Bank Notes

Date: 4/01/2020
Events Date: Event Event Comments
  Crude oil *price war will either continue, or comprimise as OPEC+ get together again during summer
*not much announcement yet from Trump discussion with Putin
  Rebalance *Large players quarterly rebalancing trades seem to have completed
8:15AM ADP *dropped less than expected, but numbers not reflective of latest situation
  Coronavirus *risk off as no evidence of US cases under control yet, China PMI exports numbers highlight virus impact on world demand
*slowing new cases in Europe and China encouraging buyers to come in, but economic improvements have been reflected in price action
*upcoming data points will be reviewed, as they will reflect impact of virus on economy and better evaluate economic damage
*eurpoe new cases start to drop
*mkts monitoring effectiveness of new lockdown measures as buy signal
*travel, casino, airline stocks rally will be good measure of mkt view on virus development
  Democratic Party election *Baiden in the lead calms mkts
  India US trade deal? *not likely in 2020
  Corporate Buybacks *trades will start factoring in new earnings outlooks to continue bid, buybacks suspended as companies hoard cash to fight crisis
year 2021 EU auto tariffs *truce until year end agreed as EU agrees to delay tech tax
Markets Ticker Comments
Macro    
    *IMF cites high corporate debt vulnerable for US and China
*BoC highlights risks monitored <- economy capacity, inflation, wage dynamics, sensitivity to higher rates with elevated debt
*BIS says China, HK, Canada most risk of banking issues
Rates    
  TSY *traders closely watch comments of treasury purchase and unwind plans
*FED favouring  shortening balance sheet duration
*Fed balance sheet target estimate ~$1700 bb
(Powell: Between USD2,500-3,000bn within three to four years with mainly treasuries on balance sheet: mkts think a bit optimistic)
  IHY *virus causing HY spreads to widen as recession risk materalize
  BTP *EU emergency stimulus provide support to spreads
Equities    
  SPX *Trump tweets: mkts pricing out tweets as not always indicative of actual reality
  FXI *mkts fading China even PMI pickup, as rest of world is in shutdown which China exports to
*China not going to stimulate property sector causing property stocks to sell off
FX    
  TRY *depreciation pressure as gov intervention viewed as temporary
  USD *Mnuchin says no change to U.S. dollar policy as of now, but may in future
*speculation Trump operations  to sell dollar
  MXN *working to avoid Pemex downgrade, Pemex debt swap helping bid
*mkts think oil industry reforms not enough to help
  EUR *EUR inflation not expected to last
*ECB comments on options to help weak banking sector
*Trump could challenge trade as EUR devalues
*no solid bid expected until negative rates lifted
  GBP *pounded by virus spreads
  AUD *drop with rate cut, employment data to deteremine further cuts
  CNY *most likely move back to within 6 range after trade deal
*CNY becoming petro ccy will faciliate CNY global use
*gains signal China goodwill on trade deal
  CAD *virus, tanking oil drag down CAD
Commodity    
  USO *price can drop to 10 / bbl, but risk reward is improving for longs, but large gains not expected in near term
*Saudi flooding mkt causing massive drop as everybody will fight for mkt shares as oil floods mkt
Credit    
  RATINGS (RATC) *Ireland upgraded to AA- by S&P
*S&P upgraded Spain to A
*Fitch negative outlook on Chinese banks
     
COT Flows VIX *shorts unwind
  CAD *shorts build
     
     
Central Banks Announcement Date Comments
FOMC 18-Mar-20 *25 or 50 bps cut expected, or March and April 25 bps cuts
*50 bps emergency cut
*investors price in 2+ rate cuts, with one expected in April as virus stimulus cut
BoC   *50bps cut
*bond mkts start to price in cuts as next move, 2 cuts expected
RBZ   *on hold expected
RBA   *central banks coordinated cuts expected
*mkts expect cut if US China trade deal breakdown
*indicate QE will only be considered when policy rate has been lowered to .25%
ECB   *mkts expecting ECB to follow FED on cuts
*leaking of virus insurance cut by media
*QE may lossen ISIN limit restrictions in future
*Germany 50bb fiscal package, but not immediately
*cut as primary stimulus measure comments
BoE   *unchg as expected
*25 bps cut priced in for 2020
BoJ   *unch as expected
*CB targeting low interest rates until 2020
Mkt News:
Norway wealth fund plans to remove emerging corporate bonds and linkers from investment, and sell off energy investments
China fintechs granted banking licences in Hong Kong, with eyes on New York and London
Antitrust probe on big tech
Brazil state owned banks have poetntial heavy losses from construction conglomerate scandal
China take over of Baoshang bank hs caused liquidity strain for bigger Chinese banks who are now more risk averse
IMF chief replacement: Jeroen Dijsselbloem, Kristalina Georgieva, or Olli Rehn <- Kristalina front runner
chatter Microsoft interested to buy Bloomberg

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