April 27. Central Bank Carrots
–FOMC today. There’s a chance that a hike will be clearly signaled for June, but I doubt it. In terms of policy divergence and central bank influence, there is no end competing and seemingly random examples. On the raw material inflation side, China stands out, as steel and iron ore have had blazing rallies due to China’s stimulus policies. Some news articles say regulators are becoming concerned. Exhibit one this morning is silver, up 21 cents and threatening new highs. On the other hand, the Australian dollar tanked this morning on weak inflation data. An article on BBG about Standard Chartered has this quote from the CEO, which I suppose sums things up: ““I am expecting very high volatility for the rest of this year and probably into next year,” said Winters, 54. “It’s too early to call the risk-off theme. We could have episodes of real risk aversion.” BoJ up next, but since last summer the Nikkei has made lower lows and lower highs. The carrot of more etf buying is not moving the horse, it’s just moving through the horse.
–Yesterday afternoon risk aversion was on display with AAPL’s results. Nasdaq took a tumble and is unresponsive this morning, though crude oil is at $45/bbl. The shift in sentiment away from stocks and into commodities appears to have legs.
–A couple of large trades in interest rates yesterday. EDM6 9912.5 puts were bought slight under 0.5 in 100k, a cover of the short leg in the 9925/9912/9900 put butterfly. A telegraphed June hike would easily put the 9925 strike into play, but whenever Yellen steps up the plate, with the fans eager for at least a single, she whiffs. The other trade was also an exit, the sale of 15k TYM 128 puts at 15 to 16. Nice timing as yesterday’s earnings reports prompted a modest move back into fixed income.
