Did stocks window dressing come one day early in this volatile, bipolar, stop-hunting, HFT-infested market? Looking at futures this morning, which are down about 12 points already on yet another surge in the USD which has sent the EURUSD just above 1.07, the lowest since March 20 , and the USDJPY back under 120 now that the “strong dollar is bad for stocks after all” algo seems to be back from vacation, all those hedge funds who chased risk higher yesterday because their peers did the same, may find they are all selling on the way down. It will be oddly ironic if all of yesterday’s widely touted gains evaporate comparably in the first 10 minutes of trading today, and lead to an end in the longest streak of quarterly increases in two decades.
To be sure, China already did, with another early surge in the SHCOMP seeing a 1% pull back in late trading, driven by reports of foreigners getting out ahead of the inevitable tsunami of local high schoolers selling. Japan did not fare much better and the Nikkei also dropped 1% as the last day of the month across Asia has seen broad based selling. For now Europe is buckling the trend with Eurostoxx up modestly, however with newsflow out of Greek negotiations hardly favorable, the question is will the weakness in the EUR be enough to offset yet another day of fundamental insecurity about the future of the Eurozone. As a reminder, every day that Greece remains without a deal is one day closer to a bankruptcy and/or bank run that tips its banks over the edge leading tot he same outcome.
Crude likewise has seen a bout of weakness driven by the drop in the EURUSD, as well as reports from ISNA that a draft agreement was being written up between western powers and Iran over the country’s nuclear enrichment program. As a result Brent extends its drop into the 3rd day, falls below $56 with WTI under $48 as Iran nuclear talks move into final day of high-level diplomacy. Events in Yemen, outcome of Nigeria elections also watched. “The main thing the mkt is looking at is the headlines out of Lausanne, where it looks like at least they will reach a political agreement ahead of today’s deadline,” Petromatrix oil analyst Olivier Jakob told Bloomberg. “There is still a bit of a question mark on sanctions and the pace of returning oil, but it is heading too that and more supply on the mkt and that is not good in terms of price.” Keep an eye on flashing red Iran headlines which will likely led to even more jagged and stop-hunting WTI trading this morning.
Crude futures and metal prices trade lower this morning alongside another climb higher in the USD which has caused WTI and Brent to fall over USD 1 and Brent edging back towards USD 55 amid a de-escalation of concerns over Yemen.
On the macro front there has been little news this morning or overnight, which means equity indices in Europe trade only marginally higher although the FTSE 100 is underperforming alongside lower crude and metals prices. On the subject of UK asset classes, GBP saw a small lift following a slightly higher than expected revision for Q4 GDP at 0.6% vs. Exp. 0.5% Q/Q, however this failed to dictate medium-term price action. Tobacco names in the UK are underperforming in early trade after early reports from the NY Post that FTC staff are recommending a suit to block the USD 27bln merger of Reynolds American (RAI) and Lorillard (LO). Although today sees the final trading day this month and quarter, markets are relatively quiet heading into the Easter weekend and market closes on Friday. This means fixed income markets have seen little price action this morning and trade largely range-bound. European equities then trimmed their gains following disappointing Eurozone CPI and unemployment figures, the unemployment rate coming in higher-than-expected and January’s reading also revised higher.
Regarding Greece, EU’s Tusk said that a deal for Greece could still get completed by end of April but does not expect anything before Easter. Greek press TVXS then reported that officials have said an agreement is very close for Greece and could come within the next 1 or 2 days, however, officials from Greece said a deal had not been agreed with the Troika and talks could continue into next week.
