| | | | | | | | January 27, 2025 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
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The Financial Times' FTfm: Fixed Income special report examines how Donald Trump's presidency and broader economic trends are influencing fixed income markets. Fund managers remain optimistic about US high-yield bonds, though some warn of overheating in certain areas. Navigating the volatility of US Treasuries under Trump's policies has become a key focus for investors, as these traditionally safe assets are now viewed as riskier bets. Emerging markets, such as Mexico and Malaysia, are bracing for challenges as Trump's trade policies push up the cost of dollar-denominated debt. Meanwhile, the "barbell" effect is disrupting traditional bond funds, with cheaper passive funds and alternative assets rising in popularity, echoing trends seen in equity markets. Despite warnings from China's central bank about risks in its bond market, global investors remain confident that systemic financial disruptions are unlikely. Lastly, lower inflation makes gilts an appealing choice for investors, offering predictable and steady income streams. ~JJL
| | | | | | Lead Stories | | | Traders Who Bought VIX Calls Last Week Get Protection From Rout; Wall Street 'fear gauge' jumps as stocks sell off on AI fears; Low volatility had attracted call buyers: Susquehanna's Murphy
David Marino and Natalia Kniazhevich - Bloomberg
Traders who picked up cheap VIX call options last week are getting some protection from Monday's global tech selloff that erased more than $400 billion in market value from Nvidia Corp. alone.
Demand for calls on the Cboe Volatility Index, also known as the VIX, surged last week as traders bought more than 200,000 lots combined of February 22 and 23 calls, after the index sank below 15 to the lowest in a month. The call buying drove the skew, or the premium of calls betting on an increase in the VIX over puts, close to a record high, according to Cboe Global Markets.
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Wall Street Options Pros Play It Cool Before Key Earnings Week; Put-call ratio on US stocks holds near multi-year lows; Tech options show muted demand for protection against swings
Natalia Kniazhevich and David Marino - Bloomberg
Options traders are keeping calm ahead of this quarter's biggest week of earnings.
Companies representing more than 30% of the Russell 1000 Index's market value are expected to report this week, including technology and energy giants from Apple Inc. to Exxon Mobil Corp. On top of that, the Federal Reserve will announce its latest rate decision Wednesday, while Donald Trump is issuing executive orders and pronouncements on everything from interest rates to oil prices.
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Wall Street Fear Gauge Surges, Doesn't Yet Indicate Panic
Brian Swint - Barron's
The CBOE Volatility Index, better known as the VIX or the "fear gauge," was surging early Monday amid concerns that China's DeepSeek program could upend the outlook for artificial intelligence.
The index was up 28% at 19.03, having previously closed at 14.85. However, it's still below the threshold of 20 that the index has only occasionally exceeded over the past year.
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DeepSeek Deep Sixes the Stock Market. How Far the S&P 500 Could Fall.; A tech-stock selloff sent the broader market lower. Worries about new AI competition might finally spark a market correction.
Paul R. La Monica - Barron's
DeepSeek just might derail the stock market's rally.
The S&P 500 hasn't had a correction, a 10% pullback from a high, since October 2023. Investors kept buying throughout 2024 despite angst surrounding the Federal Reserve and interest rates, not to mention numerous international concerns.
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AI-themed ETFs plunge in wake of DeepSeek news
Suzanne McGee - Reuters
Prices of exchange-traded funds with outsize exposure to Nvidia plunged in the initial hours of trading on Monday in reaction to news that a Chinese startup has launched a powerful new artificial intelligence model.
Technology market insiders like venture capitalist Marc Andreessen have labeled the emergence of year-old DeepSeek's model a "Sputnik moment" for U.S. AI companies, most of whose share prices slid on news that downloads of DeepSeek already have overtaken those of U.S. rival ChatGPT on Apple's online app store.
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The Three Forces Shifting the Investment Landscape; Mean reversion in markets is far from guaranteed in a world of economic dispersion and tech exceptionalism.
Mohamed A. El-Erian - The Wall Street Journal
Three factors heavily influenced the financial landscape over the last 12 months - AI-focused technological optimism, hoped-for leveling up, and higher government bond yields. All three will continue to be in play this year but in a manner that suggests greater volatility, and the need for an investing rethink that incorporates a larger universe of opportunities in both public and private markets. Optimism about the productivity-enhancing potential of exciting tech innovations is reflected in the extent to which a handful of companies have led the surge in the S&P 500 Index from one record level to the next. It is a well-founded sentiment, given the many ways in which artificial intelligence will improve what we do and how we do it. It is also warranted by the speed with which advances are being made. The money being thrown at the sector and the frequency of upgrades has some in the industry readily admitting that they are not sure where the technology will be in the next two year
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Investors offloaded record volume of private equity stakes in 2024; Booming secondary market as pension funds and buyout groups seek alternative ways to cash out
Ivan Levingston and Alexandra Heal - Financial Times
Investors offloaded a record amount of private equity stakes on the second-hand markets last year, as the prolonged drought in dealmaking has encouraged pension funds and buyout groups to seek other ways to cash in their investments. Volumes traded globally reached $162bn in the so-called secondary market, where investors in private equity or other private funds sell their stakes to new investors for cash, or the fund managers themselves sell company stakes to new funds.
