| October 25, 2018 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Near and Midterm (Election) Hurdles: An Economic Outlook with CME's Blu Putnam
JohnLothianNews.com
"You can't put the toothpaste back in the tube."
The Fed has its hands full. The midterm elections are right around the corner. The trade war is making Brazil a bigger agricultural player. Here to make sense of it all is Bluford Putnam, CME Group chief economist and managing director. In this video filmed at FIA Expo, Putnam discusses his views on these three challenges facing the economy.
Watch the video and read the rest »
| | | | | | Lead Stories | | | At Sell-Off's Core Is an Earnings Season That's Consoling No One
Sarah Ponczek and Elena Popina - Bloomberg (SUBSCRIPTION)
A quarter of the way through earnings season and 10 months into what is sure to be the biggest year for profit growth this decade, the numbers are strong. The market doesn't care.
It sounds astonishing: at a time when S&P 500 operating income is surging more than twice the historical average, stocks have gone nowhere, with both the Dow Jones Industrial Average and S&P 500 erasing their annual gain on Wednesday.
/bloom.bg/2yyN78m
Wall Street Says Far More Pain Needed Before 'Fed Put' Kicks In
Natasha Doff - Bloomberg (SUBSCRIPTION)
BlackRock, HSBC say $2.3 trillion stock tumble not enough; Eurodollar markets lower wagers on interest-rate increases
Besieged global investors swimming in a sea of red are consumed with one magic number: the strike price of the so-called Powell Put -- or how much more blood stock markets need to shed before spurring the Federal Reserve to temper its hiking plan.
/goo.gl/KrCMFM
Buckle up: Wall Street volatility is back with a vengeance
Marley Jay - Associated Press
If you're an investor who was lulled to sleep by the stock market's calm, steady gains this summer, you're wide awake by now. Stocks have swooned over the last three weeks as investors worried about a sea of troubles, including rising interest rates, the trade tensions between the U.S. and China and slowing economies outside the U.S. All of which could impair profit growth for U.S. companies.
/goo.gl/E7tbX7
Soaring Short Volatility Trades Pose New Threat to Stocks
Mark Kolakowski - Investopedia
Back on Feb. 5, a popular trading strategy called short volatility, or short vol, blew up, creating massive losses for speculators. Some investment products based on the strategy lost almost their entire value, and had to be liquidated. Undaunted by that experience, speculators subsequently began making heavy short vol bets once again, and net short positions in futures contracts linked to the CBOE Volatility Index (VIX) are now even bigger than they were at the start of February, Bloomberg reports.
bit.ly/2yxvp50
Early Rally After Yesterday's Collapse, But Will It Last?
JJ Kinahan - Forbes
Stocks looked ready to snap back Thursday from Wednesday's late collapse, but the question is whether any rally attempt can carry through to the closing bell.
Lately, it seems like every time the market tried to mount a recovery, sellers showed up late in the day to kick things back down. That doesn't mean the same thing will happen this time, but it's hard to blame investors if they feel skeptical about the stamina of this morning's green numbers. Early morning rallies after a big sell-off are pretty common, but they don't always last, and the rout isn't necessarily over. Anyone trying to participate today should consider taking special care, especially in the first half hour.
bit.ly/2yxMuMj
Exclusive: UK derivatives clearers may get no-Brexit deal reprieve - EU document
Huw Jones - Reuters
The European Union might grant temporary permission for clearing houses in Britain to continue serving EU customers if there is a no-deal Brexit next March, an EU document seen by Reuters showed.
/goo.gl/xEJHpf
A volatile October for markets does not have to be bad news; The instability in stocks and bonds is part of necessary shift away from central bank support
Mohamed El-Erian - Financial Times (SUBSCRIPTION)
This week's volatility only amplifies an already unsettling month for global equity markets. It is the product of a longer-term shift driven by an important change in the underlying regime for financial markets. We are moving away from the comforting support of ample, consistent and predictable liquidity and towards economic and corporate fundamentals having greater sway.
/goo.gl/4MwyAv
Reasons to be cheerful while markets take a knock
Katie Martin - Financial Times (SUBSCRIPTION)
While markets globally take a hit (again), the more determined optimists are undeterred.
Mark Haefele, CIO at UBS Global Wealth Management is not complacent: "Unlike earnings reports in the first half of the year, US companies are contending with some pockets of softness in the global economy, especially in auto markets in Europe and China and some shorter-cycle industrial markets."
/goo.gl/kMnDcA
October's global market sell-off in charts
Financial Times (SUBSCRIPTION)
October has been tough to navigate in markets, with analysts noting that Halloween came early. Here are some of the charts that tell the story of the month.
/goo.gl/jxVtYP
Why the Dow tumbled 600 points and the Nasdaq fell into correction territory for the first time in 2 years
Mark DeCambre - MarketWatch
A few short weeks ago the Dow industrials were on the verge of busting through another psychological milestone at 27,000.
However, all that momentum has evaporated as a sweeping downturn grips financial markets, sending the Dow Jones Industrial Average DJIA, +0.70% tumbling more than 600 points on Wednesday and pushing the Nasdaq Composite Index COMP, +1.76% into correction territory for the first time since Feb. 11, characterized as a drop of at least 10% from a recent peak.
