Monday, September 21, 2015

morning market color

Greece - Syriza won 145/300 seats, more than expected

o   will need to form a coalition, likely with previous partners Independent Greeks (10 seats)

o   Syriza is bound to austerity program and committed to implementation - this outcome removes ST risks

o   in the prev election, bonds sold off on a Syriza win; on the other hand, now it's a relief to get Syriza elected

·         Fed - mkt can deal with good news or bad news, but it hates uncertainty

o   Sept 17 meeting gave less clarity than mkts would like

o   futures pricing in 51% chance of no hike this year

o   13 "dots" looking for hike this year

o   US tsy 2y yield peaked at 80bps, fell to 66-68bps after the Thurs meeting, now back up to 70bps

o   Yellen speaking on Thurs - hopefully schedules a press conference for the October mtg, but unlikely

·         HY correlates better with eqy mkts than EM mkts

·         Credit spreads widening out while eqy mkts are stabilizing/up - are fixed income investors seeing sthg that eqy guys aren't?

·         Q3 earning season starts in the next couple of weeks

o   historical trend has been for expectations decline to during the course of the previous quarter, earnings beats this declined exp

o   ^ this hasn't happened this quarter

·         Volkswagen (VLKAY) - admitted that their cars met emissions standards only during tests and not on the road

o   diesel sales are halted - this is ~one-quarter of US sales

o   potential penalties/fines of billions of dollars

o   shares down 20% overnight

·         DAX is still up +11bps despite VW

·         Alibaba (BABA) - share lockup period on 63% of shares is ending, may lead to ST weakness

·         Data flow is focused on the US this week

o   M: US existing home sales at 10am

o   T: US FHFA house prices

o   W: PMI day (China, EZ, US, Japan)

o   Th: US durable goods, new home sales

o   F: US Q2 GDP 3rd revision, UMich consumer survey

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