Morning Thoughts 31-03-2021

[Rintel]

Morning before we begin, if you guys wana check out the market news scroll right to the bottom.  Right! Let's get to the show. 

👇👇

Well, the volatility I was hoping for didn’t manifest itself. Not to worry, I was able to get my order filled for LVS@ 61.15  with a size of roughly 270 basis points. Leaving an extra 230 for any new buying opportunities we may potentially have. As of today pnl is sitting at -3basis points. 

  Now on to this morning’s note, here are a few things that jumped out at me this at 4:55 whilst I was making my notes .

Commodities are starting to look interesting again (CRB daily) With the dollar breaking out to 93.4 throw in  a higher high and a higher low plus it is sitting right at the top of its volatility adjusted range, I have not been doing this for very long but these are the setups I like for long term positions Now, two things could happen , it either breaks and accelerates higher or it corrects and resumes its downward path . Either way, we gonna get a trend. It’s either gonna be a commodity rally in which case I like the look of the “Natty Gassie “, the CRB index or it’s a dollar wrecking ball then I like the look of the UUP etf. We will know one way as the other as this situation unfolds. I am very bullish on growth and the economy especially for countries who are far ahead in terms of rona vaccinations. So any wobbles I will take as an opportunity to purchase things that I like . 

 Bonds are moving again with the 10yr now at 1.72 within a bullish trend , plus a top range of 1.74 and a lower range of 1.57. Traders who are short the TLT should probably collect some profits here. 

Bond volatility is sitting comfortably at 67.4 with more potential room to run at a top range of 76 and a bottom range of 60.

The almighty vix (19.6) is still within a bearish trend with occasionally bullish signals. The range on that is 17.4 on the low end vs a top end of 21.8.

Looking back at the last few months it should be noted that the volatility of the vix has been increasingly compressed ie bearish for the vix the fore bullish for stonks. 

 

For the FTSE it’s up 0.06% since Monday and still within a bullish trend. Top end of the range for that is 6825 vs the lower end of the range @6675. In terms of risk reward you have about 0.84% upside vs 1.4% downside. Which isn't very enticing IMHO.

 If you are wondering how I came about the numbers it's volatility adjusted rescaled range that shows potential statistical trading ranges for assets. If you want daily trading ranges for stocks you like send me a ping and I will run the model to calculate it for you. 

So that's all from me for now. Keep scrolling down for market and macro economic news that I found useful when taking my morning notes hope you them useful. 

Good luck out there!!

In The News

Markets

 

Asia Stocks Dip, U.S. Futures Hover as Yields Rise

 

Asian stocks edged lower Wednesday amid upward pressure on bond yields as investors await more details on the next leg of U.S. stimulus spending. The dollar extended gains as it wraps up its best quarter in a year.

 

Banks weighed on Japan’s equity gauge after Mitsubishi UFJ Financial Group Inc. joined the list of firms globally to take a hit from the meltdown at Bill Hwang’s Archegos Capital Management. Chinese shares retreated while Australia’s index outperformed. U.S. equity futures steadied after a lower close for the S&P 500 Index.

 

Ten-year Treasury yields advanced again in Asian trading, having touched a 14-month high of 1.77% before subsiding overnight. Gold traded around multi-month lows under $1,700 per ounce. Oil was steady before the April 1 meeting of OPEC and its allies.

 

Investors are watching the course of the U.S. growth rebound and its possible impact on inflation, amid concerns that a renewed rise in bond yields could hit some stocks. President Joe Biden is poised to unveil a large infrastructure package, and key jobs data are due Friday. The International Monetary Fund will upgrade its forecast for global economic growth next week.

 

“It’s a really challenging market right now, very volatile, very rocky,” Terri Spath, Zuma Wealth chief investment officer, said on Bloomberg TV. “Although a lot of the economic data is improving, overseas and in the U.S., we are still in a very fragile place. You need to be cautious at this point because you will have some opportunities to buy at lower levels in the near future.”

 

Asian shares defensive, set for monthly loss on bond rout

 

Asian stocks were on the backfoot on Wednesday while the safe-haven dollar held near a one-year high as Treasury yields resumed their upward march, hitting sentiment even as Chinese data underpinned signs of a solid global economic recovery.

 

MSCI’s broadest index of Asia-Pacific shares outside of Japan eased from a one-week high of 682.36 points to be last at 680.04 and still a fair distance away from an all-time peak of 745.89 touched just last month.

 

For the month so far, the index is down 1.6% to be on track for its first loss in five months. It is poised for its fourth consecutive quarterly gain though it would be the smallest increase since a 21% fall in March 2020 when the coronavirus pandemic brought the world to a standstill.

 

“Markets are watching closely to gauge the damage and potential ripple effects caused by the Archegos Capital Management crisis,” ANZ analysts wrote in a note.

