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My Diary 608 --- A Day for Hammer

(2009-10-01 22:08:39) 下一个

My Diary 608 --- A Day for Hammer

1 October, 2009

ZT from GS Note

Equities hammered on the back of the weaker than expected ISM and weekly claims.  The S+P closed down 2.6% at just under 1030, the biggest daily decline since early July.  Financials got hit the hardest (down 4.4%) although all 10 S+P sub-sectors were down.

What do we think is happening?  Simply put, we seem to be transitioning from a market biased to rally on average news to one biased to sell-off absent better than expected news.  Of course one day doesn't define a trend so maybe we should chalk it up to position squaring ahead of payrolls (our equity colleagues report much cleaner spec positioning as of COB today).

For the technicians out there, 1037 was the key pivot today -- today's close below 1030 opens up 995 to the downside. 

For FX technicals please see below for some real-time thoughts from John Noyce.

The VIX spiked 2.5 points to 28.25%.  Seems like just yesterday we were celebrating the break of 30 and now it looks like we could be trading there again tomorrow.

Fixed income went nuts today as well (for those who interested in the actual milestones, please contact in-house expert Greg Asi in London) with huge volumes going through in bunds, an incredible daily range today in red short sterling, and an aggressive acceleration through the key 3.25% level in 10-year treasuries.  10-years are trading at 3.185% as of this writing, with-in half a bp of the 50% fib retracement level.  Even more incredible is the fact that the fixed income market managed to do this despite $78bn of supply next week.

In FX, the story today was the broad based USD rally which started on the back of the Alumnia comments and accelerated as global risk assets sold-off.  EM got hit especially hard although it appears as if investors were doing some differentiating rather than hitting all crosses equally.  It is also worth noting that USDJPY actually sold-off a touch, perhaps due to lingering Japanese year-end issues but more likely due to the front-end US bond rally and corresponding interest rate differential compression.

While we are talking FX, it is quickly worth mentioning the Cisco purchase of Lysaker, which must have contributed to the NOK's outperformance today.  Bottom line here is that all international deals are different so trying to second guess how the deal is going to be hedged seems fruitless.  That being said, 3 yards of USDNOK is a lot so expect more craziness in the cross.

Commodities were crushed across the board with natural gas again the biggest loser (down 8%) on the back of increasingly ugly supply data.

In credit, the market sold off in-line with the equity markets.  HY closed at 90.5, IG at 110 on decent volumes (around 3bn in igs). 

For those handicapping payrolls, earlier today we reduced our forecast to -250k from -200k based on all the weak job data already released.  This puts us significantly below the -175k consensus.  I don't know about you but I miss those derivative auctions which I always found interesting on a quiet payroll Friday morning in London.

Today we published our September final GLI -- bottom line is that this measure suggests the industrial cycle is improving, but at a decelerating pace.  Please let us know if you want the full report.

The US auto companies released auto sales this afternoon -- ugly across the board with very little good news other than GM reporting significantly lower y/y inventories.

For those who follow Chinese equities, our colleagues in Asia published a very interesting piece overnight.  Bottom line is that investors in Chinese shares are becoming more cautious, that 4Q equity issuance is highly concentrated on China stocks, and that valuations are back in the middle of their range.  Accordingly we would look to put on HSCEI put spreads as a tactical hedge.

Tomorrow brings the Norway PMI data and the much anticipated payroll report.

 

 

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