Dovish US rates outlook overshadows weak China trade data

Market Review

Yesterday saw an extremely muted market, with no decent moves in either direction in any assets, rather just a sideways drift with an arguably positive sentiment linked to it. In the afternoon we saw the release of the DOE Crude Oil Inventories which we expected to see a much larger build than most other analysts. This prediction came through although crude seemed less driven than we hoped as the components overall saw a bigger draw down than what the analyst consensus was and net it was a neutral release. The FOMC minutes this month was a lot more dovish than last time, and Janet Yellen’s <<6 months>>, has now been proven to be an overblown comment as the market is pricing in “could” instead of “would”, an important difference which has been sidestepped by many analysts in their eagerness to create stimulating market commentary. No strategies were obtained yesterday within the allocated time frame.

Today's Fundamental View

Getting to our desks this morning we witnessed equities and bonds trading at their highs on the back of thoughts of monetary easing, leading equities and bonds to together move with a positive correlation. This correlation has lost some effect the last few hours and while bonds are still continuing higher, we have seen a broad sell off in equities. Overnight the Chinese imports and exports fell beyond expectations, and alongside this the Chinese Premier has stated that he does not intend to embark on any form of stimulus to deal with short-term volatility. A positive for the market which has been pushing the euro up this morning is the Greek return to the bond market, where it has been reported the peripheral country has had some good demand for their debt, with the order book exceeding €20 billion compared to yesterday’s estimate of €11 billion. Final yield was set at 4.95%, which is substantially better than anything we may have hoped for even a year ago. Today’s initial jobless claims from the US is expected at 1330BST, and as the data has somewhat been emerging to the better lately we are bullish on this. Today’s strategy will be long all assets but oil, which we remain bearish on for supply reasons yesterday, as well as Libya ports opening up for crude transport as a deal has been made between the government and rebels. 

Alternative View

Adverse comments from central bankers may adversely affect the markets, as will any developments in Ukraine.