June 26, 2017 - Market Update (Low yields to pressure US banks, Italian tax payers taking EUR 17 bln bill, FX options - implied vols making lows, VIX at 10, Fed to keep hiking, EUR longs trimmed)

Short recap

Asia up

Europe opening higher

Trump ok to cooperate with Senate on healthcare bill

Mester/Williams to keep hiking

Goldman Sachs sees 25% probability of a recession in US over the next 2 years

BIS was out with very positive annual report saying global growth to reach long-term average levels

Sees high risk of still growing debt level due to low rate environment and productivity growth

Arguing central banks should normalise their policies. More  link

FX options – implied vols making new lows

Similar picture in VIX, trading around 10 level

Equities

Pre-earnings – investors looking forward to see strong earnings in order they feel comfortable with current market valuation (highest since 2004)

Low yields to bite US banks, may see the pressure this week in case of risk off

As the valuations of US banks need to reprise given the low yields

Takata filling for bankruptcy after worldwide airbag recalls

Chinese bank regulator pushing banks to implement reforms

Intesa Sanpaolo to receive assets, senior bonds from two failed Italian regional banks

Gov to cover EUR 17 bln hole, subordinated debt holders to take the hit

Nestle having a new shareholder (Third Point) that pushes for squeezing more juice out of the company for shareholders

Looks like GE’s acquisition of Alstom’s power biz is paying off with a new contract for power plant supplies in Romania

IT companies like Cisco, IBM or SAP are pushed by Russia to share cyber security info

Bonds

10-yr Trys yield at 2.15% - not much movement

10-yr Bund yield at 0.25% - despite the mess with banks in Italy, the IT-GE yield spread stable after huge drop in June

The hit subordinated bond holders took in IT can spread around within this space in EZ

EURUSD

COT report as of Tuesday last week:

EUR longs 45k vs 79k previously - after the highest since 2007, EUR long specs trimmed positions

US yields to set the direction today

Range 1.1100-1.1300 this week likely

Support at 1.1187 (23.6% Fibo)

Trading above 10 DMA at 1.1176

Just out of curiosity Morgan Stanley was out with 'Strategic FX Portfolio Trade Recommendations' – Limit order from May 18:

Entry: 1.1030

Target: 1.1800

Stop: 1.0800

The rationale:

“We expect the USD to rally modestly against EUR as the market reprices its Fed expectations. We would use that rally in the USD to sell vs the EUR.

Increased signs of pro-integration pressures emerging in Europe (eg. Macron, Portugal - Fitch upgraded outlook from stable to positive ... improvement in the periphery)

Stronger growth environment should bring inflows into the equity market. The risk to this trade is a slowdown in equity market”.

Data/Events

Fed’s Williams

ECB’s Draghi (1730 GMT)

Tue

ECB’s Draghi (0800 GMT)

Fed’s Williams (0805 GMT)

BoE’s Carney (1000 GMT)

Fed’s Harker (1515 GMT)

Fed’s Yellen (1700 GMT)

Fed’s Kashkari (2130 GMT)

Wed

Fed’s Williams (0730 GMT)

Central bankers meeting in Portugal (1330 GMT):

ECB’s Draghi, Constancio, Mersch

BoE’s Carney

BoJ’s Kuroda

BoC’s Poloz

Thu

Fed’s Bullard (1700 GMT) 

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

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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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

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Mar 16, 2017 - Market Update

Short recap

Asia took the inspiration from Wall Street on dovish sounded Fed

EU opening higher on significant repricing of equities after Dutch elections and Fed

The Dutch stayed smart and said no to nationalism, thus sending the wave of relief across Europe

Fed still on the safe side

Hiked 25 bps, still sees 3 hikes this year as economy is doing well

On track to reach 2% inflation target, outlook for hikes/pace unchanged

Overall positive FOMC (in line) but what surprised many was no upgrade to the outlook/pace of hikes (dots) for 2017/18 despite the stronger data in Jan/Feb

That may prove that Fed is open to create asset bubbles and accept higher inflation over dumping the growth

Next hikes likely in June and Sept, Dec may bring balance sheet reduction talk

S&P 500 eying 2400

DAX to retest the April 2015 highs at 12 400

And may find additional support from another rise in car sales in EU (proving that economy is doing well)

Inditex (owner of Zara) doing better than H&M on the back of growing online business and better presence in emerging markets

Audi under emission scandal scrutiny

EDF working hard to put back to use 4 nuclear reactors after technical issues

FX – we need to respect the magnitude of the moves

EURUSD – back to the range 1.0500-1.0800/50

FOMC and Dutch election risks are off

Now we have Trump to watch as the importance of Fed is much lower as per their data dependency

But only until another round of speculations about June 14 hike re-emerge again

USDJPY – to follow yields, back to the range now

May get lower on yields even to touch the 111.50 level

Kuroda sees 1% inflation in 2018

FX options

Vols lower across the board

1m EURUSD down to 6.7% (lowest since Sep 2016)

1m USDJPY down to 7.9% (lowest since Dec 2015)

On the other hand overnight vols up on central bank meetings:

EURNOK, EURCHF, EURGBP, USDTRY - all up

Gold – fully depending on USD and yields

1221 important for further move up

But geopolitical risk of nationalism in EU receded

  

10-yr Trys yields at 2.52%

Experienced covering of shorts in Trys yesterday (strongest move since June 2016)

Questions – how durable this move is?