 

Some global banks are facing billions of dollars in losses after U.S. investment firm Archegos Capital Management LP defaulted on margin calls, putting investors on edge about who else might be exposed.

 

Oil market seeks cues from cautious Saudi Arabia, as OPEC+ mulls May production plans

 

Saudi Arabia has a 1 million b/d question to answer.

 

The OPEC kingpin has been cutting its crude production by that much below its official quota the last two months, bolstering oil prices against the unsteady pandemic prognosis.

Now as OPEC and its allies prepare to meet April 1 to decide on May output levels, the market awaits word from Saudi energy minister Prince Abdulaziz bin Salman on when the kingdom will begin easing its production restraint.

 

Early indications are that it may not be soon.

 

Faltering oil prices in recent days after a weekslong surge to around $70/b have many analysts forecasting that the so-called OPEC+ group may largely roll over its quotas for at least another month.

 

The OPEC secretariat itself is less bullish than it was just three weeks ago and is revising down its forecast of 2021 oil demand growth to 5.6 million b/d, after officials determined March 30 the previous estimate of 5.9 million b/d was overly optimistic, delegates told S&P Global Platts. The new projection has yet to be finalized.

 

While setting OPEC+ quotas requires unanimous consent among the coalition's nearly two dozen members, Saudi Arabia's voluntary cut is a unilateral decision, making Prince Abdulaziz's reading of the market's tea leaves the focal point of the week.

 

The OPEC+ deliberations will begin with a March 31 virtual meeting of the Joint Ministerial Monitoring Committee, which the prince co-chairs with Russian counterpart Alexander Novak, before all 23 OPEC+ ministers convene online on April 1.

 

Brussels squares up to UK in fight over euro swaps clearing

 

The EU is gearing up for a campaign to seize greater control of one of the City of London’s most prized assets: its dominance over the clearing of €81tn worth of derivatives contracts that are vital for global businesses.

 

François Hollande fired the starting gun less than a week after the UK’s shock decision in June 2016 to leave the EU, with the French president at the time warning “the City, which thanks to the EU, was able to handle clearing operations for the eurozone, will not be able to do them”.

 

Five years later, the UK still controls 90 per cent of euro swaps clearing, an issue that is causing increasing angst in Brussels and across EU capitals as Britain’s financial regulations begin diverging from those in the bloc.

 

“We are facing a reality — the current concentration is clearly unsustainable,” a senior EU official told the FT.

 

Swaps are widely used by companies to protect themselves against unfavourable changes in interest rates. Brexit has also reshaped trading of euro swaps, pushing it out of the UK capital to EU cities like Paris and Amsterdam as well as across the Atlantic to Wall Street.

 

US storage fields post first net injection of year due to mild weather

 

US storage fields posted the first net injection of the year in the week ended March 27, according to a survey of analysts, which is one week earlier than normal, while the Henry Hub summer and winter strips slipped slightly to $2.70/MMBtu and $2.90/MMBtu, respectively.

 

The US Energy Information Administration is expected to report a 19 Bcf injection for the week ended March 26, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from an 8 to 30 Bcf injection. The EIA plans to release its weekly storage report on April 1.

 

The forecast increase in storage would be a dramatic change relative to last year and the five-year average, which saw inventories decrease by 20 and 24 Bcf, respectively. When compared with the prior week, milder temperatures weighed on demand and loosened balances.

 

The EIA will most likely announce the first injection of the year primarily due to the arrival of mild, spring temperatures, especially towards the end of the week to March 26, according to S&P Global Platts Analytics. However, at the same time, non-weather related demand continues to increase from LNG exporters and industries recovering from the February freeze. These non-weather factors will play a key part in the coming injection season on whether storage can build back to year-ago levels.

 

Cathie Wood sees bright prospects for China’s tech disrupters

 

Cathie Wood, founder of Ark Investment Management, has thrown her support behind the growth prospects of China’s tech disrupters, despite recent headwinds that have wiped months of gains from tech shares.

 

Wood, who has risen to investment stardom over the past year by earning huge profits from heavy bets on Tesla and other fast-growing US tech giants, spoke to the audience of an online webinar in March, alongside Li Yimei, Beijing-based chief executive of China Asset Management.

 

She highlighted the rise of “disruptive innovation platforms” in China rather than individual companies, which she believes to be the more fundamental forces for exponential growth, including DNA sequencing, robotics, energy storage, artificial intelligence and blockchain. “The US has had a huge lead in a lot of innovation over the years. But now countries are competing with us,” she said.

 

“Competition in technology is a really good thing, in terms of moving the technology forward faster than otherwise would have been the case,” Wood added.

