JonesTrading’s Dave Lutz has a roundup of what traders are chatting about right now:
Good Morning, US Futures are looking off 30-40bp, with the S&P taking out yesterday’s lows. Angst reigns as Oil drops — and a trio of headlines (Greek Elections, China clamping down on Leverage in Credit, “considerable Time” removal from Fed) all weigh. London is off 1.2% in heavy volume (1.5x normal) as every major sector of the FTSE is off at least 1%. The DAX is off 1% as energy companies retreat — but the Athens stock exchange is off over 11% and Greek yields are out 50bp as political uncertainty mounts — So the EU banks are getting hit for 1.7%. With the Oil drop, Gulf Exchanges under good pressure — Dubai lost 6.6%, Saudi lost 2.5%, Qatar 3.5%, and Abu Dhabi 3.7%. Over in Asia, Shanghai had its biggest drop in 5years on record volumes as China’s securities clearing house had tightened the use of corporate bonds as collateral for short-term financing, the Miners knocked Aussie for 1.7% as the price of Iron ore gapped lower again overnight (JPM cut forecasts). Despite the wild move in the Yen in the last 24hours, The Nikkei was off only 70bp.
The 10YY is coming in, as “Flattener” flows continue to pressure longer-term yields in the USA despite Bunds being flat. The $US/Y has broken south of 120 — a key level for it to retake, but the Euro has a bid, pressuring the DXY this AM. With this tailwind for commodities, we have Brent/WTI Crude up 1% (Brent was off 1.5% earlier). Silver is up 1%, and Gold is holding yesterday’s late day surge, adding 20bp and over $US1200. Natty has been beaten up of late, we are seeing some covering this AM. Grains and Beans are under pressure this AM. Scheduled Catalysts today include NFIB Small Business Optimism at 7:30, UK GDP, US JOLTS Job Openings, Wholesale Inventories and ISM Semiannual Report On Business at 10, and a 3Y auction at 1. We will get SIFI headlines for the Fins today, and API data tonight.
Some Trends I’m watching:
·Despite the weakness yesterday, “Growth” stocks only underperformed Value by 17bp. We have a slew of China data tonight (CPI, PPI, New Yuan Loans, Money Supply) — be interesting to see if the “growth” trade outperforms again. (IWO > IWN)
·Watch the “Gundlach Floor” of 2.2% in the 10YY as “Flattener” trades continue to sell short-term (SHY) to buy 10’s (TLT).
·Despite Rates yesterday, Banks had a great day — An allocator may have been at work, big prints of financial ETFs hit the tape late in the day. In total it looked like about $US750mm of financials buying FXO (Alphadex) and IYF. SIFI announcement from the Fed on Bank Capital Requirements today may be a “Buy the News” as a uncertainty is removed. MS and GS your highest levered.
·Watch the Commodity Rich Exporters – Canada (EWC), Russia (RSX) and Brazil (EWZ). Canada had it’s worst loss in 3 years on plunging Oil — Led by drops in Resource and Financial Shares
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