Manufacturing slide

September 4, 2019

–Mfg ISM came in sub-50 at 49.1 for the first time since 2016 (the low in 2016 was 48.0).  Additionally, some of the components suggested even weaker growth ahead.  New Orders were 47.2 vs expected 50.5.  Since the 2008/09 crisis there has been only one other reading that low, which occurred in 2012.  Prices paid at 46.0 also lowest since 2016.   Rates fell accordingly, with bonds having already been boosted by the tariff escalation announced Sept 1.  Silver absolutely exploded on the day, with SIZ9 up over $1 late to 19.36.  Gold added $27/oz to $1556.0.  Not quite a new high for gold but certainly so for silver. 

–Tens ended yesterday at 1.464%, down 4 bps.  Red pack was the leader on the ED curve, rising 6.5 bps.  New lows once again in near euro$ one-year calendars, with EDZ9/EDZ0 closing lower in 6 of the past seven sessions at -63.5, down 3.5 on the day.  EDU9/U0 fell 4.75 to -82.5.  Also worth noting is the ten year treasury/tip spread which ended at a new low of 151 bps.  

–Peak ED contracts remain EDM21 and EDU21 at 9891.5; these are new high settles for the move.  The peak on the FF curve is FFN21 at 9917.5 or 82.5 bps. 

–Stocks are amazingly resilient in the face of (or perhaps due to) a firm dollar.  GBP made a new low early of 1.1959 but bounced a bit; getting close to the Oct 2016 post-referendum low of 1.1841.  EUR hit a new low for the year as well at 1.0926.  Possibly oversold and is indeed seeing a bounce this morning.  EURJPY also new low since Q2 2017.  ESU9  prints 2930 as of this writing, close to another test of a huge resistance area of 2940-45.  A couple of closes above that resistance would likely lead to new highs.  Yesterday after the electronic close Bullard suggested an immediate cut of 50 is in order, while Rosengren said the exact opposite, that no cut is currently needed, noting that stocks don’t seem to be pricing recession.  The market is pricing high odds of 25.

–News today includes Trade balance and Beige Book.  Fed’s Williams speaks in NY, Q&A with media. 

Posted on September 4, 2019 at 5:04 am by alexmanzara · Permalink
In: Eurodollar Options

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