Goldman: "A Day Characterized By Broad-Based Liquidation"

From Goldman's sales and trading desk

Equities suffer their biggest single day loss on the year with financials performing the worst. The uncertainty surrounding the Italian election was the clearest negative catalyst, but the price action in USDJPY surely adding to the nervousness. SPX ends down 28 to close 1488 (-1.83%). The DOW ends down 216 to close 13784 (-1.55%). The NASDAQ ends down 46 to close 3116 (-1.44%).

The VIX closes up almost 5 handles at 18.99. Today was also the largest day by volume for the front-month VIX contract.

Popular positions were under significant pressure in FX today. EURUSD and EURJPY initially hit on the back of Italian elections headlines. That eventually brought about EURCHF stops (sub 1.2260) and eventually significant USDJPY stops (through 93.00 and all way down to a low 90.85).

Treasuries rallied sharply on the day in line with the broader risk off move. 10s rallied nearly 10bp on the day though flows were skewed towards better selling – hedge funds selling in the belly in both cash and swaps as accounts looked to fade the rally. Later in the day flows shifted as tactical shorts looked to cover.  We also saw better paying from real money in the back end. In Europe, we saw a sharp reversal in Italy as polls suggested risk of a hung parliament – flows were skewed towards selling of 5y and 10y Italy from domestic, levered, and European real money accounts.

Gold finished up $11.60 to 1593.50 on a day characterized by broad based liquidation in the macro markets. Expectations of colder weather pushed natural gas prices much higher today with Apr trading up 12c to 3.47 (+3.61%). Base metals was a bit of a mixed bag but Nickel once again the biggest underperformer shaving $270 (-1.59%)

Credit was driven by the macro environment today as the credit indices led single names wider. IG19 ended +3.66bp to 90.125bp, and HY19 was -.69pts to 101.969pts. In Europe, iTraxx MAIN S18 closed +.38bp to 113.25bp, and iTraxx XOVER S18 finished +3.25bp to 443.25bp.


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