At all costs

October 1, 2021

–Weak close in stocks to end the month as both ES and Nasdaq show signs of a broad topping pattern.  While Congress wrangles with the debt ceiling and social spending bills, and the Fed hangs on to the tattered narrative of transitory inflation pressures, the message from China is blunt:  “China orders energy firms to secure winter fuel supplies at all costs.”  Would there even be an ‘energy crisis’ across the globe if not for central banks having turbo-charged demand?  Of course, the move away from fossil fuels is also a factor. 

–Jobless claims yesterday were higher than expected at 362k.  A report yesterday from MNI (cited by Jim Bianco on twtr) says the St Louis Fed model sees a LOSS of 818k jobs in September.  Apparently, a renewed surge in covid cases and shortages of materials is the reason.  The report is based on real-time data from Homebase.

–Consensus for next week’s NFP is 400 to 500k, which is the bar set for taper.  A negative print would almost certainly cause a re-think.  It’s amusingly circular, the Fed has created demand through monetary stimulus, which has helped create conditions leading to shortages, which negatively impacts output, which sparks the Fed to ‘fix’ it by continuing stimulus.

–Tens are back below 1.5% this morning as funds flow from stocks to fixed income.  Another 30k 0EZ 9962.5/9950p 1×2 bought for 2.0.  Settled there vs 9950.5 in EDZ2 (13.5 and 5.75).  The 9950 straddle settled 12.0 which is probably priced appropriately for perceptions of one hike by the end of next year, but if I was forced to make a buy or sell decision I’d choose the former.  By comparison, 2EZ atm straddle is double the price at 24; of course the strike price of 9887.5 is more than double the yield (50 bps vs 1.125%).  

–In error I mentioned today’s data releases on yesterday’s note: Today PCE Core prices yoy expected 3.6%, same as last month.  ISM Mfg expected 59.6 and Michigan Inflation expectations also released.  

a few morning news snippets…..

German inflation hits 29-year high of 4.1%

The price of polyvinyl chloride or PVC, used for pipes, medical devices, credit cards, vinyl records and more, has rocketed 70%. The price of epoxy resins, used for coatings, adhesives and paints, has soared 170%. Ethylene — arguably the world’s most important chemical, used in everything from food packaging to antifreeze to polyester — has surged 43%, according to ICIS figures.

China orders energy firms to secure winter fuel supplies at all costs.

Posted on October 1, 2021 at 5:09 am by alexmanzara · Permalink
In: Eurodollar Options

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