Bank Notes

"markets"
Date: 5/04/2020  
     
Events Date: Event Event Comments
  Earnings Season *portfolio managers position for Earnings season, with tech rally due to believe that tech companies are not impacted by lockdow but will post better than expected earnings
*tradings will be monitoring virus impact on earnings closely
  Main Street Lending Program *600bb program with loan offerings for main street
*extension to buying high yield etfs
  Coronavirus *US China tensions cause risk off and oil dip, Buffet views on recovery not helping risk either
*Equity repricing will be based on reopening plans, production recovery, second wave impacts
*mkts consolidate, pending any drug or vacine develop which will trigger repricing
*Europe proposing common bond to fund virus stimulus
*slowing new cases in Europe and China encouraging buyers to come in, but economic improvements have been reflected in price action
*upcoming data points will be reviewed, as they will reflect impact of virus on economy and better evaluate economic damage
*mkts monitoring effectiveness of new lockdown measures as buy signal
*travel, casino, airline stocks rally will be good measure of mkt view on virus development
  Democratic Party election *Baiden in the lead calms mkts, Sanders supports Baiden
  India US trade deal? *not likely in 2020
  Corporate Buybacks *trades will start factoring in new earnings outlooks to continue bid, buybacks suspended as companies hoard cash to fight crisis
Holidays Asia Mkts closed for week Labour day/May day/Golden week, expect slower volumns
10am ISM  
year 2021 EU auto tariffs *truce until year end agreed as EU agrees to delay tech tax
     
Central Banks Announcement Date Comments
FOMC   *unch as expected
BoC   *unch as expected
RBZ   *on hold expected
RBA   *central banks coordinated cuts expected
*mkts expect cut if US China trade deal breakdown
*indicate QE will only be considered when policy rate has been lowered to .25%
ECB 30-Apr *unch expected
*BB bonds excepted for QE in anticipation of Italy downgrade
BoE   *unchg as expected
*25 bps cut priced in for 2020
BoJ   *unch as expected
*CB targeting low interest rates until 2020
Markets Ticker Comments
Macro    
    *IMF cites high corporate debt vulnerable for US and China
*BoC highlights risks monitored <- economy capacity, inflation, wage dynamics, sensitivity to higher rates with elevated debt
*BIS says China, HK, Canada most risk of banking issues
Rates    
  TSY *traders closely watch comments of treasury purchase and unwind plans
*FED favouring  shortening balance sheet duration
*Fed balance sheet target estimate ~$1700 bb
(Powell: Between USD2,500-3,000bn within three to four years with mainly treasuries on balance sheet: mkts think a bit optimistic)
  IHY *virus causing HY spreads to widen as recession risk materalize
  BTP *EU emergency stimulus provide support to spreads
Equities    
  SPX *Trump tweets: mkts pricing out tweets as not always indicative of actual reality
  FXI *mkts fading China even PMI pickup, as rest of world is in shutdown which China exports to
*China not going to stimulate property sector causing property stocks to sell off
FX    
  TRY *depreciation pressure as gov intervention viewed as temporary
  USD *Mnuchin says no change to U.S. dollar policy as of now, but may in future
*speculation Trump operations  to sell dollar
  MXN *Pemex downgraded
*peso under pressure
  EUR *EUR inflation not expected to last
*ECB comments on options to help weak banking sector
*Trump could challenge trade as EUR devalues
*no solid bid expected until negative rates lifted
  GBP *pounded by virus spreads
  AUD *drop with rate cut, employment data to deteremine further cuts
  CNY *most likely move back to within 6 range after trade deal
*CNY becoming petro ccy will faciliate CNY global use
*gains signal China goodwill on trade deal
  CAD *virus, tanking oil drag down CAD
Commodity    
  USO *large drops due to price action related to the roll
*price can drop to 10 / bbl, but risk reward is improving for longs, but large gains not expected in near term
*Saudi flooding mkt causing price pressure as storage facilities maxed out
Ratings    
  RATINGS (RATC) *Italy on hold by S&P, will downgrade if deficit and Debt to GDP increase significantly
*Mexico downgraded by Moody’s
*Australia outlook cut to negative by S&P
     
COT Flows USO, GLD *longs accumulate
  NZD *shorts holding
     
     
Mkt News:    
Norway wealth fund plans to remove emerging corporate bonds and linkers from investment, and sell off energy investments
China fintechs granted banking licences in Hong Kong, with eyes on New York and London
Antitrust probe on big tech  
Brazil state owned banks have poetntial heavy losses from construction conglomerate scandal
China take over of Baoshang bank hs caused liquidity strain for bigger Chinese banks who are now more risk averse
chatter Microsoft interested to buy Bloomberg
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