at Noon. Fed’s Williams Speaks at 12:45, and we have the $US24B 3Y auction at 1. Treasury’s Monthly Budget Statement hits at Noon.
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