JPMorgan Says Volatility Turning From Market Foe to Friend
Joanna Ossinger – Bloomberg
Volatility in stocks and bonds has ebbed to levels that could boost markets rather than fuel more turbulence, according to JPMorgan Chase & Co.
Price swings are getting muted as central banks and governments around the world provide unprecedented packages of stimulus to cushion the economic hit from Covid-19. That’s improving conditions in funding markets, market liquidity and deleveraging by value-at-risk sensitive investors — three key areas for volatility — according to strategists led by Nikolaos Panigirtzoglou.
Legendary emerging markets investor Mark Mobius warned that stocks could see a ‘double bottom’ as the coronavirus lockdown tanks the US economy
Saloni Sardana – Markets Insider
A recent recovery in financial markets after weeks of intense turmoil is likely to be short-lived, according to legendary emerging markets investor Mark Mobius, who warned Tuesday of the “incredible” implications of the global coronavirus shutdown.
Mobius, the founder of the eponymous Mobius Capital, said markets have the potential to sink even further as banks begin posting their earnings during ongoing volatility caused by the coronavirus pandemic.
JPMorgan Chase and Wells Fargo braced for sharp rise in credit losses
Laura Noonan and Robert Armstrong – Financial Times
JPMorgan Chase and Wells Fargo reported steep falls in first-quarter earnings as the two US banks increased loan-loss provisions by $10bn from last year to prepare for the ultimate impact of the coronavirus pandemic.
Jamie Dimon, JPMorgan’s chief executive, said his bank was bracing itself for “the likelihood of a fairly severe recession”, while his counterpart at Wells, Charlie Scharf, warned of increasing economic pain to come.
Crude Oil Options are Predicting Lasting Volatility
Owain Johnson and Jeff White – OpenMarkets
While all eyes have been on the huge fall in the outright price of crude oil, the oil options markets are also sending plenty of signals about market expectations for the longer-term impact of COVID-19. The price of benchmark WTI crude oil fell from an average of over $57 per barrel in 2019 to reach the low $20s by the end of the first quarter of 2020. Global demand for many of the refined products made from crude oil – particularly gasoline and jet fuel – has collapsed in the wake of the restrictions on movement introduced to combat the spread of COVID-19.
US confident of ‘fundamental shift’ in oil politics
Demetri Sevastopulo and Derek Brower – Financial Times
The US energy secretary says Washington’s success in pushing Russia and Saudi Arabia to end their oil price war marks a “fundamental shift” in global oil politics, which has been made possible by its own self-sufficiency.
Dan Brouillette told the Financial Times in an interview that the shale energy revolution had “dramatically” elevated the US’s negotiating power compared to its position in dealing with previous global crises.
Glutted Oil Markets’ Next Worry: Subzero Prices
Sarah Toy – WSJ
The coronavirus pandemic is turning oil markets upside down.
While U.S. crude futures have shed half of their value this year, prices for actual barrels of oil in some places have fallen even further. Storage around the globe is rapidly filling and, in areas where crude is hard to transport, producers could soon be forced to pay consumers to take it off their hands—effectively pushing prices below zero.
****JB: I’ve got some room in my closet…maybe clear out my storage locker.
Tesla Stock Rides Seven-Session Winning Streak, Rising 56%
Alexander Osipovich – WSJ
Tesla Inc. shares extended their winning streak to seven sessions, rebounding to levels not seen since early March, before the Covid-19 pandemic took a huge bite out of the company’s stock. The electric-car maker’s shares rose 9.1% to $709.89 on Tuesday after Credit Suisse upgraded Tesla, saying it was better positioned to emerge from coronavirus-related disruptions than other car makers. Those gains extend Tesla’s rally since April 2 to 56%. Over the same period, the S&P 500 has gained 13%.
Exchanges and Clearing
Eurex Exchange’s Quarterly Equity Derivatives Highlights – Q1/2020
The first quarter of 2020 was undoubtedly a unique market environment. We didn’t just have to deal with the particularly high volatility but also the other fall-out caused by the COVID-19 pandemic. The index and single stock derivatives markets experienced a situation of uncertainty based on postponed AGM’s, the respective dividend payments, and also potential reductions of announced dividends.
Regulation & Enforcement
Banks, borrowers neglect Libor plans in coronavirus maelstrom
Sinead Cruise and Lawrence White – Reuters
Banks and the businesses they lend to are putting the brakes on preparations for the end of Libor, industry sources say, because they are too busy grappling with fallout from the coronavirus to deal with the complexities of interest rate benchmarks.
CFTC advances bankruptcy regime update, four other rulemakings
Jeff Reeves and Will Acworth – FIA.org
The U.S. Commodity Futures Trading Commission moved forward on five rulemakings at an open meeting on April 14, the first since the U.S. government switched to a work-from-home policy to contain the spread of the novel coronavirus. The agency’s five commissioners discussed the rulemakings via a conference call, and the discussion was broadcast to the public via the CFTC’s website.
A proposal to adopt a new rule of The Nasdaq Stock Market LLC NOM titled Transfer of Positions within NOM Options 6 Section 5
Dividend Suspensions And One Increase, JNJ
We have seen many dividend suspension since the corona chaos, but this morning we have an announced increase in dividends from Johnson & Johnson (JNJ). JNJ announced earnings this morning and its dividend that will go ex on 5/22/2020 and raised div from $0.97 to $1.01 a change of +4%. JNJ is up 3% to $144 in pre-market trading. ORATS earn move report below reflects the options market expectation of a $2.82 move by the close today.
The Principles of VIX Trading (podcast)
RCM Alternatives blog
The early world of VIX trading can be closely likened to the wild, wild West – or as some say – fun. Competition was lower, there were less algos and AI integration, and overall had lower volume and liquidity. And now – the VIX is an established and globally recognized gauge of U.S. equity market volatility that’s widely traded. There’s some similarities, and some differences, but there’s not a plethora of people who traded (and are seen as experts) in both.
Webinar: Protective Puts & Stock Repair Strategies
We’ve all heard the myth of how risky options trading can be. But did you know that options are often used to avoid or mitigate risk? If you’ve ever thought about how you might protect your long stocks or ETFs, or even how to recover from a position that’s gone against you, OIC has a webinar you can’t miss.
Will mutual funds get a second wind… as ETFs?
Andrea Riquier – MarketWatch
Call it “the ETF-ication of everything.”
Exchange-traded funds, which debuted in 1993, have remade the financial services industry in their image. Brokerages are making assets more tradable. Fund managers are targeting narrower slices of the market as investing strategies. Fees are being slashed across the board.
And now ETFs are coming for mutual funds, those clunky, expensive financial products that defined the late 20th century. Industry participants see a coming wave of mutual funds being converted into ETFs as inevitable, as a confluence of legal and regulatory shifts makes it possible and recent market volatility proves ETFs are the more reliable option.