Market Review
Last week was another special one for geo-politics, with the Russian/Ukrainian crisis continuing to weigh on the market.The movement on the back of developments have been ever decreasing, as the rocket fired in to Russia end of last week only created a range movement rather than a continued risk off or alternatively supply disruption move upward, illustrating how immune the markets have become to these type of events. In fact, we would argue that geo-political “supply” risk is saturated, and will not move the market in any way we saw at the height of the Syrian crisis until we actually see crude not being delivered. At this point it seems supply news about ports opening in Libya has a much grander effect than risks of war. In terms of data we saw a continuation of the good jobs data we have witnessed all summer, with a phenomenal reading of 284k; though due to fear over the number not being as real as trader hopes due to seasonality or factories being kept open for summer production the market did not react very positive to this, as traders rather await next weeks number to see if it was a singular event. The S&P and US10Y both hit the entries on Friday, though not hitting the targets they should have been closed in positive territory at 5pm.
Today's Fundamental View
The market has been remarkably quiet this morning, with most markets being painfully range bound. The S&P had a blip up to test the pivot though this was halted and it is now back to mid range. Bonds have been slightly softer this morning after reports that Fed’s Fisher has written of tapering re-investments of maturing securities. As this was already aired by the voting hawk of the Federal Reserve the 16th July, we doubt this will have any meaningful effect on the market for the rest of the session, unless others come to his support. Tapering re-investments will mean the money supply will actually go down, which opposed to tapering of QE which means the money supply increase by a lesser amount. There have been reports this morning that Vladimir Putins circle of oligarchs are increasingly airing their discontent with the man named the Tsar amongst friends as he is increasingly hurting their worldwide freedom as well as pockets with the economic sanctions that are currently imposed. With this it does not help that Russia have been slapped with a $50 billion ruling of paying the said amount to large shareholders of the previous oil giant Yukos, famed for its bankruptcy after its majority shareholder Mikhail Khodorkovsky fell out with Vladimir Putin. The afternoon data calendar is not massive, but contains two different sets of data which will have some impact, services as well as home sales data. The strategy today will attempt to catch some of the ranges, and will go long equities and the USD, long crude oil as well as short US10Y.Alternative View
Comments from Russian officials may halt the move up, though this should still lead to USD strength in a risk off move. Please remain aware of all developments coming out of Ukraine, Russian and the Middle East and keep a conservative outlook with regards to risk. Over exposure in markets with such uncertainty is dangerous and should be avoided.
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