JonesTrading’s Dave Lutz has what traders are talking chatting about right now.
Good Morning! Markets are rebounding from early pressure as Brent hit 5 1/2year lows, WTI broke under $US48 in the overnight. US Futures have rebounded over the last hour as Oil has cut losses in half, M&A chatter (VZ for AOL) and we could be seeing some equity flows on allocation from Treasuries – 10YY broke 2%, may have set off a trigger to rotate to stocks for some. The DAX has bounced back 50bp, led by covering in Energy companies, and consumer names are seeing tailwinds with plunging Oil prices. Greece was closed overnight, and Holiday in Spain has subdued volumes – Over in Asia, Russia’s MICEX is up 2%, shrugging off a falling Ruble on downgrade chatter. The Haven flight yesterday drove the Yen higher, hitting Japan’s exporters and the Nikkei for 3% in decent volume. Hong Kong lost 1%, but China gained again, adding 10bp to another record close on retail account creation and headlines of fast-tracking some projects. Aussie was weighed back by it’s heavy exposure to Energy companies, despite a continued rebound over the last few weeks in Ore.
Heavy demand persists for yield in Europe — With Germany’s 10YY now yielding 46bp, and their 5Y “breakevens” — showing the inflationary expectations of their Bond Market in 5 years — Is showing 24bp of deflation, a new record. This is driving demand for US Treasuries, with the US 10YY under 2% – REITS, Utilities, Staples all a big tailwind. Banks are haters. Despite the lower yields, the $US is making gains, mostly against a weaker Euro — but watch for potential intervention – EURCHF nearing a test of December’s lows, when Switzerland introduced negative interest rates to weaken franc. Aside from the damage in Oil, Natty remains under pressure — it has lost 9% from the peak yesterday when floor trading opened. Gold has some legs, up near $US1210 — testing the 100dma where it failed back in December. Scheduled Catalysts include Markit US Composite PMI at 9:45, Factory Orders, ISM Services at 10. API data for Crude after the bell at 8:30 — Estimates for an increase of 750k. Congress back in Session today, and you could get some Oil headlines (Keystone, Exports, Mexico)