 

Europe

 

UK calls for world to ‘get tough’ with China as part of global trade shake-up

 

Britain’s international trade secretary has called for the world to “get tough with China” as part of a shake-up of the global trading regime, which she claims is “stuck in the 1990s”.

 

Liz Truss will on Wednesday urge the US and other G7 countries to work to revive the World Trade Organization, which has been caught in the crossfire between Washington and Beijing.

 

Speaking ahead of a virtual meeting of G7 trade ministers — the UK is the current chair of the group of advanced economies — Truss urged the US to put its weight behind the daunting task of reforming the WTO.

 

But she argued that any changes had to include a tough approach to Beijing; former US president Donald Trump said the WTO gave special treatment to China, because of its official designation as a “developing country”.

 

“The WTO was established when China was 10 per cent the size of the US economy,” Truss told the Financial Times in an interview. “It is ludicrous that it is still self-designating as a developing country — and those rules need to change.”

 

UK employers turn much more confident about hiring - REC

 

British employers are turning much more confident about hiring staff as the country speeds ahead with its coronavirus vaccination programme, a survey showed on Wednesday.

 

The Recruitment and Employment Confederation (REC) said confidence in hiring rose six percentage points to a net level of +16 in the three months to February 2021.

 

In February alone, it jumped to +29.

 

“Recruiters report that this latest lockdown has been much less damaging than many feared back in January,” Neil Carberry, chief executive of the REC, said.

 

“There is still widespread pessimism about the wider economy, but that may be because respondents fear for sectors that have been shut down during lockdown.”

 

Employers were relying mostly on temporary hiring, a sign of caution about the outlook, and there were concerns about shortages of construction workers, the REC said.

 

Germany to Bar AstraZeneca Vaccine for Those Under 60 Starting Wednesday

 

Chancellor Angela Merkel said Germany will halt the use of AstraZeneca Plc’s Covid vaccine for people younger than 60 starting on Wednesday after new cases of rare blood clots emerged.

 

The policy change, endorsed by state health ministers, came after the release of new data on potential side effects of the vaccine. Germany’s vaccination commission said the shots should only be administered to older people as those very rare side effects predominantly occurred in the younger recipients.

 

“These are findings that we and the vaccine commission cannot ignore,” Merkel told reporters Tuesday night. “We all know that vaccination is the most important tool against the coronavirus -- that we have different vaccines at our disposal is our good fortune.”

 

The move marks an astonishing about-face after Germany and other European countries first endorsed the use of the shots only for younger people, amid an initial lack of data for those over 60. They later recommended the use for everyone. Then, earlier this month, a number of countries including Germany temporarily suspended the jab before resuming it after the European Union’s drug regulator said it was safe.

 

Americas

 

Volkswagen U.S. Name Change Was April Fool’s Joke Gone Awry

 

Volkswagen of America’s purported name change to “Voltswagen” was an April Fool’s joke gone bad.

 

On Monday, the automaker briefly posted, then removed, a draft press release on its website related to branding, sparking media speculation that company was changing its name to promote electric vehicles. VW published the announcement in full on Tuesday, pledging to rebrand as “Voltswagen” in the U.S., “a public declaration of the company’s future-forward investment in e-mobility.”

 

Later Tuesday, the company fessed up.

 

“The renaming was designed to be an announcement in the spirit of April Fool’s Day,” VW said in a statement after removing the release from its U.S. media site. “We will provide additional updates on this matter soon.” Earlier, a VW spokesperson at the German manufacturer’s headquarters in Wolfsburg called it “an interesting idea” from the marketing department.

 

U.S. Home Prices Rise at Fastest Pace in 15 Years

 

U.S. home prices are rising at the fastest pace in 15 years, reflecting how fiercely buyers are competing for a limited supply of homes in nearly every corner of the country.

 

From small cities like Bridgeport, Conn., to large ones like Seattle, prices have been steadily moving higher. Two closely-watched house-price indicators released Tuesday posted double-digit national price growth, demonstrating the widespread strength of the market.

 

A number of forces have merged to fuel the red hot housing market, including mortgage rates dropping below 3% in July for the first time ever. Millions of millennials are aging into their prime-homebuying years in their 30s. New-home construction has lagged behind demand and homeowners are holding on to their houses longer.

 

The coronavirus pandemic has turbocharged this demand. Many Americans sought homes with more space to work remotely during Covid-19, or felt freed to move farther from their offices.

 

At the same time, the pandemic worsened the already severe shortage of homes for sale. Low interest rates prompted more homeowners to refinance and stay put instead of moving. Others delayed their moves due to concern about virus exposure, according to real-estate agents. Even as home builders have ramped up the pace of new construction in an effort to keep up with demand, they are limited by rising material costs and shortages of land and labor.

