Wall St wavers on rising recession worries

Dec 7, 2022

Observations & Insight

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Lead Stories

Wall St wavers on rising recession worries; Apple, Tesla slump
Ankika Biswas and Shashwat Chauhan – Reuters
Wall Street’s main indexes struggled for direction on growing fears that the Federal Reserve’s monetary policy tightening could trigger a recession and hit corporate earnings, while Apple and Tesla were the biggest drags on the Nasdaq.
The benchmark S&P 500 (.SPX) fell for the fifth straight session on Wednesday.
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The Stock Market Could Get Crazy Again With a Volatility Spike
Jacob Sonenshine – Barron’s
The stock market has been calm, but that can’t last much longer.
The S&P 500 has gained almost 10% from its lowest close of the year, set in early October. Accompanying that has been a Cboe Volatility Index (VIX), which measures the extent of expected swings in stock prices, at the 21 level, close to its low for the second half of the year. To be sure, that’s fairly elevated, historically speaking, as the VIX was often below 15 for the post-financial crisis era. Still, 20 isn’t as high as it could go, as it has gone into the mid-30s several times this year. Enabling the calm has been hope that the Federal Reserve will slow down the pace of rate hikes, which threaten to put the economy into a recession; hikes are designed to dent demand in order to reduce the rate of inflation.
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Traders Expect Inflation, Fed Meeting to Drive Choppy Markets
Eric Wallerstein – WSJ
A Wall Street volatility indicator is flashing ahead of the consumer-price index report and the Federal Reserve’s interest-rate decisions, due next Tuesday and Wednesday, respectively.
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Equity Predictions for 2023 Look Negative, and Are Probably Correct
John Authers – Bloomberg
Christmas is coming, the goose is getting fat, and throughout the financial world analysts are publishing their predictions for 2023. A lot of the research produced at this time of year is genuinely interesting, and teams often benefit from the discipline of being forced to put their assumptions on paper and arrive at a prediction. That said, there’s still not much point in the exercise — because it is driven by the calendar.
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Goldman Sachs CEO says recession is likely, with 35% chance of a soft landing
Steve Gelsi – MarketWatch
Goldman Sachs Group Inc. CEO David Solomon said Tuesday he’s mostly expecting a recession in the coming months, as interest-rate hikes and inflation continue to let the air out of what is now a relatively strong economy.
Asked about the viability of cryptocurrency after the bankruptcy of FTX, Solomon said he feels strongly about the positive potential of the underlying blockchain technology that enables digital transactions, but he did not voice any optimism around bitcoin or other cryptocurrencies.
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BNP Paribas studied 100 years of market crashes – here’s what it says is coming next
Steve Goldstein – MarketWatch
Whether Santa eventually comes or not is still to be determined, with Mr. Claus perhaps postponing a decision until next Tuesday’s CPI release. Strategists led by Greg Boutle, head of U.S. equity and derivatives strategy, are expecting a capitulation event next year. “This would be a departure from the current bear market regime, which has been characterized by a grind lower in equities as P/E multiples have contracted,” they say.
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Exchanges

Miami International Holdings Reports November 2022 Trading Results; SPIKES Futures, MIAX Options and MIAX Pearl Equities Set Year-to-Date Volume Records
Miax
Miami International Holdings, Inc. today reported November 2022 trading results for its U.S. exchange subsidiaries – MIAX , MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group), and Minneapolis Grain Exchange (MGEX™). November 2022 Trading Volume Highlights; Total U.S. multi-listed options market share for the MIAX Exchange Group reached 13.55%, representing a 2.4% year-over-year (YoY) decrease. A total of 115.1 million multi-listed options contracts were executed on the MIAX Exchange Group, representing a 7.7% decrease YoY and an average daily volume (ADV) of 5.5 million contracts. Total year-to-date (YTD) volume reached 1.2 billion contracts, a decrease of 3.4% from the same period in 2021.
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Post-Brexit derivatives clearing tussle continues as European Commission clamps down on non-EU CCPs; Regulatory package put forward today by the European Commission is intended to reduce EU participants reliance on CCPs outside of the Bloc and repatriate clearing volumes.
Annabel Smith – The Trade
The European Commission has today, 7 December, confirmed its plans to re-claim a large portion of EU clearing volumes as part of an update to the Capital Markets Union (CMU) in its Emir Review. Under the changes, all relevant market participants will be required to hold active accounts at European CCPs for clearing at least a portion of certain derivative contracts.
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Brussels Eyes London’s Huge Clearing Business
Patricia Kowsmann – WSJ
Even after Brexit, trillions of dollars of European derivatives trades are cleared annually in London. The European Union wants to shift some of that clearing business onto its home turf, potentially increasing costs for banks.
Under proposals released Wednesday by the European Commission, the EU’s executive arm, banks and other market participants would be forced to clear at least some contracts in euros inside the EU.
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We are FOW’s Exchange of the Year
Eurex
The year ends very satisfyingly: We have been named “Exchange of the Year – Europe” by FOW. Since we have already received two more prestigious awards this year, we seem to be doing something right. The jury of the FOW justified their decision to choose Eurex as follows: Thanks, we feel appropriately flattered and we also acknowledge the growing importance and disruptive potential of digital assets. We will not rest on our laurels. On the contrary. Given the current situation on the financial markets and the general challenges facing our industry, there is no time for that. We promise to keep on with our way of working and anticipating our clients’ needs.
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SGX Group named “Global Exchange of the Year;” Global award win recognises innovation in derivatives industry; Caps year of accolades from publications covering different asset classes
SGX
Singapore Exchange (SGX Group) has been named “Global Exchange of the Year” at the FOW International Awards 2022, capping a year of accolades from major media publications covering different asset classes across the international derivatives industry. FOW, the leading magazine of London-based Global Investor Group, yesterday announced its global awards recognising innovation in the derivatives industry. In September, SGX Group clinched “Exchange of the Year” at FOW’s Asia Capital Markets Awards, while SGX Chairman Kwa Chong Seng received its “Lifetime Achievement Award”.
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Regulation & Enforcement

