| April 16, 2020 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Investors, Beware: The Fear Gauge Is Sending False Signals
Steven M. Sears - Barron's
It's the start of the most important earnings season in a decade.
The stock market just posted its greatest weekly rally in 46 years. But that factâand even official government reportsâwill be less valued by investors than first-quarter earnings reports, which will provide reasonably solid data to evaluate what has happened to the economy since the coronavirus threw it for a loop.
/bit.ly/2XGy4qz
Options markets send cautiously bullish signal on U.S. stock rally
April Joyner - Reuters
As Wall Street stocks pause for breath following a blistering three-week surge, signals from the options market are suggesting that some investors believe the gains may endure. The Cboe Volatility Index , known as "Wall Street's fear gauge," ended below 40 on Tuesday for the first time since March 5, after rising as high as 82.69 during a sell-off that took the S&P 500 down as much as 34% from its peak.
/reut.rs/3bgXZZB
'Lira Is the New Rand' as Traders Start Pricing Diverging Risks
Colleen Goko - Bloomberg
Turkey's lira may be about to challenge South Africa's rand as the worst-performing emerging-market currency this year.
Traders are the most bearish on the lira relative to the rand in 10 months, based on the cost of hedging against declines using put options. The premium of contracts to sell the South African currency in the next month over those to buy it, known as the 25-Delta risk reversal, was at 5.36 percentage points on Thursday, compared with 9.12 for the lira.
/bloom.bg/34H76QP
Morgan Stanley's first-quarter earnings plunged 30%, missing Wall Street's forecasts
Theron Mohamed - Markets Insider
Morgan Stanley posted first-quarter earnings on Thursday that fell short of the consensus estimates of Wall Street analysts polled by Bloomberg.
The banking titan's net revenues fell about 8% to roughly $9.5 billion, contributing to a 30% decline in net income to about $1.7 billion.
/bit.ly/3esMIHO
Unusual price swings around daily FX 'fixes' spark alarm
Eva Szalay - Financial Times
Abnormal moves in currencies shortly before the calculation of daily benchmarks are bumping up costs for investors and could even suggest that high-speed traders are trying to manipulate exchange rates, according to Raidne, a market surveillance company.
Since the start of March, Raidne says, the Australian dollar, sterling and the euro have started to behave oddly in the run-up to London's so-called 4pm fix â the most commonly used benchmark in foreign exchange, run by WM/Reuters. The fix is a five-minute period of trading used to calculate daily exchange rates that underpin a huge range of transactions.
/on.ft.com/2z661GK
Morgan Stanley warns on outlook after 30% profit fall
Laura Noonan - Financial Times
Morgan Stanley's earnings targets would take "longer to achieve", chief executive James Gorman warned on Thursday, after the bank reported that its profits had tumbled by almost a third in the first three months of 2020.
The Morgan Stanley chief executive acknowledged the futility of attempting to meet financial targets that were set before the coronavirus crisis, following what has been a bruising start to the bank earnings season.
/on.ft.com/3cphaAC
Crude Oil Options Are Predicting Lasting Volatility
Owain Johnson and Jeff White - CME Group
While all eyes have been on the huge fall in the outright price of crude oil, the oil options markets are also sending plenty of signals about market expectations for the longer-term impact of COVID-19.
The price of benchmark WTI crude oil fell from an average of over $57 per barrel in 2019 to reach the low $20s by the end of the first quarter of 2020. Global demand for many of the refined products made from crude oil - particularly gasoline and jet fuel - has collapsed in the wake of the restrictions on movement introduced to combat the spread of COVID-19.
/bit.ly/2XHmGun
U.S. options markets resilient despite dislocations, NYSE analysis shows
March data on trade types and market quality reveal impact of floor closures, extreme volatility
Will Acworth - MarketVoice
From a trading volume perspective, March was an exceptionally good month for the U.S. equity options markets. As the U.S. economy ground to a halt and the stock market plunged, the total number of options cleared by the OCC reached 662.8 million, smashing the record set only one month before.
/bit.ly/34E94Bw
| | | | | | Regulation & Enforcement | | | Europe extends short-selling bans despite hedge fund pressure
Philip Stafford and Laurence Fletcher - Financial Times
Five European countries have extended bans on the short-selling of shares, despite pressure from hedge funds to scrap the restrictions put in place after a sharp market sell-off last month.
The bans in France, Spain, Austria, Belgium and Greece had been scheduled to expire in coming days, but regulators said late on Wednesday that they would extend them until mid-May. Authorities had argued that restrictions were necessary to stabilise stock prices, after fears over coronavirus knocked about 30 per cent off European shares in March.
/on.ft.com/3clFkvZ
ECB cuts banks' market risk-related capital requirements
Balazs Koranyi - Reuters
The European Central Bank will temporarily lower commercial banks' capital requirement related to market risk so they can keep functioning during the current coronavirus-related volatility, the ECB said on Thursday.
