Mar 14, 2017 - Market Update

Short recap

Europe opened lower

Brexit bill approved without any amendments – victory for May

Not to be invoked before Mar 27

FTSE pushed to retest the highs

14 mln Americans to lose medicare coverage is a bit bitter pill for Trump and his administration to swallow

Merkel to meet Trump on Friday instead of today due to flight cancellation (NY area bad weather conditions)

Intel buying Mobileye (USD 15.3 bln) to enter the field of autonome driving with direct competition of Nvidia and Qualcomm

Building a one place to do get all, so car makers can get all what they need in driverless technology and equipment

Mylan settled with Roche to produce a biosimilar version of breast cancer drug

Vista Equity Partners buying DH Corp (CAD 4.8 bln) to bet on fintech future

Morgan Stanley taking wealth management more digital and hiring tech specialist to train advisors

Blackstone to set up EU headquarters in Luxembourg

US cyclicals reversed yesterday and VIX dropped, proving we are in a bullish trend going to FOMC

EUR – a nice correction of Friday move in many crosses

But let’s wait for FOMC and market reaction

Thursday to be a “D” day (decision day) for EURUSD and its direction

USD – getting muscles ahead of FOMC

FX options

Vols keep falling with Implied still above Realized

Despite risk events like Dutch elections and FOMC

Once these events are off the table, expecting further drop in vols

Looking further to French election vols on election days decline in line with overall market

Seeing the vols cheap considering that Le Pen is still strong part of the presidential race

May be vols pricing is derived from current market sentiments? It doesn’t really make sense.

GBP vols no reaction to Brexit bill approval

Just spot dropped to 1.2123 from around 1.2200

Vols in line with the market heading lower

Trys and Bund yields higher (2.62% and 0.48% respectively)

Peripheral spreads unchanged, waiting for Dutch elections tomorrow

GE-FR spread steady at 61 bps, to watch reaction to Dutch elections results

Oil still second guessing on how big and sustainable the supply overhang is

WTI and Brent oversold, resistance 50.60 and 53.30 respectively

US shale production rising

Gold range bound

Levels: 1177, 1193 and 1210, 1221

Data

GE: ZEW Economic Survey – expecting higher

EZ: Industrial Production – expecting higher

US: NFIB Small Business Optimism Index – to keep positive

This week is busy:

Mar 13-14 – US budget draft to show first details of Trumps stimulus plan

Mar 15 – FOMC (25 bps hike expected)

Mar 15 – Dutch elections (polling stations close at 2000 GMT, first exit polls to start right after)

Mar 15 – US debt ceiling deadline

Mar 16 – BoJ meeting (right after Fed hiking…)

Mar 16 – SNB meeting (to be watched as EURCHF is not behaving in a normal way)

Mar 16 – BoE meeting

Mar 17 – Merkel meeting Trump

Mar 17-18 – G20 FinMin meeting

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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