What are traders talking about this morning? 'Sell USA, Buy EU' (DIA, SPX, SPY, QQQ, TLT)
Via Dave Lutz at JonesTrading, here's a quick guide to what traders are talking about this morning:
Good Morning! Just back from a great trip seeing clients in Europe – I’ve been doing this trip for years, but was really stunned by how “cheap” it was. There was no Greek “angst” in the air with fund managers, but instead a overwhelming theme of “Sell USA, Buy EU” equities. Concerns about US valuations (I agree short-term vulnerability into earnings) coupled with the addiction to chasing QE has made the street underweight US to a extreme – a delicate position for us contrarians. We discussed QE4 (repatriation in highway bill); Oil (Shale producers will defend share like OPEC – “fracklogging”); Gold (Some big levered bets against miners developing); Dollar (WETF as a $ play); and of course my new home, JonesTrading (Correlation between liquidity and portfolio performance / Our unique liquidity pool where we trades multiples ADV daily / How FSA is pressing to decouple execution, and how we can help)
Anyway, We have a pullback from last weeks closing peaks, which saw both the Nasdaq and Russell 2,000 hit new bull market highs. Euro markets are retreating much more sharply than US, as the DAX is off 1.4% compared to the S&P’s 20bp (mean reversion?) as the Euro has a slight bid against the Greenback. Greek PM Tsipras & German Chancellor Merkel meeting today the main cause for angst, as expectations dropping quickly for any real breakthroughs. Consumer Discretionary under sharp pressure, losing 2% followed by continued weakness in materials and industrial shares. Sentiment was better in Asia, led by a 2% jump in the shanghai composite, its 9th straight gain. We had a 1% pop in the Nikkei to a fresh 15Y high (Foxconn lends a hand to Sharp) and Aussie reversed lower after testing ASX6000.
The US 10YY is under pressure and the curve flattening – keep an eye on last week’s lows just under 1.9%. German Yields actually just turned higher, breaking above 19bp for the first time since Friday. Keep an eye on EURUSD and 1.088 – has tested and failed that 2x in the overnight. The trajectory for the DXY seems lower, as it barely holds Friday’s lows, causing a tailwind for commodities. The Oil complex remains weak, with WTI a huge underperformer to brent despite the falling $. Natty gas is getting hit for 3% as weather warms in the USA, while we continue to see the Softs performing well. Keep an eye on Wheat (WEAT).
Today at 8:30 we get Chicago Fed Nat Activity Index – and then heavy central bank headlines at 10: Fed's Williams Speaks on Economic Outlook and ECB's Draghi to Speak Before ECON Committee. Also at 10am, we get the first in heavy housing data this week, Existing Home Sales for Feb. Eurozone Consumer Confidence at 11, while Federal Reserve's Fischer to Speak in New York at 11:45. Greek meet with Merks starts at Noon, Presser scheduled for 2pmET.