JonesTrading’s Dave Lutz has what traders are chatting about right now.
Good Morning, and Happy Friday! US Futures are under pressure, with the Russell dropping 75bp (but off the lows) as same concerns intensify (Oil, Greece, China). House reaches a Budget Deal late last night, and an interim spending bill is passed, so that risk is mitigated. Overseas markets are mostly weaker, with the FTSE leading to the downside, losing 1.5% in average volume – dragged down by exposure to Oil and Miners. The DAX is down 1.2% in lighter trade, while Athens is having a “dead cat” bounce of less than 1%. Russia is up 1%, despite the Rouble smashing thru lows again — Shanghai popped 50bp as retail sales came in stronger – the Nikkei rallied ahead of elections in Japan this weekend (Polls showing Abe picking up seats), while Aussie lost 20bp with Mining shares weaker as China factory production dropped.
The 10YY is under pressure as German yields take out lows — Oil’s drop has German Breakevens reading deflationary — that and “Flattener” trades have the US 10YY at 2.12% (Yield curve flattening sharply again, the longest weekly run since 1992). The Euro has a bid, as a crowded short covers ahead of Greek elections and the Fed next week. Commodity FX all getting hit sharply — Norway, Aussie, Mexico and Russia, despite the latter 2 intervening overnight – The DXY is under pressure, and threatening the 88 level, a tailwind for commodities. That said, Oil is under pressure again – WTI broke $US59 this AM as the IEA cuts demand forecasts for the 4th time in 5months and Chinese data disappoints, but losses have been cut in half as more US traders arrive. Lumber is popping again, while Copper is adding 40bp. Natty Gas is up 1% after yesterday’s hit, while most Agricultural commodities are higher (DE expected to report their sales figures today) Scheduled Catalysts include PPI at 8:30, Univ. of Michigan Confidence at 9:55, Energy markets will watch the Baker Hughes Rig Count closely at 1, and at 3:30 we get the “Commitment of Traders” data. After the EU close, we will get a few ratings updates: U.K. Debt Rating Published by S&P, Fitch / France Debt Rating Published by Fitch