"There’s No Place For Hope On Friday the 13th" - Rout Post-Mortem With Goldman
It is always interesting to see how Goldman's sales deks views the day's action.
All might be well in China, but Europe again is a cause for serious concern. Spain is the victim of the most intense violence – CDS trades to new all-time wides, and local banks sent nearly 5% lower. The hope might have been that once European markets closed, US equities would recoup losses. But there’s no place for hope on Friday the 13th, and stocks close at the low. The post-close price action in futures was even worse as ES1 drops further still. Back below the 50d again. Perhaps spillover from weakness in European financials, but problematic as tech, the other obvious leader of the year’s rally, is also flagging. SPX drops 17 to close 1370 (-1.25%). The DOW drops 137 to close 12850 (1.05%). The NASDAQ drops 44 to close 3011 (-1.45%).
The VIX up 2.35 to 19.55.
With Spanish CDS trading 500 for the first time ever, no surprise that the EURO is under pressure. Perhaps surprising that the pressure wasn’t more intense as the recent low still holds and vol, while picking up a bit on the day, is still very near multi-year lows. Notable weakness in MXN as well, as positioning continues to mean a bad day for risk means a very bad day for the currency. USDJPY back to its old, boring ways – 40 pip range today despite the happenings elsewhere. SGD manages to hold onto most its post-MAS gains despite a very negative day for risk assets.
Continued concerns over Europe + equity sell-off = rally in Treasuries. Hard to believe we have rallied back to levels from before the breakout in rates a month ago, with 10y yields back below 2%. Flows were light on the day. Some real money buying the belly before the CPI data and leveraged buying in 5s post-data. While we saw some interest in fading the move near the highs, Treasuries still went out at the highs of the day.
Metals led us broadly lower in commodities on weaker headline data from China and a USD rally overall – gold down 1.1% and silver down 2.2%. WTI down 0.8% while brent manages to finish up 0.1%. In ags: sugar down 3%, wheat down 2.2%, and corn down 1.3%.
Post China GDP and ECB headlines, credit sold off with the market finding support at 100.375 for IG and 95.125 for HY; following HY dropped 0.5 with no buyers. IG closed at 102 and HY closed at 94.875.