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Morning Quant Ride April 5, 2018

Apr 05, 2018

Traders’ Corner

The Wall Street Journal reported that Sino-American trade negotiations will be conducted over the next 6 months. NEC head Larry Kudlow stated that “it’s going to take a couple months. I doubt if there will be any concrete action for several months”. Rising tensions between China and the US have been driving markets in recent trading but trade pressure may now be abating.

After trading mostly higher yesterday, US equity futures are mixed this morning. S&P 500 future are 0.12% higher, and Dow Jones Industrials are up 0.72%. Nasdaq Composite futures are 0.27% lower, as technology again trails the broader market.

Weekly Jobless Claims were weaker than expected, at 242k vs consensus of 225k. US International Trade for February was ($57.6B), below consensus of ($56.8B). US Money Supply and Fed Balance Sheet will be released at 4:30 p.m EST.

US options, pre-market, are implying a drop in risk premiums with the VIX currently at 19.96 after closing at 20.06 yesterday.  April 20 OTM Puts on SPY, April 6 OTM Puts on QQQ, April 06 OTM Calls on SPY, April 20 OTM Puts on IWM and May 18 OTM Puts on Facebook are the most actively traded options this morning.

Asian & Australia Equities Recap

Asian equity markets bounced back this morning, continuing the rally started in US equities yesterday.  Japanese equities closed positive with the Nikkei 225 +1.53% and Topix +1.08%.  Real estate, healthcare, and financials were the top performing sectors while utilities were the only sector negative.  Notable movers included: Mitsui Fudosan +4.41%, Terumo +3.94%, TOTO +3.86%, and Nissan Chemical +3.85%.  Market breadth was positive with the Advance/Decline ratio closing at 4.56.  News headlines were limited with commentary focusing on the fact that low wage growth in Japan is making the country’s inflation target harder to reach.  In contrast, Hideo Hayakawa, a former Bank of Japan (BOJ) Chief Economist, believes the BOJ will raise it target for Japanese Government Bond 10-year yields later in the year on account of rising inflation.

Chinese and Hong Kong equity markets were closed for the Qingming Festival.

Indian equities finished there trading session in the green with the Sensex +1.75% and Nifty 50 +1.94%.  All sectors in the Sensex were positive with metals stocks the largest outperformers.  Notable movers included: ICICI Bank +3.52%, State Bank of India, +3.19%, Hero MotoCorp +3.00% and Hindustan Unilever +2.35%.  Market breadth was overwhelmingly positive with 30 of the 31 stocks in the Sensex closing positive.  The Reserve Bank of India decided to keep its benchmark interest rate target unchanged at 6.0%.

In the Land Down Under, Aussie equities closed positive with the ASX 200 +0.48%.  Financials, tech and real estate stocks were the top performing stocks while materials, telecom and utilities were the largest laggards.  Notable movers included: Retail Food Group +10.71%, Orocobre -9.54%, WiseTech Global +5.19%, Infigen Energy +4.27% and Costa Group +4.21%.  Market breadth was positive with the Advance/Decline ratio closing at 1.85.  The Australian February Trade Balance was AUD$825mm vs. consensus of AUD$1.0bn.

Asian options markets were relatively quiet again with 1-month implied volatility on Nikkei 225 index options dropping to only 1 standard deviation above its 1-year average.  Risk premiums for Aussie index options have finally begun to mean-revert after holding well above 2 standard deviations for the past 2 weeks.  Currently, 1-month implied volatility on ASX 200 index options slightly more than 1 standard deviation above its 1-year average.  Skew remains elevated across the region with demand for OTM Puts keeping skew in the 75th to 80th percentiles.  April 13 OTM Calls and Puts were the most actively traded options in Tokyo.