/on.mktw.net/2CFbeoD
| | | | | | Exchanges and Clearing | | | CME Group Inc. Reports Third-Quarter 2018 Financial Results
CME Group
CME Group Inc. (NASDAQ: CME) today reported revenue of $904 million and operating income of $550 million for the third quarter of 2018. Net income was $412 million and diluted earnings per share were $1.21, up from $0.91 in third-quarter 2017. On an adjusted basis, net income was $495 million and diluted earnings per share were $1.45, up from $1.19 in third-quarter 2017. Financial results presented on an adjusted basis for the third quarters of 2018 and 2017 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
bit.ly/2CIdR90
****SD: Reuters with the recap here.
Eurex Exchange's Quarterly Equity Derivatives Highlights
Eurex Exchange
Eurex Exchange is home to the broadest range of pan-European single stock options and futures with a product offering of more than 750 equity options and 800 single stock futures from more than 10 countries. This equity derivatives update covers the highlights of the latest quarter. The overall trend is clear. Although special events or major market moves may be the reason behind a specific volume increase, investors are increasingly bringing their business to a liquid, pan-European platform where they benefit from having a 'single point of entry'. This enables investors to profit from cross-border margin efficiencies, a single rulebook, as well as a consistent settlement and exercise methodology.
The Spanish product segment highlights the continuous pan-European growth in the third quarter. Spanish single equity options volume grew by 30% compared to Q3/2017, while the Spanish single stock futures increased by 500%.
bit.ly/2yC8UMa
Li Zhengqiang, Chairman, Dalian Commodity Exchange: To Steadily Promote Construction Of World's First-class Derivatives Exchange Date
Mondovisione
Li Zhengqiang, Chairman of Dalian Commodity Exchange (DCE), said at the China and Global Derivatives Market Development Forum on October 16 that DCE will steadily promote the construction of a world's first-class derivatives exchange. It will accelerate the launching of more futures and options products, further integrate the OTC (over-the-counter) market business, and facilitate the opening-up of more mature products to bring more convenience to domestic and overseas participants. And it will strive to provide the global market with an open and transparent commodity futures price settled by RMB and with wide representativeness and keep improving its core competitiveness of serving the real economy and its international influence.
| | | | | | Regulation & Enforcement | | | Market Data Fight Rages On US equity exchanges' market data revenues are in regulators' crosshairs.
Larry Tabb - Tabb Forum
The SEC has taken up the mantle of challenging the appropriateness of the exchanges' market data fees and is hosting a series of roundtables to investigate the matter. Larry Tabb, who will be participating in one of the panels, has prepared a research deck to help the SEC examine the market data business. Download a complimentary copy of the data and check out Tabb's basic findings here.
/goo.gl/YdEc9q
****SD: From the Financial Times - Exchanges warn SEC against muscling in on market data cost debate
SEC Won't Release 'Speed Bump' Study It Promised Two Years Ago; Investors expressed surprise at decision not to publish the study, which the agency committed to in 2016
Cezary Podkul - WSJ (SUBSCRIPTION)
The Securities and Exchange Commission won't release a study of the impact of brief delays in stock trading on market quality and pricing that investors have been expecting for two years.
/goo.gl/kxTwRb
| | | | | | Technology | | | Data Science and the Trading Desk
Terry Flanagan - Traders Magazine
Francis Bacon, René Descartes and Isaac Newton were among pioneers who advanced the idea of making conclusions based on observation and evidence, rather than just reasoning. Centuries later, institutional brokers are incorporating tenets of the scientific method into their own pursuits of buying and selling blocks of equity. The nutshell premise is that data and proof walk, conjecture talks. This is especially the case in a rapidly evolving market with a multitude of promising -- but untested -- trading options.
/goo.gl/bVnAn2
| | | | | | Strategy | | | Has the stock market sell-off bottomed? These four things will tell you when
Kate Rooney - CNBC
U.S. stock markets have struggled to find footing in October, and Nicholas Colas, co-founder of DataTrek Research, says there may be more room to fall. He listed four metrics to use as a road map "through the minefield" in the process of finding a bottom, including sentiment on rate hikes and global equities. "We don't think the selling is over and now is not the time to bottom feed," Colas says.
/goo.gl/EHDESu
Saving This Market May Come Down to These 4 Things: Taking Stock
Arie Shapira - Bloomberg (SUBSCRIPTION)
We should have seen all of this coming, no? Alarm after alarm kept ringing weeks before earnings season kicked off, with a slew of profit warnings in addition to virtually every earnings report in late September having some sort of let-down that caused shares to crater downward -- think back (way before the PPG and Fastenal blowups) to BMW, Micron, Red Hat, Nike, Conagra, FedEx, General Mills, KB Home, and seemingly every single auto-related company.
/bloom.bg/2ywaM9m
A 'lost decade' for stocks may have just arrived, says this adviser
Barbara Kollmeyer - MarketWatch
Another dip-buying dilemma greets investors for Thursday, after a hard Wall Street reset dumped the Nasdaq in bear territory and wiped out 2018 gains for the Dow and S&P 500.
/goo.gl/rgBUuf
Tesla Options Suggest Post-Earnings Comeback From 2018 Losses
Gregory Calderone - Bloomberg (SUBSCRIPTION)
It's been a tough year for Tesla Inc. investors who have stuck with the company through a tumultuous 2018. Now the options market is signaling that stock holders could be back in the green after the electric carmaker's third-quarter earnings report.
/bloom.bg/2O0NT2B
****SD: And that suggestion was indeed correct. Looks like Citron and Andrew Left made back some of their Tesla losses. Timely. If you are no longer a burnt short, does that make you preserved pants?
| | | | | | Miscellaneous | | | OPEC Mulls Options to Cut 2019 Oil Output to Prevent Oversupply
Javier Blas - Bloomberg (SUBSCRIPTION)
Asks technical panel to study options for next year's supply; Recent rise in crude inventories 'may require changing course'
OPEC urged a committee to prepare "options" for how much oil it should produce next year to prevent the market slipping back into oversupply, the clearest sign yet that the group could reduce output to avoid prices falling further.
/goo.gl/a5N65K
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