Bank Notes

"markets", Commentary, markets
Date: 3/02/2020  
     
Events Date: Event Event Comments
  Coronavirus
*coordinated central bank cuts expected
*mkts repriced risk and adjusted base case of coronavirus contained and won’t spread, now adjusting for virus risk
*mkts monitoring if new cases growth rate is consistently slowing
*travel, casino, airline stocks rally will be good measure of mkt view on virus development
  China stimulus *mkts up on China stimulus, target boost to aid national airlines, offsetting Apple drop
  Democratic Party election *Sanders, Baiden, Warren front runners
  India US trade deal? *not likely in 2020
  Earnings Season *trades will start factoring in new earnings outlooks to continue bid
02-Mar Brexit negotiations  
year 2021 EU auto tariffs *truce until year end agreed as EU agrees to delay tech tax
Markets Ticker Comments
Macro    
    *IMF cites high corporate debt vulnerable for US and China
*US balance sheet is shrinking, but EU and China balance sheet still growing
*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 *mkts scale back rate cut expectations
*Powell on hold comments didn’t lift rates
*traders closely watch comments of treasury purchase and unwind plans
*FED favouring  shortening balance sheet duration
*FED slowing hikes will avoid inversion repricing
*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 *central banks tighten, but balance sheet still expending
  BTP *Italy comment 2020 budget aim between 2% and 2.1% provide support
Equities    
  SPX *hints of QE for equity repricing
*US Congress: traders monitoring hints of gov cooperation going forward
*Trump tweets: mkts pricing out tweets as not always indicative of actual reality
  FXI *China ready for stimulus to offset tariffs, 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 *working to avoid Pemex downgrade, Pemex debt swap helping bid
*mkts think oil industry reforms not enough to help
  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 *slight bid as GDP meets expectations
  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 *mkts start to price in cut, failed to bid on oil rally
Commodity    
  USO *bid mainly due to Rosneft sanctions and Libya conflict
Credit    
  RATINGS (RATC) *Ireland upgraded to AA- by S&P
*S&P upgraded Spain to A
*Fitch negative outlook on Chinese banks
     
COT Flows VIX *bids spike
     
     
     
Central Banks Announcement Date Comments
FOMC 18-Mar-20 *25 or 50 bps cut expected, or March and April 25 bps cuts
*investors price in 2+ rate cuts, with one expected in April as virus stimulus cut
*unch as expected, dot plots show no cuts for 2020
*US China negotiations maybe key if further cuts
*mkts unwinding futher rate cut expectations
BoC   *unch as expected, slight dovish forward looking estimate
*fwd guidance hint direction can be either way
*bond mkts start to price in cuts as next move, 2 cuts 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   *mkts expecting ECB to follow FED on cuts
*leaking of virus insurance cut by media
*QE may lossen ISIN limit restrictions in future
*Germany 50bb fiscal package, but not immediately
*cut as primary stimulus measure comments
BoE   *unchg as expected
*25 bps cut priced in for 2020
BoJ   *unch as expected
*CB targeting low interest rates until 2020
     
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
IMF chief replacement: Jeroen Dijsselbloem, Kristalina Georgieva, or Olli Rehn <- Kristalina front runner
chatter Microsoft interested to buy Bloomberg  



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