JonesTrading’s Dave Lutz has what traders are chatting about right now.
Good Morning, and Happy Fed Day (2pm announce, 2:30 Yellen Presser) – US Futures are higher this morning, decoupling from stress overseas. Russia had some wild swings overnight, with the Ruble falling from 75 to 62, then chatter the Russian Central Bank was intervening surged it back positive. This, coupled with EU CPI coming in the lightest in 5years, has Deflation fears accelerating, pushing German 5Y Breakevens lower (-20bp now). We have the Greek Election today (no winner expected this round), and while their market is up 3%, the rest of Europe is a sea of red. Eurostoxx off 1% as Banks are under pressure in EU on slowdown and widening PIIGS spreads, while Airlines weigh on the FTSE. Germany’s DAX is off 70bp in very light trade, with only Telecom in the green. In Asia, Russia’s MICEX was able to cut 4% losses in half, and the Nikkei was able to eek out a small gain as the Yen weakened. Shanghai closed up another 1% on dovish hopes, while Hang Seng lost 40bp, weighed by Macau gaming names on the latest China Graft headlines
The US10YY is higher early, bouncing 3bp to 2.09% – That said, there remains a strong bid under Bunds, pressing their 10YY under 59bp. The DXY is higher, stretching it’s legs above 88, as the Greenback is stronger against both Euro and Yen. The Oil complex is under pressure, with Brent off 1.2% and WTI 1.6% as we had a Heavy build in last night’s API data ahead of the DOE today at 10:30, Analysts Expect a Drop of 1.9 Million Barrels. Another factor weighing is the Saudi budget was announced, showing strong reserves and spending on “Mega Projects” — no pullback on Oil drop. Silver is rebounding from the 5% hit yesterday, and while Gold is 50bp higher, it remains under $US1200/oz. Scheduled Catalysts today include US CPI at 8:30, DOE data for Crude, Gasoline and Distillates at 10:30, the FOMC Rate Decision (With Dots) at 2, and the Yellen presser at 2:30
A few trends I’m watching for early today:
Smallcaps underperforming on Reversal of the “Good Harbour” trade yesterday
XOP, OIH well outperformed the commodity yesterday
Gaps in Gold as chatter intensifies Russia could sell reserves
Rails continue to show a bid, despite Oil — Could see a rotation accelerate from Airlines
Selling EU to Buy US trade — Will be most evident in Banks (IYF > EUFN)
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