Morning Notes
| 1/28/2020 | ||
| Events Date: | Event | Event Comments |
| Coronavirus | *mkts monitoring if spreading or under control *mkts buying dips as suspect risk asset overreact to virus as little evidence virus is spreading in North America |
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| India US trade deal? | *India won’t join China backed regional trade agreement | |
| Hong Kong protest | *if Chinese forces move in, will hit emerging market assets | |
| Earnings Season | *trades will start factoring in new earnings outlooks to continue bid | |
| 31-Jan | Extended Extended Brexit deadline | |
| 04-Feb | State of the Union | |
| Feb | Fed REPO ops update | *mkts think FED will raise IOER to move rates to mid target point *support expected till Apr 15 tax date |
| 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 |
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| 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) |
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| 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 |
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| FXI | *China ready for stimulus to offset tariffs, not going to stimulate property sector causing property stocks to sell off | |
| FX | ||
| USD | *Mnuchin says no change to U.S. dollar policy as of now, but may in future *speculation Trump operations to sell dollar |
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| MXN | *working to avoid Pemex downgrade, Pemex debt swap helping bid *mkts think oil industry reforms not enough to help |
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| 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 |
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| GBP | *drop as Carney remark softens pound | |
| 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 |
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| CAD | *mkts start to price in cut, failed to bid on oil rally | |
| Commodity | ||
| USO | *gs thinks oil will rebound, traders will eye economic data to confirm *iran conflict cause oil bid *US supply more than offset Iran output, ample US supply will cap price gains in foreseeable future |
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| Credit | ||
| RATINGS (RATC) | *Ireland upgraded to AA- by S&P *S&P upgraded Spain to A *Fitch negative outlook on Chinese banks |
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| COT Flows | JPY | *safety bids unwind continues |
| Central Banks | Announcement Date | Comments |
| FOMC | 29-Jan-20 | *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 | 22-Jan-20 | *unch expected, maybe slight dovish forward looking estimate *fwd guidance hint direction can be either way *bond mkts start to price in cuts as next move, traders think maybe overreaction |
| RBZ | *announcement of possible neg rate causes kiwi to fall | |
| RBA | *RBA holds as expected *mkts expect cut if US China trade deal breakdown *indicate QE will only be considered when policy rate has been lowered to .25% |
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| ECB | *unch as expected, restarts QE Nov *QE may lossen ISIN limit restrictions in future *Germany 50bb fiscal package, but not immediately *cut as primary stimulus measure comments |
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| BoE | *unchg as expected *25 bps cut priced in for 2020 |
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| BoJ | 21-Jan | *unch as epxected *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 | ||
| GS planning to buy E-trade or a bank | ||
| chatter Microsoft interested to buy Bloomberg | ||
| China tech stocks down as gov allocate less to tech investments | ||
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