Oct 13. Oil hit / Brainard dovish

–Cubs win
–Thin trade Monday.  The biggest change was crude oil which slumped around 4.5% (CLZ5 -221 late to 4794) in a delayed response to an increase in OPEC production numbers.  Stocks were marginally better bid though HYG and JNK closed lower on the day.  The curve flattened with red/gold eurodollar pack spread -3.875 to 123.5 (reds +1.25 and golds +5.125).  Treasury futures were similar, with the 2 yr down around 1 bp and tens -3.4.  EM currencies have had a strong spike higher since last Friday’s employment data which convinced many that a US hike is off the table.  (Ind rupiah has been a star performer surging 9%).  Fed comments have been mixed, but late in the day Brainard weighed in dovishly.  (RTRS) “I view the risks to the economic outlook as tilted to the downside. The downside risks make a strong case for continuing to carefully nurture the U.S. recovery – and argue against prematurely taking away the support that has been so critical to its vitality.”  Earlier, Lockhart said labor mkt data supports raising rates.  Backs liftoff by end of the year, but also says inflation risk is more to downside.   US economy not highly exposed to China…but it may be negatively impacted through europe.
–This morning equities have turned south as China’s imports plunged 20% in September against an expectation of 15%.  The US might not be “highly exposed” but it certainly reacts.  By the way, China’s ten year yields below 3.25%, even with growth supposedly around 7% and fears of a hard landing…might already be in the midst of a hard landing.
–Fortress is closing its global macro fund with a ytd loss of 17.5%. 
Today’s news includes a speech by Bullard at 8 est.  Other news includes NFIB small business optimism expected 95.5 (a bit lower than 42 yr average of 98).  

Posted on October 13, 2015 at 5:11 am by alexmanzara · Permalink
In: Eurodollar Options

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