FR-GE yields spread below 60 bps on lower Le Pen fear

Data

BoJ meeting

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

BoE meeting – no change expected

Trump to present budget (1100 GMT)

US: Housing Starts – expected slightly higher

US: Job Openings & Labor Turnover Survey – expected a small dip

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

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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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

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Mar 6, 2017 - Market Update

Short recap

Asia in red on Fed rate hike prospects and slowing China

China working on reforms to reign in the debt load, put in place measures to contain future financial crisis and shift the export lead to consumer oriented economy

North Korea playing with fire again

German Private banking association don’t see the need for ultra-loose policy from ECB anymore

Oil lower on Russia production cut compliance

Trump verbally dumping MXN lower but is it really what he wants?

Weaker MXN means Mexico more competitive

Gold – net longs up 48% hitting 3-month high (COT)

Deutsche Bank selling EUR 8 bln of shares and stake in Asset management business

Need to strengthen position and increase the capital ratios

If sold at EUR 11.65 per share would bring the CET1 to 14.1%

A small surprised in dividend of EUR 0.19 while market not expecting anything

Peugeot-Citroen helped GM to exit from Europe by buying Opel-Vauxhall

OMV buying a share in Russian gas field (EUR 1.75 bln)

Yellen’s speech on Friday:

“A rate increase at next meeting "would likely be appropriate" if Fed determines that data on employment and inflation are continuing to move in line with expectations.”

Well a magic word “if”…

EURUSD and USDJPY – back to square one

Pace of rate hikes not expected to changed on Mar 15 even if Friday’s NFPs are strong

That’s why USD reaction on Fischer and Yellen muted

Do we really have more USD strength in store?

COT report – cutting USD long posit

EURUSD daily levels:

3^rd res 1.0789

2^nd res 1.0706

1^st res 1.0664

Pivot 1.0581

1^st sup 1.0539

2^nd sup 1.0456

3^rd sup 1.0414

USDJPY daily levels:

3^rd res 115.47

2^nd res 115.11

1^st res 114.53

Pivot 114.17

1^st sup 113.60

2^nd sup 113.23

3^rd sup 112.66

FX OPTIONS

EURUSD - Saw a massive selloff in the middle and longer end of the curve on Friday due to:

Le Pen losing ground, risk on in stocks, spot higher from 1.0500 despite Fed speakers and US data, and March hike already priced in

1w covering ECB and NFPs at 7.5 vol, what is the spot range of 110 pips

3m ATM down 0.9 vol to 9.35 level (3m covering FR elections)

BONDS – A heads up…

10 yr Trys yield at 2.47%

10 yr Bunds yield at 0.35%

A bit of divergence (more than 200 bps) between 10 yr Trys and Bunds

Is the market really reflecting the reality of rise in price and economy growth in EZ that way?

More reasonable level for Bunds yield would be around 1% than 0.35% now

Just imagine the shift if it materializes

ECB – QE and wording on inflation/growth crucial

As the political risks in EZ are fading away (Le Pen)

Data

The whole week will be about the below. Today we have EU Summit but no major headlines expected.

Thu:

ECB – expecting just some verbal tweaks on QE, bond buying, may be reshuffle of maturities…etc.

Markets will be searching for any hints on change in the position on rise in prices and growth

No major change expected despite Buba seeing world differently

Fri:

US NFPs – headline figure, unemployment rate and Average hourly earnings will be watched

Earnings is the number to look at if no bad surprise in headline

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

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Mar 3, 2017 - Market Update

Short recap

Asia in red

EU opening lower

Smaller companies in UK getting ready for Brexit as they keep cash and reduce investments  

Peugeot-Opel deal may be announced in a couple of days

Henkel bidding for Darex Packaging (USD 1.05 bln)

Alcoa consolidating internally

FX brokers tempted by US market on upcoming financial deregulations

Snap up 41% first day on NYSE in most prominent tech IPO since Alibaba

May be reminding us 1999-2000 year with techs flying high, CBs supporting markets with cheap money

Kind of scenario when the last 1-2 years of bull market are very strong

US stocks valuation overstretched

But looking at Europe can be an option, especially if political risks are off the table

Gold consolidating, support at 1220

Silver dropped 4%, support at 17.38/17.73

US 10 yr Trys yield at 2.47%

Very busy day for Fed’s officials as they have last chance to tweak the market about March hike (now priced at 90%):

Evans, Lacker (1515 GMT)

Powell (1715 GMT)

Fischer (1730 GMT)

Yellen (1800 GMT)

If Fed hikes in March, the wording about potential acceleration of hikes will be crucial for the market

EUR – political risks in EZ vs better incoming data, risk of taper from ECB

USD – Trump stimulus policies, hikes

EURUSD – no change, overall market is positioned neutral in EUR

Res 1.0526 (61.8% Fibo)

Sup range 1.0500/20

Sup 1.0453-61

Sup 1.0340

Closing below 1.0460 important for big players as bears worked well the whole week. EUR may get stronger but against CHF, JPY, AUD…etc.

The risk are Fed speakers, if we do not manage to close below 1.0460/80 range (as something may be cooking around) the caution next week is warranted (ECB, US NFPs).

Reuters poll:

EURUSD at 1.0400 in 6m, 1.0300 in 12m

Trump not clear on USD

EURUSD options

Seen realized vols trading lower

1w Implied much higher at 9 than Realized at 4

1w expiry is covering Yellen tonight and US NFPs next Friday

RRs keep strongly favoring puts as we are sitting close to 2017 low of 1.0340

FR elections – despite recent opinion polls the expiries covering 2^nd round of vote on May 7 still trading at high end of volatility curve

Data

Fri:

EZ: Retail sales to print higher but trending lower

US: ISM Non-manufacturing activity index – expecting no change

US: NFPs only next week on Mar 10

Next Friday:

US: NFPs

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

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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