FIA, ISDA and AFME publish position paper on European Commission Market Correction Mechanism Proposal
FIA
FIA, ISDA and AFME have published a position paper on the European Commission’s “Market Correction Mechanism” proposal for natural gas prices in the European Union. The proposed mechanism would set a price cap on the TTF front month future contract price when certain conditions are met.
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CFTC goes live with amended swap rules
Wesley Bray – TheTrade
The US Commodity Futures Trading Commission (CFTC) has gone live with the amendments of its swap data reporting framework, which now includes harmonised critical data elements developed by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO).
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Technology

Trading Technologies’ TT platform wins Derivatives Trading System of the Year at FOW International Awards 2022
Trading Technologies
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, infrastructure and data solutions, last night captured the award for Derivatives Trading System of the Year at the FOW International Awards 2022. The honors, recognizing the “best and brightest innovations in the derivatives industry,” were bestowed last night in a ceremony at Global Investor Group’s Trading London event.
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CloudMargin Wins FOW International Award for Collateral Management Solution of the Year
CloudMargin
CloudMargin, creator of the world’s first and only collateral and margin management solution native to the cloud, last night won the FOW International Award for Collateral Management Solution of the Year. Hosted by Global Investor Group in a ceremony held in conjunction with its Trading London event for Europe’s derivatives community, the FOW International Awards recognise “the best and brightest innovations in the derivatives industry.”
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Strategy

VIX At Its 50 Day Moving Average
JJ Kinahan – Forbes
It’s been a rough start to the week for stocks. As we approach the midway point, the S&P 500 is down over 3.5% while the Nasdaq 100 is down closer to 4%. Even the Dow Jones Industrial Average, which has held up best this year, has given up nearly 2.5%. Peel back the onion a little and you’ll find some big name companies having a tough week.
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Miscellaneous

Meme Stock Drops, Bitcoin ($BTC) Fall Leave Retail Traders Hurting
Denitsa Tsekova – Bloomberg
He could stomach the plunge in global equity markets that devalued his stock investments. He was still willing to stick it out when the money he’d moved into crypto coins with names such as SushiSwap and Avalanche halved in value. But the collapse of FTX Group, where all his remaining savings sit in a locked trading account, was too much for Joseph Pizzoferrato. “Losing $10,000 is crushing me,” says Pizzoferrato, who works for a life insurance company in Nevada and began day trading in 2020 while stuck at home during lockdown. “If I do ever go back into crypto, it’s going to be just extra money but not anything involving life savings.”
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Cryptos Are the ‘Bubble of a Generation,’ ECB’s Panetta Says
Jana Randow – Bloomberg
Crypto-assets that promised radical change in how people pay, save and invest have turned into the “bubble of a generation,” highlighting the need for stricter regulation and risk management, according to European Central Bank Executive Board member Fabio Panetta.
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ICE to Start Rival Gas Market in London to Sidestep EU Price Cap

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First Read Hits & Takes John Lothian & JLN Staff Thank you to all who replied to my request to help one of my Eagle Scouts who was recently laid off on the West Coast and is looking for new opportunities in the climate tech and sustainability space. You are...

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