Observations & Insight
Blue Skies In a Post-COVID World: Downside Doesn’t Look as Deep, SocGen Says
By Suzanne Cosgrove – John Lothian News
One day the world will recover from the COVID-19 pandemic, but what will a recovery look like and when will it take place?
Societe Generale’s Klaus Baader, global chief economist, and Sophie Huynh, cross-asset strategist for the French bank, tackled those questions in a webinar last week by outlining possible scenarios for 2020 and 2021, although they acknowledged that the outcome of the U.S. presidential election and prospects for a coronavirus vaccine remain unknowns.
To date, activity has sprung back powerfully in many economic sectors from the collapse that took place amid COVID-related lockdowns, Baader said, putting the U.S. and much of Europe in what he characterized as a V-shaped recovery from the shock of the pandemic. The U.S. and Europe took similar hits in exports, he noted, but the Euro zone’s recovery began sooner.
“However, the initial rebound was the easy part,” Baader said. The hard part is keeping the expansion on course, and it will inevitably slow beyond the third quarter, he said. Growth “will require continued fiscal and monetary policy support, as well as a sound balance between public health and economic concerns.”
To read the rest of this story, go HERE.
Kolanovic Says Selloff Over With Market Past Impact From Options
Sarah Ponczek – Bloomberg
The technology-led selloff that sent the Nasdaq 100 into a correction over a three-day span has likely run its course, according to JPMorgan Chase & Co.’s Marko Kolanovic.
The tech-heavy equity index rose more than 1% for the second straight day, led higher by gains in megacaps that were at the center of last week’s rout. To Kolanovic, the bank’s head of macro quantitative and derivatives research, renewed gains in the likes of Tesla Inc., Apple Inc. and Netflix Inc. signal that the options market’s grip on stocks has loosened.
Are higher Treasury yields coming? Options traders bet yes
April Joyner – Reuters
Options investors are positioning for rising Treasury yields, as improving data and rising hopes for a COVID-19 vaccine fuel bets on U.S. economic growth.
The average one-month put-call ratio on the iShares 20+ Year Treasury Bond ETF TLT.O stands near its highest level since the beginning of the year, according to data from Trade Alert, reflecting expectations that longer-dated bond prices will fall in coming months. Bond yields move inversely to prices.
U.K. to Fine London Trader for Recklessly Disregarding Colleague’s Concern
Jonathan Browning – Bloomberg
The U.K.’s financial watchdog said it planned to fine a London trader 100,000 pounds ($129,900) for market abuse after he “recklessly” failed to heed a colleague’s misgivings about his trading behavior.
Corrado Abbattista, the chief investment officer of Fenician Capital Management, placed orders for stock options that he didn’t intend to execute, the Financial Conduct Authority said Wednesday. Abbattista plans to appeal the ruling and denied his conduct amounted to market abuse, the FCA said.
Super-Rich Step Up Big Stock Sales After Global Prices Surge
Benjamin Stupples and Yoojung Lee – Bloomberg
Some of the world’s wealthiest people have sold more than $3 billion of stakes in their major holdings since August, diversifying their fortunes as stock markets rebounded.
Heinz Hermann Thiele offloaded about $1.2 billion in shares of Knorr-Bremse AG, the German brake manufacturer that underpins his fortune. Pieter van der Does and Arnout Schuijff, co-founders of Adyen NV, were part of a group of executives that sold stock in the Dutch payment firm worth $821 million, while Steven and Mitchell Rales pocketed almost $1 billion through Fortive Corp.
The S&P 500 will soon see more 3-7% drops followed by new highs in ‘stairstep’ rally similar to 2009, Wall Street strategy chief says
Emily Graffeo – Markets Insider
Investors should expect more drawdowns for the S&P 500 in the 3-7% range before the market “stairsteps” higher like it did in the 2009 recovery, according to Canaccord Genuity’s Tony Dwyer.
The chief market strategist said in a recent note that a pullback in favor of “economic recovery” sectors over stay-at-home stocks was expected, and the 7% correction in the S&P 500 over the last week has reflected that theme.
Exchanges and Clearing
Buy-side still overwhelmingly unprepared for uncleared margin rules from 2021; State Street polled 300 buy-side firms and found that less than a fifth were fully ready to comply with UMR from September 2021 or September 2022.
