Bank Notes

Commentary, News
Date:5/26/2020
Events Date:EventEvent Comments
 US China tensions*China wants to renegotiate trade deal, which will trigger risk of trade tensions
*Nasdaq proposes to tighten listing rules, impacting Chinese firms
*China increasig soybean imports calm markets for now
*traders monitoring sanctions for risk direction, tech issues still presist between two countries over Huawei etc
 Main Street Lending Program*600bb program with loan offerings for main street
*extension to buying high yield etfs
 Coronavirus*vaccine news gives mkts a boost with bids starting Friday
*US not taking punitive measures against China because of virus gives mkts sign of relief and risk on mood
*Equity repricing will be based on reopening plans, production recovery, second wave impacts
*mkts consolidate, pending any drug or vacine development which will trigger repricing
*travel, casino, airline stocks rally will be good measure of mkt view on virus development
 Corporate Buybacks* buybacks suspended as companies hoard cash to fight crisis
 Jobs*if layoffs continue, it has been historically proven recessions will be deep and lengthy to turnaround. Mkts watching upcoming jobs numbers positive trends, and what measures gov may start to offset unemployment numbers
 EU recovery fund*France and Germany agreement is mkt positive
 3 Trillion stimulus bill*house vote passed is very positive sign for mkts
*stimulus could be ready by end of May
21-MayNational People’s Congress*GDP targets will be watched closely, but most likely targets will be withheld due to virus
year 2021EU auto tariffs*truce until year end agreed as EU agrees to delay tech tax
   
Central BanksAnnouncement DateComments
FOMC *unch as expected
BoC *unch as expected
*hint at possible negative interest rates
RBZ *on hold expected
RBA *unch as expected
*first QE program launched in March
ECB *unch as expected
*BB bonds excepted for QE in anticipation of Italy downgrade
BoE *comments cause speculation negative rates in the cards
*25 bps cut priced in for 2020
BoJ *unch as expected
*CB targeting low interest rates until 2020
MarketsTickerComments
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*Pemex downgraded
*peso under pressure
 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*large drops due to price action related to the roll
*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 price pressure as storage facilities maxed out
Ratings  
 RATINGS (RATC)*Italy on hold by S&P, will downgrade if deficit and Debt to GDP increase significantly
*Mexico downgraded by Moody’s
*Australia outlook cut to negative by S&P
   
COT FlowsVIX*longs scale back
 
   
Mkt News:
Norway plans to withdraw 37BB from wealth fund
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
chatter Microsoft interested to buy Bloomberg
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