Goldman Summarizes Today's "Serious Pain In Risk Assets"

Tyler Durden's picture

From Goldman's sales and trading team. Remember: Long S&P 500 (in AUD terms) is one of the FDIC-backed hedge fund's top client recommendations of 2014. As if, of course, shorting gold.

Equities have the worst day of the year and really no exchange around the globe was left out. Now every one on our screen is down YTD. For US markets, today was the worst day since last June. Overall, while today was active, it was still an orderly session. We did have some interest to buy topside options. All sectors in the red with Telecom hardest hit -3.7%. Closes: SPX -2.3% to 1741.25; DJIA -2.1% to 15372.8, NASDAQ -2.6% to 3996.96.

 

The VIX is up 2.68 to 21.14.

 

FX symptomatic of the larger risk off move with EM weaker across the board: MXN -1.35%, BRL -1.1%, ZAR -1.3%, and TRY -1.2%. In G10, the price action was more concentrated with JPY +1.0% which intraday broke below 101 to a 3-month low of 100.77 before recovering slightly. USDJPY is looking increasingly shaky as the Nikkei continues to get hit, now down over 10% YTD. AUD and CAD hold in well, CAD actually +0.3% today and we didn’t see position unwinds there.

 

Serious pain in risk assets lent a bid to US treasuries as yields continue to retreat from their New Years’ day highs. Weak ISM Manufacturing exacerbated the downward pressure on yields in a market already feeling a flight to quality bid on the back of weakness in NKY and Eurostoxx. Flows in the morning were relatively muted despite huge volumes in futures. Notable flows in the afternoon were many non-traditional users of USTs buying the belly in small clips that ultimately amounted to considerable net buying. Also notable, considerable activity in TYH 125 puts today as over 100k contracts were traded by lunchtime. 10s and bonds lead the rally, both finishing 7bps stronger at 2.577% and 3.531% respectively.

 

Gold traded within a $5 range during Asia and London hours but spiked abruptly after ISM data came in well below expectations, touching an intraday high of 1266.40 before calming down to about 1261 +1.33%.  Base metals was once again weaker today as aluminum fell 1.70% marking an 8% decline since 17Jan14. The crude complex was broadly weaker in line with the move in equities but Brent found in particular found a bid around noon, trading up to 106.15 from an intraday low of 105.50.