Apr 27, 2017 - Market Update + ECB

Short recap

Asia up

Europe opening lower

BoJ – no change, outlook for econ up, CPI down

NAFTA to stay for now, I “admire” the respect of Trump for his partners

Trump’s tax reform out, if in place making a huge hole to federal budget

And making Fed to move faster

So far no inspiration for the market as it lacks the details and is very complex thing

No US Gov shutdown until Sep 30

New healthcare bill getting support

PBOC keeps reducing risk in financial system what is reflected in Shanghai Composite

Equities

US stocks didn’t hold gains after Tax reform announcement on fading momentum

With Home Capital Group in a need of USD 2 bln credit line

Something is going on in Canadian real estate

Airbus having a legal case

In love with Ducati? Likely on sale, just contact Volkswagen…

Earnings season

Twitter, Fiat-Chrysler surprised, strong results from BASF and Deutsche Bank

Alphabet – expecting higher revenue, would be interesting to see any comments on diversifying its advertising revenue over other areas (cloud…etc.)

Microsoft – expecting better results as company benefits from its cloud services

Amazon – expecting better results as it benefits from its market position but some risk of using cash are present

Intel – Mobileye acquisition to pay off but company is still having to fix the core

Others to report: Celgene, Ford, Dow Chemical, UPS, Bristol-Myers Squibb, Johnson Controls, AbbVie, Marathon Petroleum, GoPro…etc.

Bonds

US yields experiencing more positioning then reflecting the reality of strong data and Fed likely hiking again in June

10-yr Trys yield at 2.31%

10-yr Bund yield at 0.36%

EURUSD (daily)

Negative tone under 1.0970

Looking whether closing the week below Sunday open at 1.0889

Support at 1.0850 and 1.0835 (200 DMA)

FX options

EURUSD 1m ATM vols

Saw a massive sell off in vols after 1^st round of FR elections

RR favoring calls (from O/N to expiries covering 2^nd round of FR elections)

ECB today – O/N vols trading at 17% setting the expected spot moving range at 0.9%

Commodities

Gold – now supported by geopolitical risks (fading) only

Upcoming

Bundestag voting on Brexit

ECB meeting

Expecting quiet meeting, no surprise (FR elections in two weeks)

Draghi to defend the QE continuation with maybe a slower pace of bond buying in 2018 and the rate rise well into the future

Will need to talk down any taper speculation at an earlier stage despite EZ macro data

Would correspond to three year cycle as Fed had

To please the hawks likely a small wording adjustment at Jun 8 meeting

Inflation to stay low (oil prices), core still weak at 0.7% (likely to be still disappointing in 2017/18)

Draghi/officials will be very prudent after last experience with a bit more hawkish tone

Having a huge market impact, had to talk it down after

Apr 29 – EU Summit to sign off the Brexit negotiations guidelines

May 7 – French presidential elections 2^nd round (Macron/Le Pen – 60/40)

May 25 – OPEC/Non-OPEC meeting

Jun 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

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

Good luck Champs!

Mr Hawk

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