JonesTrading’s Dave Lutz has a roundup of what traders are chatting about right now:
Morning! US Futures are under some pressure this AM, losing 30-40bp, as we have Oil breaking down sharply on growth warnings from EU and Japan. Germany is off 60bp, as Construction companies among the worst hit, while Energy and Materials companies have the FTSE down nearly 90bp — but volumes are tracking light (“Immaculate Conception” holiday in Europe). Of note, interesting that EU Banks are outperfroming despite PIIGS yields wider (Italy cut by S&P) and Moody’s warning on the sector. Over in Asia, Despite weaker trade data, Shanghai jumped another ~3%, extending its rally since late October to 32% on heavy retail activity. The Nikkei was up small, while the Hang Seng continues to underperform as student protestors up their activities. India’s Sensex was hit for 1% as Call Centres and Consulters were hit as INFY flounders sold a block. Aussie gained 70bp despite the miners staying red — as headlines “Aussie Banks need $US20B in Capital” sparked buying.
The US 10YY is nearing red as “Flattener” trades continue. Keep an eye on that “Policy Sensitive” 2YY gaining 2bp to 3 ½ year highs. Japanese GDP comes in light, hitting Yen past Y121.8 — but concerns the Yen has “Fallen too far, too fast” sparked covering. The DXY is green, making most gains against Euro — causing a headwind for commodities. Oil is breaking down sharply as Brent is hit with street downgrades; Nowotny comments on a “Massive slowdown” and Chinese data showing a lack of imports. Brent is off 3%, while despite the stronger $US, we continue to see WTI outperforming, off “only” 2.2%. Metals are mixed, with Gold trying to get back towards $US1200, while Copper if off 40bp (China data). We have very light catalysts scheduled today, at 10 The Fed will release the monthly Labour Market Conditions Index, while at 12:30 Fed’s Lockhart (Dove) Speaks on Monetary Policy in Atlanta
Growth was a solid outperformer last week, with the IWO gaining 1% – Heavy speculation that China will slash rates again — we have heavy data ahead of us this week: Trade Balance, CPI, PPI, New Yuan Loans, Industrial Production, Retail Sales, Money Supply
With Crude Oil continuing to break down on weaker (ex USA) global eco data — Watch for the Airlines to keep outperforming, Rails Lagging — HYG to test $US90 (15% HYG is energy), and of course the OIH/XOP
Retails have been for sale since Black Friday — With the XRT losing 2% last week. XLY (Discretionary) has been well outperforming as Gasoline prices plunge in the USA — Wonder if this week’s Advance Retail Sales spark some buying in the XRT
Finally, keep an eye on Treasuries. We have been watching huge “Flattener” trades pressing the 10YY lower, and with German Yields nearing record lows we have to assume the bid remains for Treasuries.