Dave Lutz of Stifel, Nicolaus passes along the top topics about which he’s chattering with clients this morning.
It’s been a busy morning. The topics largely revolve around Japan:
Futures just leapt higher on headlines that Japan’s public pension fund – a pool of over $1 trillion – is shifting it’s investments towards Equities. E-minis have recovered into the green, and EU markets, which were quite resilient overnight, are popping – led by a 70bp move in the DAX. Most eyes overnight were in the Nikkei, which had lost 5% as the strengthening Yen slammed exporters – and profit taking accelerated in the world’s best performing equity market. Nikkei futures have recovered almost 3% of those losses once that headline hit. Other Asian markets shrugged off the Nikkei whack, with China off small ahead of Manufacturing data – and Aussie off 80bp as Iron Ore prices hit a 7M low, and Mining cap-ex is slashed in forecasts.
High attention on JGB’s overnight – Yields were off small as the BOJ announced a ramp and shift of purchases to dampen volatility – and the MoF outlined incentives to get more retail buying of JGB’s. US 10YY is slightly higher, but just off yesterday’s lows – We continue to see it sparking the rotation within equities: Selling Utilities, REITS and Staples (Divvy Plays), and buying Tech and Fins… The DXY is weaker, despite the Yen getting hit right now – providing a natural tailwind for commodities. Gold is back over $1400/oz, and Lumber is showing the dead-cat bounce formation after being limit down again yesterday. The energy complex is under pressure, as API data last night showed inventories at 30Y highs, ahead of DOE today at 11. Opec’s 12 oil ministers are expected to stick to the organisation’s present output target of 30 million barrels a day at their Friday meeting.