Morning Quant Ride April 2, 2018

Apr 02, 2018

Traders’ Corner

During the extended holiday weekend, China’s Finance Ministry announced that retaliatory tariffs will be levied against the US and will go into effect today. The action, representing $3 billion in trade, will impose tariffs of up to 25% on 128 US agricultural and metal products such as pork, nuts, fruit, and recycled aluminum.

Following further trade tensions, US futures are slightly lower. S&P 500 futures have declined by 0.43%, while Dow Jones Industrial futures are down by 0.24%. After what was a disappointing first quarter for technology, Nasdaq Composite futures are 0.20% off from Thursday’s close.

Economic data scheduled for release today includes the PMI Manufacturing Index for March at 9:45 a.m EST, as well as March’s ISM Manufacturing Index and February’s Construction Spending at 10:00 a.m EST.

US options, pre-market, are implying a rise in risk premiums with the VIX currently at 21.36 after closing at 19.97 on Thursday.  May 18 OTM SPY Puts, April 02 OTM Puts, April 06 OTM IWM Puts and April 06 OTM Puts are the most actively traded options this morning.  The strong demand for Puts this morning implies a bearish bias to investor sentiment.

Asian, Australian, & European Equities Recap

Japanese equity markets were modestly lower, with the Nikkei 225 down 0.31%, and the Topix down 0.44%. Tech and Consumer Staples were the only positive sectors, while Real Estate, Telecom, and Energy were the biggest underperformers. Volume in Japan was light today, 29.00% below its 10-day average. Market breadth was negative with the Advanced/Decline ratio at 0.35. Notable movers included: Fukuoka Financial Group -3.32%, Chiba Bank LTD -2.57%, Kansai Electric Power Company +5.52% and Nippon Express +1.69%. Support for Prime Minister Shinzo Abe continues to fall as the Moritomo Scandal is still weighing on Japanese politics. The disapproval rating for the Prime Minister's cabinet rose to 50% from 47.5%. March final manufacturing PMI was 53.1, below February’s number of 54.1.

Hong Kong Equity markets were closed, but Shanghai Equity Markets were open. The annoncement of retaliatory tariffs by China (see above) created a negative sentiment in the market. The CSI 300 was down 0.30%. Volume in Shanghai was 0.56% below its 10-day average. Notably, soybeans were left off the tariff list, the US exported roughly $14 billion of soybeans to China last year. Chinese March manufacturing PMI was 51.5, higher than February’s PMI of 50.3, March non-manufacturing PMIs were 54.6, lower than February’s PMI of 64.4.

Indian, Australian, and Major European Equity Markets were closed for holidays.

Options markets were quiet last night with Hong Kong and Australian markets closed.  1-month implied volatility on Nikkei 225 closed more than 1 standard deviation above its 1-year average.   Skew on Nikkei 225 options remains rich with demand for OTM Puts driving 1-month Skew to the 90th percentile.  Nikkei 225 April 13 OTM Calls and Strangles were the most actively traded options in Tokyo.  Strong demand for call and strangles suggests investors expect overall levels in volatility for the Nikkei 225 to increase with the potential for a positive overall move in the Nikkei 225 over the next 2 weeks.

Latin American Equities Recap

Latin America equities finished last week mixed with Brazil’s Ibovespa closing up 178bps, Argentina’s Merval was down 39bps and Mexico’s Mexbol is down 143bps. The Ibovespa had 57 out of 63 constituents advancing, the Merval had 13 out of 30 companies advancing and the Mexbol only had 2 out of 20 companies advancing on the day. Over the weekend, US President Trump threatened to pull out of NAFTA if Mexico does not stop its people and drugs from flowing into the US. Further commentary regarding this issue may have implications on Mexican equities and the Mexican Peso. Investors should continue to keep an eye on the LatAm region as analysts made note of the strong performance in LatAm equities and fixed income during Q1 compared to developed nations.

Rates & Commodities

The US 10-Year yield is slightly higher at 2.753% from Friday’s close of 2.738% while the US 30-Year Yield follows and is at 2.984% from Friday’s close of 2.974%. Bonds in the EMEA are not trading today due to the Easter holiday, and in Asia-Pacific, bonds are mostly unchanged. The Japanese 10-Year Yield is at .035%, higher from a low of .023% two weeks ago. The USD$ is just below a 90-price level at 89.86, down 13bps on the day. Most notably, the USD$ is giving back gains against the GBP£ from last week and is lower by 40bps at 1.407. Notably, the The People’s Bank of China (PBOC) raised the daily reference rate for the yuan to strongest since August 2015, to 6.2762.  Gold is higher from last week, up 65bps at USD$ 1334.10/ounce. Silver (USD$ 16.54), platinum (USD$ 937.82) and palladium (USD$ 953.43) are following and are +1.03%, +0.62% and +0.01% respectively. WTI Crude oil is trading higher to start the week, up 40bps at 65.20/barrel. Data showed last week that there was a drop in US drilling activity, and expectations were renewed that the US would re-introduce sanctions against Iran.

Cryptocurrencies

Major cryptocurrencies are higher to start the week after selling off quite significantly over the past seven days. Bitcoin is trading at USD$ 7,124.88 up 5.57%, Ethereum is following at USD$ 394.38, up 3.90% with Ripple at USD$ .5085 up 4.46%, to round out the top three. IBM has been reported to have be getting serious about cryptocurrency; IBM made a partnership with the Stellar platform last October and is said to be interested in expanding the business applications of cryptocurrencies in several ways. Additionally, TD bank is considering using blockchain ledgers for asset tracking. TD Bank published a patent application on Thursday, outlining how it could use a public distributed ledger to help point-of-sale computers track transactions. In South Korea, police busted bitcoin miners illegally using cheap factory power. Allegedly, companies have been able to set up mining operations in complexes where electricity costs are 10% lower as well as lower rent.

