BTP: Notably Widening In BTP/Bund Spread Post ECB Decision
Dec-12 16:49
The 10-year BTP/Bund spread has widened notably since the ECB decision, tracking the increase in ECB implied rates seen through the press conference. The spread is up over 7bps today at 113.5bps.
- The spread generally has a high beta to ECB easing expectations.
- It is worth noting that today’s widening follows a ~22bp narrowing since November 26. Even at 113.5bps, the spread is comfortably below levels seen in 2022/2023 and most of 2024.
- Although the ECB dropped its pledged to keep policy “sufficiently restrictive” in its policy statement, the tone of the press conference was not as dovish as some may have anticipated. Lagarde noted that the trajectory for interest rates is clear (i.e. down), but steered clear of any more explicit signals.
- Her concession that the neutral rate may be higher than previously can also be interpreted as marginally hawkish (but is consistent with prior communication from Executive Board member Schnabel, for example).
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USD: Greenback Breaks Out, Pressing Major Pairs to New Lows
Nov-12 16:47
Further USD strength resulting in new pullback lows for both EUR/USD and GBP/USD here - EUR/USD breaks below both the 1.06 handle as well as the mid-April low on the move. First time with a firm 1.05xx handle since November last year.
- AUD is now nearing the post-election low at $0.6513 - weakness through here is the lowest level since August.
- These moves are dollar-led here, with EUR crosses still largely rangebound - as BBG flash - the Bloomberg USD Index is breaking to new highs, and highest since late 2022 on last print.
OPTIONS: Larger FX Option Pipeline
Nov-12 16:44
- EUR/USD: Nov14 $1.0635-50(E1.9bln), $1.0750(E1.2bln); Nov15 $1.0500(E1.6bln), $1.0590-00(E1.5bln), $1.0700(E3.2bln), $1.0800(E1.9bln)
- USD/JPY: Nov14 Y151.50($2bln); Nov15 Y151.00($1.5bln)
- AUD/USD: Nov15 $0.6530(A$1.2bln)
- USD/CNY: Nov14 Cny7.2000($1.8bln)
US STOCKS: Reversing Modest Early Gains: Materials, Utilities Underperforming
Nov-12 16:43
- Stocks are trading mildly weaker ahead midday, overall volumes are improving as wider markets return from extended Veterans Day holiday weekend. Selling partly tied to position squaring ahead of key CPI and PPI inflation data over the next two days.
Currently, the DJIA trades down 249.44 points (-0.56%) at 44042.66, S&P E-Minis down 22.25 points (-0.37%) at 6009, Nasdaq down 34.7 points (-0.2%) at 19262.98. - Materials and Utilities sectors underperformed in the first half, metals and mining stocks weighing on the former: Mosaic -7.71%, Albemarle -5.71%, FMC Corp -5.16%. Independent energy providers weighed on the Utility sector: Vistra -4.42%, Constellation -3.80%, NRG Energy -2.31%.
- On the flipside, Information Technology and Consumer Staples outperformed in the first half, semiconductor stocks rebounding from Monday's sell-off: Adobe +3.71%, Nvidia +2.02%, Fortinet +1.65%. Buoying the Consumer Staples sector, Tyson Foods surged +8.72% after reporting better than expected earnings earlier. Other leaders included Target Corp +1.70%, Constellation Brands +1.19% while Walmart gained 1.06%.
- Earnings expected after today's close: Occidental Petroleum, Skyworks Solutions. Cisco expected late Wednesday, followed by Walt Disney, Applied Materials, Williams-Sonoma, Copart and Cogent Biosciences on Thursday.