European Equities Summary

European equities are broadly positive with Euro Stoxx 600 +1.76%.  Regional indices are up across the board with FTSE 100 +1.46%, DAX 2.18% and CAC 40 +1.95%.  All sector of the Euro Stoxx 600 are positive this morning with materials, tech and industrials stocks the biggest outperformers.  Real estate, utilities, and consumer staples are the largest laggards this morning.  Notable movers include: ASML Holding +3.82%, Safran SA +3.37%, Vivendi SA +3.27%, BASF SA +3.08% and Adidas AG +3.03%.  Market breadth is overwhelming positive this morning with 556 of the 600 stocks in the Euro Stoxx 600 advancing vs. only 35 stocks declining.  News headlines are limited this morning with the Financial Times pushing the idea that mixed economic data will lead to reluctance by the European Central Bank (ECB) to withdraw from its policy of monetary easing.   March Services PMI were released:

  • Eurozone 54.9 vs preliminary 55.0
  • Germany 53.9 vs preliminary 54.2
  • UK 51.7 vs consensus 54.0, prior 54.5
  • France 56.9 vs preliminary 56.8
  • Spain 56.2 vs consensus 56.0, prior 57.3
  • Italy 52.6 vs consensus 53.7, prior 55.0
  • Sweden 59.2 vs prior 59.0
  • Ireland 56.5 vs prior 57.2

Eurozone retail sales for February +1.8% Y/Y vs. consensus +2.2%.  German factory orders grew +0.3% M/M in February vs. consensus of +1.5%.  The German Economic Ministry explained the decline by falling domestic demand, however they noted that domestic demand is expected pick up in the second half of CY2018.  In Italy, Five Star Party Leader Luigi Di Maio is asking Italian President Sergio Mattarella for more time to form a coalition government.  Italian equities are up this morning with the FTSE MIB +1.81%.

Risk premiums are falling this morning with the VSTOXX currently at 17.3478 after closing at 19.5763.  Aprils 20 OTM Call and Puts, May 18 OTM Puts, and June 18 OTM Puts on the Euro Stoxx 50 index are the most actively traded options.

Latin American Equities

Brazil’s supreme court has rejected former President Lula plea to remain at liberty while appealing a 12-year prison sentence for corruption. The court debated for 11 hours and a final verdict of 6-5 was reached. Brazil’s Ibovespa down was 31bps yesterday and the index was led lower by info tech -2.15% and real estate -1.17% while utilities +0.40% and health care +0.35% were the only positive sectors. Argentina’s Merval up 7bps and Mexico’s Mexbol up 163bps. Argentina’s Merval was led by real estate +1.79% and info tech +0.88%, while industrials -0.68% and consumer staples -0.58% were the top underperformers. All sectors were positive in Mexico’s Mexbol with consumer discretionary up 3.43% and financials the 2nd best performer up 2.23%. Volatilities still remain heightened across the region as 10D realized volatility is higher than 30D volatility in Mexico and Brazil, but not Argentina. President Trump has softened a key NAFTA demand for North American content in car manufacturing. The original demand the US has been pushing for is the requirement of a North American vehicle to have 85% of its parts from North America. On the economic front in Latin America;  Brazil will be releasing March vehicle data, Chile will be releasing economic activity and nominal wages for February and Columbia will be releasing March inflation data.

Rates & Commodities

Bonds across the globe are selling off as yields are higher virtually everywhere. The JGB 10-Year Yield is at 0.033%, and the German 10-Year Yield is 0.52%. The US 10-Year yield is at 2.819% from yesterday’s close of 2.808%. The US 30-Year Yield and is at 3.058%. US bonds experienced a sharp move yesterday as the 10-Year Yield opened at 2.753% and the 30-Year Yield opened at 3.011%. Bond investors may be signaling that they believe the equity markets have hit a bottom in the near term with this move. The USD$ is at its highest level in weeks at 90.30, up 20bps. The USD$ stronger against the JPY¥ by 23bps at 107.03 and USD$ stronger against the CHF by 24bps (0.9622). Metals are slightly lower following the risk-on sentiment across asset classes. Gold and silver are are down 22bps at USD$ 1330.31/ounce, and down 06bps at USD$ 16.31 respectively. Platinum (USD$ 914.81) -0.28% and palladium (USD$ 926.17) -0.41%. are lower as well. Lastly, WTI Crude oil is rebounding following an ease of trade war fears. Currently WTI is trading at USD$ 63.23/barrel, down 22bps since yesterday’s close but higher than the low it hit at $62.50/barrel.


