Oct 27. Animal spirits

–Biggest moves yesterday were in energy, where NatGas made significant new lows and Dec Crude was also under continued pressure, (down 57 cents late to 4403, and lower yet this morning).  Nov Nat Gas is around 2.00 while Dec is 2.34, a huge discount for one month, which indicates a lack of available storage/oversupply.  EUR rebounded slightly.  Interest rate futures were lethargic at best, treasury straddles compressed by a few 64’s.  Stocks were also quiet, though it’s worth noting that Valeant (VRX) closed lower despite their press conference to assuage investor fears…doesn’t look like anyone was convinced, which is a huge red flag.  AAPL reports earnings today.  After last week’s tech surge spurred by GOOG, AMZN and MSFT there are probably high expectations for AAPL.  However, JPM announced it’s creating a competitor to Apple-pay, and other key areas of the business also face increased scrutiny.
–The market appears to trust in a debt limit deal, as one month t-bill rates have come right back down toward zero, having spiked above 10 bps last week.  However, there is an increase in tensions between China and the US, as the US Navy has sent ships into the South Sea to test territorial and shipping rights.  With the economy going south (as China’s appears to be/ see chart below) it might not be the best idea in the world for the US to serve up a ready made distraction for China’s leadership in the form of a military skirmish.  I prefer financial threats, for example, ‘China will sell its US treasury holdings and drive up rates.’  Oh, already happened?  And US rates didn’t move?  Let’s try something else.  Oh, look, is that a US Navy destroyer on our coast?
–US news today includes Durables expected -1.5% and 0.0 ex-transportation.  Richmond Fed expected -3, only important in light of continued regional weakness which was highlighted by a dismal Dallas number yesterday.  Consumer Confidence also out, a coincident indicator that says nothing about the future but does give a glimpse about the current price of gasoline at the pump. In other words, the same number that is crushing Dallas’ activity is giving drivers a few spare bucks to buy a bag of Doritos. Not exactly a precursor of a surge in animal spirits.

Doesn't look like 6.5% growth to me

Doesn’t look like 6.5% growth to me

Posted on October 27, 2015 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

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