Joe Parsons – The Trade
A recent survey of asset managers and asset allocators has found the vast majority are still hugely unprepared for the uncleared margin rules (UMR) when it comes into force for them next year. The survey from State Street, which measured perceptions and readiness of 300 buy-side firms in 16 countries, showed 81% of firms with a September 2021 or September 2022 deadline are unprepared to comply with all facets of the rules.
US futures exchanges target retail investors with ‘mini’ contracts; New products come after rising stock markets lift notional value, and therefore fees, of popular bets
Philip Stafford – FT
The biggest US futures exchanges are producing miniature versions of some of their most popular contracts to attract traders being pushed out of the market by rising costs. CME Group, Intercontinental Exchange (ICE) and Cboe Global Markets have all created smaller versions of their widely traded futures contracts, which allow investors to place bets on the direction of share prices, for example, or the level of volatility in the market. The new products are a fraction of the cost to trade, as they come in smaller increments and are targeted at what the exchanges call the “sophisticated” retail investor.
MIAX Exchange Group – Options Exchanges – Have Declared Self-Help on ISE Options Exchange
MIAX Options, MIAX PEARL Options & MIAX Emerald Options Exchanges have declared self-help on the ISE Options Exchange as of 12:21.
All MIAX systems are operating normally.
If you have any questions please contact Trading Operations at (609) 897-7302 or TradingOperations@MIAXOptions.com.
SGX wins “Best Exchange for FX” at FX Markets e-FX Awards 2020
SGX (press release)
Award acknowledges SGX’s efforts to enhance capital efficiencies for market participants; bridging OTC and listed FX markets with its acquisition of BidFX as well as first-of-its-kind FlexC FX futures product offering Singapore Exchange (SGX) has been named “Best Exchange for FX” at the FX Markets e-FX Awards 2020. The awards have been running for 18 years in recognition of the best-in-class in electronic FX trading globally. In 2018 and 2019, SGX won the “Best FX Exchange in Asia” and “Best FX Clearing House in Asia” by FX Week, now known as FX Markets, following voting by banks, dealers, brokers and currency managers in the Asia Pacific region.
Salisbury BKT Securities replaces Bloomberg SSEOMS with Itiviti’s OMS solution
Manila, September 15, 2020 – Itiviti, a leading technology, and service provider of electronic trading and connectivity solutions to financial institutions worldwide, today announced that Salisbury BKT Securities Corporation (Salisbury Securities), an institutional Philippine stockbroker has deployed Itiviti’s OMS solution to replace Bloomberg’s SSEOMS platform.
The Democratization of Direct Market Access
Ahmed Heikal – Vela
Direct Market Access (DMA) has become increasingly pervasive across the industry in recent years, particularly amongst principal trading groups (PTGs). In fact, research from Acuiti shows that around 89% of PTGs now access markets directly, either through their own DMA platforms or those provided by a third party.
Election Volatility Is Here And Most Intense Than Ever
October is a historically volatile month (see Oct 08, Oct 87), and the VIX tends to peak in the month, “jumping to [a level of] more than 21… on average over the past 30 years” (CNBC), where we even get the so called October effect or Mark Twain effect. And this October is a particularly interesting month of market fear because not only is it election year – it’s an election involving one of our most volatile U.S. President’s of all time – a certain Trump.
The Finance 202: Investors have a new election worry: Not knowing who won for weeks
Tory Newmyer, Brent D. Griffiths – The Washington Post
Investors have a new worry when it comes to the election: That the outcome may remain unknown for weeks. It’s a departure from investors’ usual handicapping of which candidate would better serve the stock market and broader economy. But the challenges of voting amid the pandemic – including the expectation that millions could rely on mail-in ballots, which President Trump has roundly bashed – are making the possibility Election Day might turn into election weeks or even months more likely.
SocGen Asked a Machine to Figure Out an Inflation-Hedging Strategy. The Robot Couldn’t Come Up With One.
Steve Goldstein – Barron’s
There is a debate going on in academia as well as the markets—whether inflation will ensue from the aggressive fiscal and monetary policy action taken in response to the coronavirus pandemic.
Quantitative analysts at French bank Société Générale considered that dilemma, and what an investor should do. The strategists, led by Andrew Lapthorne, say investors need to ask a further question, about what is driving their inflation fears?