Feb 21, 2017 - Market Update

Short recap

Asian stocks mixed despite some speculations about China getting back on track

EU to open lower with some caution ahead of Flash PMIs and after day off in US/CA

Volatility staying extremely low (as mentioned yesterday), no trigger in sight yet (may be Trump before Congress on Feb 28)

Difficult to time as the substantial rise in VIX is always steep

Oil supported by substantial jump in long speculative positions from managed accounts reaching record highs

Difficult to imagine what will happen if we experience sudden unwinding of positions

Seeing battle between OPEC cuts, higher demand from China vs rising US production

Iron ore higher today as per increased demand for higher graded steel from China

US homebuilders experiencing shortage of skilled workers

BHP Billiton reported higher profit on commodities rally

Warned about risks for metals and iron ore rally in the short term

HSBC disappointed as it struggles in its core markets, had a one off write-down, pre-tax profit down 62%

EM and China hitting the results

More and more speculative longs in Rubble sound like speculative accounts betting on rising oil

10 yr US Trys yield at 2.44%, we may see some selling pressure as US comes back

2 yr auction ahead of us can be a good gauge

Bunds range bound 164.07/164.94

GE-FR spread was widened again yesterday on Le Pen advance in polls

But new polls show Macron winning in 2^nd round (this one counts)

Some progress on Greece – bailout auditors coming to Greece again

But nothing else as EU officials do not want to irritate EZ public with Greece write off headlines ahead of crucial elections this year

Data

EZ: Composite PMI – expected slightly lower but still reaffirm the growth

US: Manufacturing PMI – expected higher

Will have FOMC Minutes and some Fed officials speaking this week but it shouldn’t be that relevant to the market after Yellen last week

Good luck Champs!

Mr Hawk

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