In today’s briefing:
- Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.
- Yield Curve Reinverts On Rising Soft Landing Expectations
- Terminal Rates Are Still Too Low
- The Week at a Glance: No Country for Inflation Undershooting Men
- [Op-Ed] Tire Market And The Environment Why All The Fuss About 6PPD
- [US Nat Gas Options Weekly 2024/40] Henry Hub Tumbles as Hurricane Weakens Demand Outlook
- [US Crude Oil Options Weekly 2024/40] WTI Surged Amid Fears of Israeli Retaliation Against Iran
- CX Daily: UK Court Accepts Chinese Investor’s Lawsuit Linked to $4 Billion in Laundered Bitcoin
Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.
- A correction was natural after the fast, strong move up
- Any detailed fiscal stimulus plan will come from the State Council or the MoF
- Capital market reforms moving in the right direction with continued focus on consumption.
Yield Curve Reinverts On Rising Soft Landing Expectations
- Despite strong jobs data, the yield curve has inverted once again. This inversion is driven by delay in rate cut expectations.
- Encouraging PCE data which showed inflation easing to 2.2% (lowest since 2021 & close to Fed’s target), the likelihood of a cumulative 50 bps cut has steadily risen.
- Soft landing reduces urgency for aggressive rate cuts, giving the Fed more flexibility to monitor the effects of previous rate hikes and to lower rates more gradually.
Terminal Rates Are Still Too Low
- Excessively dovish expectations have repriced recently, but 2025 rates require almost another 20bps increase in the US and Euro area to reverse August’s dysfunctional drop.
- Rate alignment across the US, UK, and EA limits FX opportunities. Previous contrarian views on USD strength no longer hold amid narrowing central bank policy differences.
- Equity outlooks remain bullish, supported by monetary easing. Like in 1998, shallower rate cuts would eventually become bearish, but it only requires opportunistic hedging.
The Week at a Glance: No Country for Inflation Undershooting Men
- A few hours after the decently strong non-farm payrolls report, Goolsbee of the FOMC commented on inflation undershooting its target, suggesting it will take much more to convince the Fed to change its direction on policy rates.
- On a broader scale, it’s difficult to be overly concerned about a labor market rebound in the US economy right now.
- After some time to reflect on Friday’s labor report, a few thoughts emerge: while the report was solid, there are still lingering questions.
[Op-Ed] Tire Market And The Environment Why All The Fuss About 6PPD
- A chemical used in tire manufacture has been causing controversy since 2020.
- The United States Tire Manufacturers Association (USTMA) is investigating a series of potential alternatives, following new legislation from California that requires any company selling tires in California to either declare that they do not contain 6PPD, or demonstrate that they are seriously seeking alternatives.
- As of now, no major fines have been imposed on tire manufacturers specifically for 6PPD use, but there is growing regulatory scrutiny, particularly in regions like the Pacific Northwest where environmental harm has been documented.
[US Nat Gas Options Weekly 2024/40] Henry Hub Tumbles as Hurricane Weakens Demand Outlook
- US natural gas prices fell by 1.65% for the week ending 04/Oct, ending a streak of five straight weekly gains. The decline was due to expectations of softening demand.
- Henry Hub Put/Call volume ratio fell to 0.98 (04/Oct) from 1.03 the previous week as put volumes fell by 20.2% WoW, while call volumes declined by 16.7%.
- Put OI increased for contracts expiring in October and November, while call OI rose for expiries in December, January, February, and March.
[US Crude Oil Options Weekly 2024/40] WTI Surged Amid Fears of Israeli Retaliation Against Iran
- WTI futures rose by 9.1% for the week ending 04/Oct, its strongest weekly gain since October 2022. The surge was led by escalating tensions between Israel and Iran.
- WTI options Put/Call volume ratio fell to 0.64 (04/Oct) from 0.76 (27/Sep) as call volume jumped by 120% WoW while put volume grew by 86.6%.
- WTI OI PCR fell to 0.76 for the week ending 04/Oct from 0.77 last week. Call OI rose by 11.4% WoW, while put OI grew by 10.4%.
CX Daily: UK Court Accepts Chinese Investor’s Lawsuit Linked to $4 Billion in Laundered Bitcoin
- Bitcoin /: U.K. court accepts Chinese investor’s lawsuit linked to nearly $4 billion in laundered Bitcoin
- Stabbing /: Police arrest Chinese man suspected of stabbing three 5-year-olds in Switzerland
- Stimulus /In Depth: Stimulus drives China’s biggest stock surge since 2008, but analysts fear it might fizzle
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