Market Wrap – U.S. Treasuries Solid Gains Across the Curve as Stock Markets De-Risking Continues

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    Markets continued down from yesterday trend breaks. Oil traded at new 5-year highs; U.S. Treasuries ended Wednesday with solid gains across the curve.
    [See the full post at: Market Wrap – U.S. Treasuries Solid Gains Across the Curve as Stock Markets De-Risking Continues]


    After close China cut Loan Prime Rates:

    1 year to 3.7% from 3.8% (Dec 2021 cut from 3.85% to 3.80%)
    5 years to 4.6% from 4.65% (First since April of 2020)

    NB: 5-year rate influences the rate on mortgages significant given Chinese property woes


    EUR, GBP, AUD, yen and CHF all higher against the USD

    Oil pulled back. ES higher


    Futures market points to another rebound try at the open
    Factors underpinning the positive bias:
    Belief market is in oversold condition and due for a bounce (Nasdaq down 10.7% from November closing high)
    PBOC cut 1-yr loan prime rate 10 bps to 3.70% and 5-yr rate 5 bps to 4.60%
    A burgeoning belief that the wave of Omicron infections in the U.S. has peaked
    President Biden concurs Fed needs to make policy moves to help rein in inflation
    President Biden not ready to lift import tariffs for China and thinks smaller parts of Build Back Better can still pass
    UAL and AAL report Q4 results. Both beat expectations but reaction to reports is mixed.
    Dow component TRV up 3.8% after topping Q4 EPS expectation by large margin
    Germany’s December PPI +5.0% m/m and +24.2% yr/yr
    10-yr note yield unchanged at 1.83%; 2-yr note yield up 3 bps to 1.04%
    WTI crude futures down 0.5% to $86.50/bbl; gold futures down 0.2% to $1839.50/troy oz.


    Upgrades: CME, ETSY, SEE, THC, UPS, and VRTX
    Downgrades: AMD, ASH, BLL, BURL, CVNA, F, IP, NXPI, USB, and WMT


    In Asia, China slipped 0.1% while Japan gained over 1%. The Shanghai was unable to hold gains despite getting off to a hot start after China cut both its one-year loan prime rate (LPR) and its five-year LPR, with the latter being the first reduction since April 2020. The five-year LPR acts as China’s reference rate for mortgages and helped property stocks. This had a greater impact on Hong Kong where the Hang Seng advanced over 3%. In Japan, stocks were in rebound mode. This is particularly true for some of the worst performing sectors from the prior session. Gaming stocks such as Konami and Sony took back 6%. Meanwhile, Toyota managed a 2% rise following its weakness on Wednesday.


    In Europe, the major bourses are in an early slump. The release of Germany’s PPI dampened spirits right out of the gate. The December print rose 5.0%, far exceeding the forecast of 0.8%. Puma is up 2% and among the standouts after the sportswear maker posted better than expected earnings on record sales


    Asia Closes

    Japan’s Nikkei: +1.1%
    Hong Kong’s Hang Seng: +3.4%
    China’s Shanghai Composite: -0.1%
    India’s Sensex: -1.1%
    South Korea’s Kospi: +0.7%
    Australia’s ASX All Ordinaries: +0.2%


    After claims

    2-yr: +3 bps to 1.04%
    3-yr: +2 bps to 1.33%
    5-yr: UNCH at 1.61%
    10-yr: UNCH at 1.83%
    30-yr: UNCH at 2.14%

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