The John Lothian Daily Update is a podcast turning the daily JLN hits and takes comments, our original content and the stories and quips in the top box of First Read into a daily podcast.
Low Treasury Volatility Is Key to Equity Rally, Tallbacken Says
Joanna Ossinger – Bloomberg
Investors should be alert to risks for the stock market from any significant increase in a gauge of U.S. bond volatility, according to Tallbacken Capital Advisors LLC. The ICE BofA MOVE Index, a measure of implied volatility in the Treasury market, is near September’s record low. That suggests confidence in the Federal Reserve’s ability to becalm U.S. sovereign bond yields, providing a bedrock for elevated equity valuations. While the reading also signals that markets view the outcome of the U.S. election as relatively benign, the index should be monitored closely given that some major stock markets are around all-time highs, Tallbacken Chief Executive Officer Michael Purves said in a phone interview.
A record $3.7 billion in Bitcoin options are set to expire on January 29 as interest in cryptocurrencies surges
Harry Robertson – Markets Insider
Bitcoin options worth a record $3.7 billion are set to expire at the end of the month. The surge in the Bitcoin price has helped the options market expand rapidly. Investors remain bullish about Bitcoin, according to options data, despite recent volatility.
Brexit drives swaps trading to US platforms
Robert Mackenzie Smith – Risk.net
Up to 50% of euro and sterling interest rate swaps trading has moved from European and UK venues to platforms in the US since the start of the year, in Brexit’s latest impact on derivatives markets, sources report. The UK’s transition period with the European Union ended on December 31 without an equivalence arrangement for large parts of the financial services industry.
China’s Virus Flare-Up Before Holiday Stokes Oil Demand Fear
The resurgence of Covid-19 in China has led to lockdowns and calls for citizens not to travel during the upcoming Lunar New Years holidays, stoking concern that oil and fuel demand will take a near-term hit. People are being encouraged to remain in their cities to prevent the spread of the coronavirus, with some provinces offering cash incentives, or hongbao, and food vouchers to those who choose to stay home. China State Railway Group Co. cut its estimate for the number of travelers over the festive period to 296 million from 407 million amid low train ticket bookings, Xinhua news agency reported. While it’s a significant drop, it’s still higher than 2020.
Trading boom drives record revenues at Goldman Sachs
Laura Noonan and Robert Armstrong – Financial Times
A trading and investment banking boom swept Goldman Sachs to record fourth-quarter revenues, helping the Wall Street bank to more than double its profits and endorsing management’s year-old strategic plan to lift returns.
Goldman on Tuesday posted net income of $4.5bn for the final three months of 2020, up 135 per cent year on year. Revenue rose 18 per cent to $11.7bn, the highest ever for a fourth quarter. Earnings per share, at $12.08, were well above the $7.06 expected by analysts in a Bloomberg poll, in a results season in which the other big banks, such as JPMorgan Chase, also beat expectations but by smaller margins.
Hedge funds returns at 11-year-highs in 2020: data
Maiya Keidan – Reuters
Global hedge funds posted average returns last year of 11.6%, the best year for the industry since 2009, as they took advantage of market volatility due to the pandemic, according to data from industry tracker Hedge Fund Research (HFR).
Hedge fund assets rose to $3.6 trillion at the end of 2020 after adding another $290 billion in the final three months of the year, according to the data.