Credit Suisse

U.S. Futures Slide, Crude Under $39 As Dollar Rallies For Fifth Day

Following yesterday's dollar spike which, which topped the longest rally in the greenback in one month, the prevailing trade overnight has been more of the same, and in the last session of this holiday shortened week we have seen the USD rise for the fifth consecutive day on concerns the suddenly hawkish Fed (at least as long as the S&P is above 2000) may hike sooner than expected, which in turn has pressured WTI below $39 earlier in the session, and leading to weakness across virtually all global risk assets.

Credit Suisse Blames "Worst January Ever" On Rogue Traders; Fires 2,000

When last we checked in on Credit Suisse, the bank had just reported its first annual loss since the financial crisis and the stock had plunged to its lowest level in a quarter century. Things have not gotten better since then. On Wednesday, CEO Tidjane Thiam announced his second restructuring plan in five months. "I will not be a hostage to fortune," Thiam told Bloomberg.

Frontrunning: March 23

  • Futures little changed day after Brussels attacks (Reuters)
  • Trump, Clinton win big in Arizona, but Cruz, Sanders show fight (Reuters)
  • Belgium identifies Brussels bomb suspect, suicide bombers (Reuters)
  • After Brussels Terrorist Attacks, Security Ramped Up in U.S. Cities (WSJ)
  • Terror Impact Threatens Cameron EU Pitch, Merkel's Open Door (BBG)
  • Brussels Attacks Will Jolt 2016 U.S. Presidential Race (WSJ)

Dollar Winning Streak Continues For Fourth Day Pushing Oil Lower; Futures Flat

Following two days of rangebound moves, where Monday's modest market rebound was undone by the Tuesday just as modest decline (despite the early surge higher on the latest "bullish for stocks" European terrorism), overnight equity action continued to be more of the same, and as of this moment S&P 500 futures were unchanged, while European stocks were modestly higher. But while equities remain surprisingly uneventful despite loud warnings by both JPM and Goldman now that another bout of volatility and equity downside is coming, in FX there has been a substantial change, one which has seen the US dollar rise for a fourth day, the longest winning streak in a month, driven by the latest round of hawkish Fed jawboning courtesy of the Chicago Fed's Charlie Evens yesterday, which in turn has pushed down prices of oil, gold and copper.

Soon After We Sounded The Alarm, Canada's Regulator Warns Local Banks Are Underreserved To Energy Losses

Two months after we first suggested that Canadian lenders are woefully underreserved to future oil and gas loan losses, we are happy to announce that Canada's regulator has heard our warning, and as the WSJ reported, "Canada’s banking regulator is urging the country’s major banks to review their accounting practices to ensure they have sufficient reserves as the commodity-price collapse takes a toll on the economy."

These Illiquid Companies Are Most At Risk During Today's S&P Rebalance

The one data set which may be most interesting to traders is the names which are the most illiquid and thus most likely to see material price movement as a result of today's rebalance. According to CS, it will be the following ten names, 8 of which it calculates will see a net outflow.

Another Fed "Policy Error"? Dollar And Yields Tumble, Stocks Slide, Gold Jumps

In the aftermath of the Fed's surprising dovish announcement, overnight there has been a rather sudden repricing of risk, which has seen European stocks and US equity futures stumble to roughly where they were when the Fed unveiled its dovish surprise, while the dollar collapse has continued, sparking deflationary fears resulting in treasury yields plunging even as gold soars, all hinting at another Fed policy error. So was that it for the Fed's latest intervention "halflife"? We don't know, but we expect much confusion today over whether even the Fed has now run out of dovish ammunition.

All Eyes On Yellen: Futures Flat Ahead Of Fed Meeting Expected To Usher In More Rate Hikes

Today Janet Yellen and the FOMC will go back to square one and try to reset global expectations unleashed by the ill-fated December rate "policy mistake" hike, when at 2pm the Fed will announce assessment of the economy, even if not rate hike is expected today. Just like in December the Fed will be forced to telegraph that it is hiking rates as a signal of a strengthening US, and global, economy where "risks are balanced" and hope that the subsequent global reaction will not be a rerun of what happened in January and February when confusion about the Fed's intentions led to a global market rout.

"It's The Q2 2015 Rally All Over Again" - Morgan Stanley Warns Big Oil Drop Imminent Due To "Rampant Hedging"

"The current setup is similar to 2Q15. Back in 2015, a rally in prices driven primarily by a USD pullback led to producer hedging and capped deferred prices at $65/bbl. This resulted in a flatter curve, but it also limited the rally in the front to $60 given the state of US inventories. The current rally mirrors this period in 2015 in many ways, only that producers are willing to hedge at much lower levels. As the USD and producer hedging reasserted themselves, that rally proved to be short lived."

Why Oil Producers Don't Believe The Oil Rally: Credit Suisse Explains

Locking It In. Since January, the spread between spot Brent prices and 2020 Brent prices has dropped nearly $8.00 to $10.71 per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. According to Reuters, the majority of selling has come from E&Ps looking to lock in prices to hedge against a repeat of last year's second half commodity price route. At the same time, the hedges indicate a lack of confidence that the current commodity rally will continue.

Goldman Gives Draghi An Ultimatum, But The ECB May Be Finally Ready To Snap

"The ECB needs to surprise this week, not because of markets, but because – given the trend in core inflation – the existing policy mix is behind the curve."- Goldman FX strategist Robin Brooks

"There is a refugee crisis; what could the ECB do? There is climate change; oh, the ECB needs to do something. I have the hiccups; oh, the ECB should do something ... it's crazy. I find this completely ridiculous and irresponsible. But we got ourselves into this" - ECB source.

It's Official: This Is The Biggest Short Squeeze Ever (And May Get Even Bigger)

US equity markets are soaring once again and two things are driving it - CTA-driven short-covering in commodities and the algo-driven squeeze of the most-shorted stocks. Having risen 13 of the last 16 days, "Most Shorted" stocks are now unchanged since The Fed rate-hike, soaring 25% in that time - the biggest squeeze in history. And Credit Suisse warns, it could get the dash for trash continues.