As we previously noted, while speculatrs had been reducing their shorts in Treasury futures, they had added to Eurodollar shorts - pushing their bets on Fed rate hikes to record highs. However, as Bloomberg notes, signals are starting to emerge that traders who built up that heavy short, or hawkish, eurodollar base since the start of 2016 could be starting to throw in the towel on a March Fed rate hike.
Tesla shares have quickly given up all gains from the better-than-expected earnings as the sell-side awaits more clarity on the cost and capital raise plans. One analyst specifically took aim at the fourth quarter results, calling out the beat as "phantom" given the exclusion of the SolarCity acquisition from consensus estimates.
Speaking at a Reuters activist conference, ValueAct's Jeffrey Ubben, said that his firm had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash. "I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth."
Since President Trump’s surprise victory over Hillary Clinton in November, investors and management teams have been acutely focused on the new administration’s policy proposals. As expected, all 4 key themes discussed on Q4 conference calls are closely linked to Trump's policies and include tax reform, regulation, fiscal spending and trade policy.
Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street.
After nearly a full month has passed since his original confirmation hearing back in mid-January, the Senate has finally voted to confirm former Goldman Sachs banker, Steven Mnuchin, as Trump's Treasury Secretary, adding one more official former vampire squid to the team of Trump's "Goldman Guys."
In December, Japan - the largest holder of Treasuries following China's recent sharp selloff - saw domestic investors dump their holdings of by the most since May 2013. “It was a deer in the headlights moment,” said Zoltan Pozsar, a research analyst at Credit Suisse, and it may be about to get much worse.
"We think a scenario where retail investors, corporates and financials all get much more optimistic at the same time needs to be respected. As TABX cratered and credit markets wavered in early 2007, the S&P 500 went on to make new highs, not peaking until October. Greed is a powerful force. We are trying not to forget that."
S&P futures rose further into record territory, European shares rose to within striking distance of their highest levels in more than a year while bonds fell and the dollar rose as investors cheered a surge in Chinese trade data amid hopes of "phenomenal" tax cuts by Donald Trump, all of which have rekindled the Trumpflation trade.
In a relatively quiet session, which may see US traders sleep in a bit after last night's Superbowl thriller, European and Asian shares rose ahead of Mario Draghi’s testimony at the European Parliament, while US equity futures were fractionally higher (up 0.1% to 2,293) after stocks jumped the most in a week, as traders assessed the trajectory for interest rates while scrutinizing every new Trump tweet.
“The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position,” Wolfgang Schauble told Tagesspiegel. “When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus . . . I promised then not to publicly criticise this [policy] course. But then I don’t want to be criticised for the consequences of this policy.”