Oh boy... Container shipping rates skyrocket 173%
Carriers diverted +$200 billion in trade from the red sea due to Houthi militant threats. shipping a 40-foot container from Asia to northern Europe now costs over $4,000, up +173%. Supply-chain issues are back.. Have markets been celebrating the end of inflation too soon? Source: Genevieve Roch-Decter, CFA, Bloomberg
Could a hot US job print invalidate the downward trend in bond yields?
The US 10 year is flirting with the massive 4% levels again. A close above it and things could become even more "dynamic" to the upside. Note 21 day right here, while 50 day remains way higher. Source: Refinitiv, TME
One of the major risk for equity markets in the short-run is Euphoria that prevailed at the start of the year. In other words, positioning is uber-bullish and can only go down from here
As Goldman trader Cullen Morgan writes, after 9 consecutive weeks higher in the S&P (quite a rarity), sentiment and positioning in US equities is very stretched. On the positioning front, US futures length (see chart below) now stands near record highs. In past instances when non-dealer positioning has been greater than $130bn, near term returns have been strong, while returns further out (3-months to 1-year) tend to skew more negative… With the latest data at +$158bn, Goldman traders are very wary of this now being a larger headwind. Similarly, CTA positioning in US Equities is approaching 2023 highs. Bottom-line: any geopolitical or macro news (e.g too hot US jobs print) might lead to higher bond yields might might put some downside pressure on equity markets.
10-Year Treasury Yield Options Bet
Ahead of US jobs data, an Options Trader bet $625,000 that the 10-Year Treasury Yield would surge to at least 4.15% by Friday's close. If the yield were to jump to 4.20%, the bet would pay the trader $10 million in profit. Source: Barchart, Bloomberg
Correlation between Equity and Bond returns
Source: BlackRock, Ayesha Tariq, CFA
Chinese stocks are trading near all-time lows relative to GDP, while US stocks are trading near all-time highs relative to GDP
Perhaps for good reason... but that's a massive spread. Source: Swordfishvegetable
Citi, JPMorgan, BofA and Morgan Stanley have collectively reduced their exposure to China by about a fourth since 2020
Source: Lisa Abramowicz, Bloomberg
US interest rate futures are beginning to shift back in the less dovish direction
Odds of 7 or 8 interest rate cuts in 2024 have halved this week. Also, odds of rate cuts beginning this month are down to just 7%. However, the base case still shows 6 rate cuts for a total of 150 basis points in 2024. This is double the 3 rate cuts forecasted at the Fed's latest meeting. Source: The Kobeissi Letter
