REFINING: Eni Brindisi Chemical Plant Closure Brought Forward

Fresh uncertainty surrounding the health of the U.S. tech sector seems to drive early weakness in NY cash equity trade, with Nvidia threatening a clean break below yesterday's low.

• S&P 500 & NASDAQ 100 e-minis to fresh session lows. but remain above Monday's worst levels.
• Bonds bid alongside the sell off in stocks, while the BBDXY ticks lower before stabilising.

• -5,000 SFRZ5 96.11, post time bid at 0941:40ET, the Dec contract trades 96.115 last (-0.020).

Looking a little more broadly than the spread to Bunds, the mid-January richening for French paper on the 10-Year SPGB/OAT/PGB butterfly has seemingly stalled.

• This suggests that the latest leg of tightening seen in OAT/Bunds (since the middle of last week) has been more of a broad EGB spread tightening move, as opposed to an OAT-driven move.
• The structure last trades at -45.2bp vs. a January closing high of -44bp, with the December closing high at -41.6bp remaining intact.
• Relative Spanish & Portuguese credit rating trajectories and fiscal situations (outside of short-term Spanish spending on flood relief) will likely prevent meaningful OAT outperformance on the structure as long as French fiscal and political risks remain evident.

Fig. 1: 10-Year SPGB/OAT/PGB Butterfly (bp)

Source: MNI - Market News/Bloomberg