Bank Notes

Commentary
Date: 6/30/2020  
     
Events Date: Event Event Comments
  Summer *mkts have entered summer mode already, with volume thinning out, Canada Day and 4th July shortened trading week
  EU tariffs *risk off as EU US trade escalate, speculation more trade escalations with other countries also to come
*US pulls out of tech tax talks
*current US tariffs on EU is small, but highlights risk of escalation
*tech tax will be key to trade escalation and auto tariffs
  3 Trillion stimulus bill *program considered maybe less than markets expected
*traders eye if unemployment benefits will continue at a lower rate
*likely will not pass congress until at least after July break
  US China tensions *US identifies Chinese companies with link to Chinese gov
*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
  Treasury report *mkts monitor risk of China labeled currency manipulator
  Coronavirus *Huston comments on possible shutdown spooked the markets, mkts most likely will stay bid if shutdown doesn’t materialize
*Value rotation lost momentum as Powell remind economy will take long time to recover
*recovery supported by central banks, comodities rebound, strength in macroeconomic data, stable reproduction numbers during reopening process
*vacine development 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
01-Jul Brexit negotiation round *transition period extension?
*deal not expected before July 1st
9,10 Jul EU recovery fund *backdoor meeting to reach accord
Oct Brexit deal deadline  
     
Central Banks Announcement Date Comments
FOMC   *unch as expected
*yield curve control could be introduced in Sept along with inflation targeting, traders monitoring ycc discussions
BoC   *unch as expected
*hint at possible negative interest rates, but mkts think not likely unless U.S. implements
RBZ   *on hold expected
RBA   *unch as expected
ECB   *unch as expected
*PEPP purchase size expected to increase
*BB bonds allowed for QE in anticipation of Italy downgrade
BoE   *comments cause speculation negative rates in the cards
BoJ   *unch as expected
*CB targeting low interest rates until 2020
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 *Central banks corporate bond buying stabilize credit mkts
  BTP *EU emergency stimulus provide support to spreads
Equities    
  SPX *Trump tweets: mkts pricing out tweets as not always indicative of actual reality
  FXI *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 *Brexit caps gains
  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 *sanctions provide a pop to crude, longer term price positive as economies reopen
Ratings    
  RATINGS (RATC)  
     
COT Flows VIX *shorts increase
     
     
     
Mkt News:    
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
chatter Microsoft interested to buy Bloomberg  
Canada losses Fitch AAA rating  



Felix Wun
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Danny Riley
MrTopstep.com

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