November 8. S&P cuts France to AA. Payrolls expected +120k.
–ECB cut rates yesterday and France was rewarded with a downgrade to AA by S&P today. Euro/yen which was 135.50 in late October closed on the low yesterday at 131.50 as the ECB tiptoes into zero rate territory, uncomfortably joining the BoJ and Fed.
–While US Q3 GDP printed 2.8, it appears as if an inventory build may impede growth for the next quarter. US rates declined slightly in sympathy with the ECB cut. Red/green pack spread fell a bit over 2 bps to a new recent low of 70. There continues to be a large seller of red June to Green Dec, rolling longs as June open int fell 23k while Dec rose 78k. Blues were strongest on the board closing +7.0. Ten year yield fell 2.5 bps to 2.61 (supply next week with 3, 10, 30 yr auctions).
–Today’s employment report expected to show NFP +120k. Personal Income and Spending also out expected +0.3 and +0.2, while Core PCE prices expected +0.1 (the inflation part of this report is the most important aspect).
–Stocks saw big reversals. Nasdaq closed at its lowest in 2 weeks even as Twitter IPO’d successfully. I’m not going to read too much into the big reversal on large volume, or the record margin debt, or the stretched valuation levels. What I will say though, is that I bought some Dec 150 puts on Goldman yesterday which appears to have a triple top and fell 2.4% yesterday…seems to have sidestepped the limelight as JPM is fined every other day, but JP was down only 0.9% yest. [this is NOT a recommendation!]
