It’s a China story

April 1, 2019

–US stock index futures are responding strongly to China’s PMI print of 50.5, a bounce from last month’s three year low of 49.2.  New Mfg Orders came in at 51.4, a five month high.  ESM currently +20.25 at 2858.00.  On the other hand, the German data were dismal.   From Reuters: Mfg PMI fell to an 80 month low of 44.1, down from 47.6 in February. “Both total new orders and export sales are now falling at rates not seen since the global financial crisis…”

–Rate futures are subsequently under selling pressure with a yield rise of 1-3 bps across the curve.  Oil is at a new ytd high.  

–As mentioned yesterday, on Friday there was large buying of EDM21 and EDU21 9800 (both 45 delta) calls at prices up to 33.0 and 37.5.  Open interest was up in both, +29k and +53k.  This player has been taking profit on calls bought Jan 11th, which were long dated 9750 calls (atm at the time) and is now rolling up in strike and out the curve.  

–US news today includes Retail Sales, expected +0.3 both headline and ex-auto and gas.  ISM Mfg expected 54.5 from 54.2 last.  

–On Friday economic adviser Kudlow was on CNBC calling for 50 bps of cuts by the Fed, parroting Stephen Moore.  Jan 2020 Fed funds settled the week at 9785.0, indicating exactly one cut by year end.  In eurodollars, the first three 1-year calendar spreads, June/June, Sept/Sept and Dec/Dec, are -32.0, -30.0 and -28.5, all of which are saying essentially the same thing, that gradual eases are on the horizon.  While the Trump admin is calling on the Fed to add stimulus, actions like NYC’s congestion fee of $11.50 to enter Manhattan, and new real estate taxes work to the opposite effect… 

Posted on April 1, 2019 at 4:55 am by alexmanzara · Permalink
In: Eurodollar Options

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