Major cryptocurrencies continue to lose value this week as Bitcoin is trading at USD$ 6,815.18 down 4.26%, Ethereum is following at USD$ 384.30, down 1.12% and Ripple is at USD$ 0.4961 down 3.43%, to round out the top three. The only two positive cryptocurrencies in the top 25 by market capitalization are Tron ($USD 0.040) up 29.67% and OmiseGO (USD$ 8.72) up 0.57%. Electronic Giant, Foxconn, is said to be building a blockchain phone from Sirin Labs. This phone is said to fill the gap in a fast-growing cryptocurrency market for a secure device that can simplify the use of cryptocurrency across multiple applications. Hacked Coincheck exchange will accepting the takeover bid from brokerage group Monex Group. Monex is expected to pay Coincheck several billion Japanese yen for a majority stake, and an announcement with more details will be released Friday. Arizona corporations can now hold and share data on a blockchain following the signing of legislation by the state’s governor. Lastly, a form of central bank digital currency (CBDC) may go live in 2018, according to a research direction at distributed ledger software startup, R3.

*All returns are price returns**All returns in local currency

Companies Trending in the News

Advanced Micro Devices’ (AMD) venture capital segment, AMD Ventures, is raising a technology fund in India and is hoping to raise $200 million.

AMC Entertainment Holdings (AMC) has announced that it will be opening Saudi Arabia’s first movie theater in over 35 years in Riyadh. The theater will be opened on April 18th.

Carlyle Group (CG) has agreed to purchase Australian winemaker Accolade Wines for an estimated $772 million.

CBS (CBS) and Viacom (VIAB) merger discussions have become strained, threatening to delay any potential deal.The Massachusetts attorney general was granted permission to continue its lawsuit against Equifax (EFX) for failing to secure the personal information of 147 million people.

Facebook Inc (FB) shares are 3.6% higher pre-market after a report from Deutsche Bank AG positing that the “worst is likely behind” Facebook, despite also reporting that 87 million accounts were breached, up from the 50 million originally.

J.M Smucker (SJM) has agreed to buy pet food company Ainsworth Pet Nutrition for $1.7 billion, expanding its presence in the pet goods industry.

Fiat Chrysler (FCAU) shares are 2.4% higher pre-market after the board of directors approved the separation of its auto parts maker subsidiary Magneti Marelli from Fiat Chrysler’s automotive manufacturing operations.

Intercontinental Exchange Inc (ICE), the firm that operates the NYSE, has entered into a definitive agreement to purchase the Chicago Stock Exchange (CHX).

Sears Holdings (SHLD) announced that a security breach at an online customer support company that manages customer data may have exposed the credit card information of up to 100,000 customers.

Ubisoft (UBI.FR) shares are higher after the company announced that its Far Cry 5 game was the fastest-selling game in franchise history and was the second biggest game launch in company history.

VTB Bank PJSC (VTBR.RM) announced plans to pay out dividends equal to 61% of its 2017 net income. VTB is under sanction from various Western nations.

Upcoming Earnings & Events

Company Name




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Event Type

MSC Industrial Direct Co., Inc.  





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Celanese Corporation






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J.B. Hunt Transport Services, Inc.  





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UnitedHealth Group Incorporated






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Comerica Incorporated  





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M&T Bank Corporation






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Quest Diagnostics Incorporated  





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BB&T Corporation






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AT&T Inc.  





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Caterpillar Inc.






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Gentex Corporation  





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IDEX Corporation






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Kansas City Southern  





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Lockheed Martin Corporation






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Norfolk Southern Corporation






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