 

“It really can only be characterized as a super sellers’ market, not even just a sellers’ market,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “The supply-demand imbalance isn’t going away anytime soon.”

 

APAC

 

U.S. trade war pushing China to steal tech, talent, Taiwan says

 

The China-U.S. trade war is pushing Beijing to step up its efforts to steal technology and poach talent from Taiwan to boost China’s semiconductor industry’s self-sufficiency, the government of the tech-powerhouse island said on Wednesday.

 

Washington has taken aim at China’s tech industry during the bitter trade dispute, putting sanctions on firms including telecoms equipment giant Huawei Technologies Ltd, saying they are a threat to national security, angering Beijing.

 

Chinese-claimed Taiwan is home to a thriving and world-leading chip industry, and the government has long worried about China’s efforts to copy that success, through fair means or foul.

 

Speaking at a parliamentary committee meeting on how to respond to the “red supply chain” - a reference to the colour of China’s ruling Communist Party - Taiwan Economy Minister Wang Mei-hua said the trade war had created new risks.

 

Database reveals secrets of China's loans to developing nations, says study

 

The terms of China’s loan deals with developing countries are unusually secretive and require borrowers to prioritise repayment of Chinese state-owned banks ahead of other creditors, a study of a cache of such contracts showed on Wednesday.

 

The dataset - compiled over three years by AidData, a U.S. research lab at the College of William & Mary - comprises 100 Chinese loan contracts with 24 low- and middle-income countries, a number of which are struggling under mounting debt burdens amid the economic fallout from the COVID-10 pandemic.

 

Much focus has turned to the role of China, which is the world’s biggest creditor, accounting for 65% of official bilateral debt worth hundreds of billions of dollars across Africa, Eastern Europe, Latin America and Asia.

 

“China is the world’s largest official creditor, but we lack basic facts about the terms and conditions of its lending,” the authors, including Anna Gelpern, a law professor at Georgetown University in the United States, wrote in their paper.

 

The researchers at AidData, the Washington-based Center for Global Development (CGD), Germany’s Kiel Institute and the Peterson Institute for International Economics compared Chinese loan contracts with those of other major lenders to produce the first systematic evaluation of the legal terms of China’s foreign lending, according to CGD.

 

Their analysis uncovered several unusual features to the agreements that expanded standard contract tools to boost the chances of repayment, they said in the 77-page report.

 

Middle East

 

U.S. open to discussing wider nuclear deal road map if Iran wishes

 

Efforts to sketch out initial U.S. and Iranian steps to resume compliance with the 2015 nuclear deal have stalled and Western officials believe Iran may now wish to discuss a wider road map to revive the pact, something Washington is willing to do.

 

U.S. President Joe Biden’s aides initially believed Iran, with which they have not had direct discussions, wanted to talk about first steps toward a revival of the agreement that Biden’s predecessor, Donald Trump, abandoned in 2018.

 

The agreement eased economic sanctions on Tehran in return for curbs to the Iranian nuclear program designed to make it harder to develop an atomic weapon - an ambition Tehran denies.

 

Three Western officials said the Biden administration and Iran had mainly communicated indirectly via European parties to the deal - Britain, France and Germany - and that they believe Iran now wants to discuss a broader plan to return to the pact.

 

“What we had heard was that they were interested first in a series of initial steps, and so we were exchanging ideas on a series of initial steps” said a U.S. official who, like others cited in this story, spoke on condition of anonymity.

 

Turkey logs highest new coronavirus cases since beginning of pandemic

 

Turkey has recorded 37,303 new coronavirus cases in the space of 24 hours, the highest number since the beginning of the pandemic more than a year ago, health ministry data showed on Tuesday.

 

The government had said on Monday it would tighten restrictions on movement and gatherings because of rising infections, less than a month after easing them.

 

President Tayyip Erdogan announced the tightening, including the return of full nationwide weekend lockdowns for the holy Islamic month of Ramadan.

 

The latest daily death toll was 155, bringing the cumulative toll to 31,385, according to the data.

 

Iran rejects ending 20% enrichment before U.S. lifts sanctions - state TV

 

Iran will not stop its 20% uranium enrichment before the United States lifts all sanctions, Iranian state TV quoted an unnamed official as saying on Tuesday, as Washington considered ways to jump-start nuclear talks.

 

The Biden administration has been seeking to engage Iran in talks about both sides resuming compliance with the 2015 nuclear deal. The agreement removed economic sanctions on Tehran in return for curbs on Iran’s nuclear program to make it harder to develop a nuclear weapon - an ambition Tehran denies.

 

“A senior Iranian official tells Press TV that Tehran will stop its 20-percent uranium enrichment only if the U.S. lifts ALL its sanctions on Iran first,” state-run Press TV said on its website.

 

That's really all for now. 

CA