Stocks surge post ISM, Risk on, JPY Gold follows

US stocks surge higher, which is caused mainly by the better than expected ISM Manufacturing which came at 49.5 vs expected 48.5. Is the worst really over? The ISM infdex is still in a contractionary territory (for the fifth straight month). The outlook remains weak, partially due to the stronger USD but also weaker demand especially abroad but in general a secotr is affected by weak commodity prices, especially crude (affecting capital spending).
Source: Macrobond, XTB
Key bullets from the report:

ISM new orders index at 51.5 came unchanged, which is a positive signal, and as the gap between the new orders and inventory indices is a leading indicator for the headline, ISM index should rise slightly over 50 over next 1-2 months
The employment index rose rose to 48.5 in February, up from January’s 45.9 which was the weakest since 2009, we will have ISM non-manufacturing employment index on Thursday which will be far more important ahead of payrolls
Nordea points to a China’s Caixin PMI as a tentative leading indicator for ISM mfg and according to it ISM should not fall much further

Source: Nordea
Stocks benefited from a better than expected report and moved distinctly higher. JPY deppreciates following risk-on attitude. A divergence between SPX and USDJPY has been partially closed.

S&P 500 comparing to Yellow Gold, Red USD/JPY

US500_18_37 01_03.png

Morgan Stanley about GBP

Morgan Stanley about GBP

Morgan Stanley points that currently, there are three types of flows at play for GBP that could extend the current decline.

First, since last Sunday evening, the shock factor that there could be a strong “Leave” campaign, increasing the probabilities of Brexit, pushed the initial leg down for GBPUSD. This type of ’shock’ flow will likely extend a few more days as investors globally reconsider their Brexit-elated trading strategies. Our positioning tracker suggests that markets we real ready short GBP going into the weekend.

The second flow is based on the asset holders in the UK, never really having considered putting on tail risk hedge trades as an overlay in their portfolio, may use the currency as an easier (dueto its liquidity) and potentially cheaper way to hedge the risk. MS is not just talking about the foreign investors here; GBP-based funds that are worried about potential equity market declines may also overlay with short GBPUSD positions.

Third, as GBPUSD declines rapidly and markets expect further declines, long-term foreign investors may start to hedge their currency risk, adding to further downward pressure. Remember that foreign investors had piled into gilts last year (GBP60bn in 2015) and FDI remained strong (GBP84bn in the year to September 2015). In particular, sovereign wealth funds were large investors into the UK’s real estate market over recent years too

Bank remains bearish on GBPUSD and see 1.3650 and 1.3500 as the next two areas of support.

Brexit, not just GBP, further impact on EUR even worse

Source – SocGen: trading the Brexit

Societe Generale’s cross asset research team have stated their views on the possible Brexit and issued a note outlining the effects it may have on markets. Key points are as follows:
“Brexit, however, isn’t just bad for the UK. It would have negative growth implications for the rest of Europe, and more importantly could cause wider political uncertainty. So far, the response to any market signs of loss of confidence in the Euro Area has come from the ECB and that isn’t likely to change. That in turn, is negative for the Euro, which this morning is hovering around psychological support at EURUSD 1.10 and above the bottom of the uptrend of the last few month at 1.0950 or so. I suspect that the break of 1.10 will see an acceleration downwards for EURUSD, while a chart of EURJPY looks even more negative in the short term.”

但是看看这个视频就可以猜个大概结果了,就像说一个用鸡巴一个用脑袋决定问题 哪个会赢呢?
英国的未来还是应该由年轻人决定,让脑袋引领。GBP近期还是会继续震荡下跌,但终究会等待‘脑袋’的声音,出现反弹。

The correlation between oil and stocks move

Bernanke: why oil and stocks move together

23.02.2016

Screenshot 2016-02-23 19.53.54.png

Former President of the Federal Reserve, Ben Bernanke, has laid out his views on why the correlation between oil and stocks has increased of late. For much of the start of the year it appeared that declining crude benchmarks were weighing on global stocks, and more recently a recovery in oil has seen shares move off their lows.

Bernanke explains his opinion on this relationship by stating:

“Much of this positive correlation can be explained by the tendency of stocks and oil prices to react in the same direction to common factors, including changes in aggregate demand and in overall uncertainty and risk aversion. However, even accounting for these factors, the residual correlation is close to zero, not negative as we would expect if it were capturing only beneficial supply shocks.”

Petrodollar

“There are several other explanations that could be investigated: for example, the possibility that declines in oil prices, even if initially caused by higher supply,affect global financial conditions by damaging the creditworthiness of oil-producing companies or countries.

Any person acting on this information does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

上文补充了2月13日看到一篇文章后的的思考

找到一个石油价格影响市场的机理——石油美元。老师说低价石油说明着经济不好需求疲软,故而市场悲观。但还有供给方的责任,美国页岩气,中东石油大国的恶性竞争,还有刚刚加入的伊朗都是油价降低的主要原因。昨天OPEC可能减产的消息让石油价格飙升进而提振欧美市场。廉价的能源应该促进经济,但当前的结果是负面的,资本逃离加重需求问题,不利于石油价格的上涨,债务问题也随之变得更加严重。