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

Companies Trending in the News

Alibaba (BABA) is completing the purchase of Ele.me, a private Chinese food delivery service. The purchase price indicates Eleme’s value to be $9.5 billion.

Alkmers Plc (ALKS) announced that the FDA has refused to review the company’s ALKS 5461 product due to lack of evidence that the drug is effective.

Facebook Inc (FB) has announced that it will utilize a certification tool to verify that marketers using email addresses for advertisement targeting obtained user personal information with consentingly.

FirstEnergy Corp.’s (FE) subsidiary FirstEnergy Solutions has filed for bankruptcy. First Energy Solutions operates nuclear and coal-fired power plants.

Hudson Bay Co’s (HBC.CN) subsidiaries Saks Faith Avenue and Lord & Taylor have both announced that they have suffered data breaches involving the credit and debit card information of more than 5 million customers.

Intercontinental Exchange Inc (ICE), which runs the New York Stock Exchange, is reported to be in advanced talks with the Chicago Stock Exchange regarding the purchase of the CSE for $50-$100 million. The CSE currently handles less than 1% of all US equity transactions.

Tesla Inc (TSLA) has confirmed that the fatal crash involving its Model X occurred after the vehicles Autopilot system was activated. The National Transportation Safety Board (NTSB) is investigating the incident. Shares of Tesla are 4.6% lower pre-market.

Walmart (WMT) has reportedly begun discussions with Humana Inc (HUM) regarding the purchase of the health insurer.

Upcoming Earnings & Events

Company Name

 

Ticker

 

Earnings Date

 

Event Type

MSC Industrial Direct Co., Inc.  

MSM

 

4/9/2018

 

Estimated Earnings Release Date

Celanese Corporation

 

CE

 

4/15/2018

 

Estimated Earnings Release Date

J.B. Hunt Transport Services, Inc.  

JBHT

 

4/15/2018

 

Estimated Earnings Release Date

UnitedHealth Group Incorporated

 

UNH

 

4/15/2018

 

Estimated Earnings Release Date

Comerica Incorporated  

CMA

 

4/17/2018

 

Earnings Release Date

M&T Bank Corporation

 

MTB

 

4/17/2018

 

Estimated Earnings Release Date

Quest Diagnostics Incorporated  

DGX

 

4/18/2018

 

Estimated Earnings Release Date

BB&T Corporation

 

BBT

 

4/19/2018

 

Earnings Release Date

AT&T Inc.  

T

 

4/19/2018

 

Estimated Earnings Release Date

Caterpillar Inc.

 

CAT

 

4/19/2018

 

Estimated Earnings Release Date

Gentex Corporation  

GNTX

 

4/19/2018

 

Estimated Earnings Release Date

IDEX Corporation

 

IEX

 

4/19/2018

 

Estimated Earnings Release Date

Kansas City Southern  

KSU

 

4/19/2018

 

Estimated Earnings Release Date

Lockheed Martin Corporation

 

LMT

 

4/19/2018

 

Estimated Earnings Release Date

Norfolk Southern Corporation

 

NSC

 

4/19/2018

 

Estimated Earnings Release Date

Line for QuantShots

Quantamize is the trade name of Quantalytics Research, LLC.

Disclaimer

Quantamize is not an investment adviser, brokerage firm, or investment company. Any data, information, or opinions presented by Quantamize or Quantalytics Research are for general information purposes only. Such data, information, or opinions are not an offer to sell or to buy, or a solicitation to buy or sell any securities. All investments and investment recommendations entail risks. Any forward looking estimates presented by Quantamize or Quantalytics Research may prove to be incorrect and not be realized. Any data, information, or opinions expressed in any form may change without notice. Any data, information, or opinions in Quantamize or Quantalytics Research in any form attributed to a third party represent Quantamize's or Quantalytics Research’s interpretation of the data, information, or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. The data, information and opinions presented have been obtained or derived from sources believed by Quantamize or Quantalytics Research to be reliable. Quantamize or Quantalytics Research, does not make any representations as to their accuracy or completeness. Nothing discussed or presented in Quantamize or Quantalytics Research constitutes a representation that any investment, investment strategy, or recommendation is suitable or appropriate to an investor's individual circumstances or otherwise constitutes a personal recommendation. Data, information, or opinions contained in Quantamize or Quantalytics Research in any form give no consideration to any particular individuals' investment needs or objectives, nor do they consider any individuals' financial condition. Consequently, any such data, information, or opinions do not in any way represent a personal recommendation to any individual investor or any entities, whatever the type. Quantamize and Quantalytics Research does not accept any liability for any losses or damages arising from the use of the data, information, or opinions included in Quantamize or Quantalytics Research in any form. All investments involve risks of loss and potential permanent impairment of capital. Investors should diversify risks and exercise prudence and their own judgement in making their investment decisions. Quantamize and Quantalytics Research and any information contained therein is not intended for distribution to or use by any person, or entity, who is a citizen or resident of or located in any locality, state, country, or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or cause Quantamize or Quantalytics Research, LLC to be required to register or be licensed within any such venues. All data, information, and opinions expressed in Quantamize or Quantalytics Research in any form are as of the date of publication and are subject to change. Quantalytics Research partners and employees may own or have positions in any investment(s) mentioned respectively therein or related thereto and may, from time to time add to, or dispose of, any such investment(s).