/reut.rs/2z9DHmZ
Derivatives industry sees breakthrough in push to scrap Libor
Huw Jones - Reuters
The derivatives industry has indicated support for hardwiring into contracts a clear path forward if there is a sudden death of Libor, the interest rate benchmark that is due to expire by the end of 2021.
The International Swaps and Derivatives Association (ISDA) - whose documentation underpins millions of transactions in the global swaps market - announced late on Wednesday preliminary findings from its second attempt to secure agreement on what happens when Libor ends.
/reut.rs/2XIgq5Q
| | | | | | Strategy | | | 'Caution Is Warranted': Fund Managers' Playbook as Results Start
Moxy Ying and Ishika Mookerjee - Bloomberg
The world of stocks has changed a lot in just three weeks. At least seven Asian markets have rebounded more than 20% from their March lows, pushing the region's benchmark to a level just 3% away from technical bull territory.
Yet this sharp rebound is facing a real test in the coming weeks -- earnings. The unfolding reporting season will be the first chance for many investors to gauge the coronavirus impact on businesses. And for some bulls, it may even lead to opportunities to add positions. While money managers' playbooks vary, the bottom line is clear: volatility may return anytime.
/bloom.bg/3cm0xG6
It's safe to buy stocks when the S&P 500 is above this level, but now is not the time
Michael Sincere - MarketWatch
I've been getting a flood of emails from acquaintances eager to buy digital currencies, calendar spreads (a complex options strategy), foreign currencies, penny stocks, and any company that claims to cure the virus.
In a bear market environment, when investors are understandably nervous, get-rich-quick investments will be peddled on the internet or by word-or-mouth. During such uncertainty, the last thing you want to do is dabble in any type of shaky and murky investment, especially if you have never done so before. To paraphrase Warren Buffett, never invest in anything you don't understand.
/on.mktw.net/3agwhuR
The biggest mistake stock market investors are making now â failing to look ahead
Nigam Arora - MarketWatch
In the wake of coronavirus-related volatility in the stock market, investors are asking: "Is the economic data showing that there will be a depression?"
The No. 1 mistake investors make as they try to figure out the answer is that they are mostly focused on one dimension of a two-dimensional problem.
/on.mktw.net/3bfnyuh
How to use ETFs to play swings in the stock market
Stefanie Marotta - The Globe and Mail
High-risk volatility-linked exchange-traded funds have benefited from the wild market swings caused by the economic fallout of the COVID-19 pandemic. While it can be a money-making bet, portfolio managers caution investors against volatility and inverse volatility ETFs plays without fully understanding the complexity of these funds.
/tgam.ca/2KdeJFr
| | | | | | Events | | | CME Group to Webcast 2020 Annual Meeting of Shareholders
CME Group
CME Group Inc. (NASDAQ: CME), the world's leading and most diverse derivatives marketplace, today announced it will host its 2020 annual meeting of shareholders virtually in light of public health concerns due to the coronavirus (COVID-19). As previously announced, the meeting will be held at 10:00 a.m. Central Time on Wednesday, May 6, 2020, but now will only be accessible in an online format.
In order to attend the annual meeting, shareholders will need to log in to the virtual meeting page (www.virtualshareholdermeeting.com/CME2020) using the 16-digit control number found on their proxy card or voting instruction form. As described in previously distributed proxy materials, shareholders are entitled to participate in and vote at the annual meeting if they were shareholders of record at the close of business on March 9, 2020, or if they hold a legal proxy for the meeting provided by their bank, broker or nominee.
To learn more about accessing and participating in the virtual meeting, please refer to CME Group's Notice Regarding 2020 Annual Meeting of Shareholders.
/bit.ly/2RJrcVt
| | | | | | Miscellaneous | | | Morgan Stanley: 'Biggest fear' is policymakers repeating 2008 mistakes
Shalini Nagarajan - Business Insider
Analysts at Morgan Stanley believe that the imminent 2020 recession will be more severe than the global financial crisis.
However, they expect output in developed markets to recover about twice as fast as post-crisis, given that global fiscal and monetary response has been unprecedented.
/bit.ly/2XCiex7
Banks Brace for Consumer Pain, but Wall Street Trading Arms Shine
Liz Hoffman and David Benoit - WSJ
For Americans checking their retirement accounts, the market's swings during the first quarter were a horror show. For Wall Street's traders, they were a windfall.
Big banks' trading desks posted their strongest results in years during the first three months of 2020âwhen the deepening coronavirus crisis wreaked havoc on the marketsâbuying and selling trillions of dollars worth of stocks and bonds, commodities and interest-rate products.
/on.wsj.com/2RHwjFE
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