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| | | | | | Exchanges | | | North American Equities Year in Review
Cboe
In 2024, Cboe's North American Equities team evolved with changing market dynamics and delivered innovative solutions to meet the needs of customers in the U.S. and Canada. Delivering customer-driven solutions and providing insightful analysis were top priorities for the team and will continue to be at the forefront as we head into 2025.
Read a detailed review of 2024 accomplishments for Cboe's U.S. and Canadian equities businesses below.
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Cboe Europe Derivatives 2024 Recap and Look Ahead
Iouri Saroukhanov - Cboe
Iouri Saroukhanov, Head of European Derivatives, recently sent a note to customers reflecting on Cboe Europe Derivatives' accomplishments in 2024 and a look ahead to 2025.
As we start the new year, I wanted to take the opportunity to recap the achievements of Cboe's Global Derivatives business in 2024 and provide an update on what to expect from us in 2025, particularly from Cboe Europe Derivatives (CEDX).
In the US, Cboe enjoyed its fifth successive year of record options volumes, with an ADV of 14.95 million contracts across our four US options exchanges. Cboe's proprietary index options complex, including S&P500 Index (SPX) options and Cboe Volatility Index (VIX) options, also set all-time high ADVs. As interest in options trading grew, we ramped up our advocacy and education activities in our ongoing effort to make options more accessible. A highlight in this regard was the launch of our US index options on Robinhood in October, greatly expanding retail access to these products.
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FIA statement on EU equivalence for UK clearinghouses
FIA
Jackie Mesa, FIA's Chief Operating Officer & Senior Vice President of Global Policy, made the following statement on the equivalence decision announced by the European Commission.
"FIA welcomes the Commission's proposed extension of the equivalence decision. While our members prefer a non-time limited equivalence determination, once finalised, the three-year extension will provide much needed certainty to EU market participants for the moment."
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ICE to Launch MSCI Equity Index Futures on ICE Futures Abu Dhabi; Launch Extends Equities Access to Gulf and Indian Markets
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of technology and data, today announced plans to launch MSCI Equity Index Futures contracts on ICE Futures Abu Dhabi on February 24, 2025, subject to regulatory review. This launches a new asset class for trading at ICE Futures Abu Dhabi and will include: Micro MSCI GCC Countries Index Futures, Micro MSCI Qatar Index Futures, Micro MSCI UAE Index Futures and Micro MSCI India Index Futures. The contracts, all denominated in US dollars, will provide investors with a way to access Gulf and Indian equity markets and manage equity risk in the region.
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Fixed Income and Thematic Investing Drives AUM for ETFs Benchmarked to ICE Indices to Record Level in Asia-Pacific in 2024
Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE), a leading global provider of technology and data, today announced record 2024 growth in assets under management (AUM) for Exchange Traded Funds (ETF) benchmarked to ICE's indices listed on Asian exchanges. This growth was driven by strong retail interest in fixed income and thematic investing in the region, and occurred as ICE has continued to expand its global index offering to include more fixed income, thematic, equity and international indices that match the strategies of the global investment community.
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| | | | | | Technology | | | Trading Technologies Advances Data and Analytics
Editorial Staff - Traders Magazine
Crisil Coalition Greenwich cited "insatiable" demand for market data as a top market structure trend to watch in 2025. "Market participants once again expect to spend more on market data in the year ahead," the consultancy said in a report. "Whether moving into a new country, a new asset class or a new investment strategy, the first step is always gaining access to new data."
"The data itself is only the first step in that journey," the report stated. "New delivery mechanisms (e.g., cloud for real-time market data), better analytics (AI anyone?) and tools to make that data actionable on the trading desk are all areas of critical investment that support the demand for more market data."
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| | | | | | Strategy | | | Options Traders Bet on More Volatility Ahead
Krystal Hur - The Wall Street Journal
Wall Street is bracing for more whipsaws in the stock market.
The Cboe Volatility Index, which measures expectations for where the market is headed through S&P 500 options, jumped more than 28% to about 19 on Monday. That's on track for the biggest gain since the mid-December market selloff.
Traders are also jumping into bets that the VIX itself isn't done climbing.
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VIX Call Demand Near Record High Ahead of FOMC
Mandy Xu - Cboe
While the VIX index has fallen the last two weeks, demand for VIX options has picked up notably, particularly upside calls. In fact, January's VIX option ADV of 938k contracts is 13% higher than last year's already record ADV of 830k contracts. Buying of VIX upside calls has driven VIX skew to near a record high, with 2M skew (25D ratio) screening in the 99th percentile high over the past 10 years.
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High Volatility Could Soon Hit Ag Futures Markets. Here's 2 Ways to Play It.
Jim Wyckoff - Barchart
There's a new sheriff in town. President Donald Trump's administration is quickly falling into place and has already made major changes to U.S. government policies. Look for potentially higher daily price volatility in agricultural futures markets in the near term as new and sometimes disruptive policies are unveiled by the Trump administration.
How To Determine If Markets Are Becoming More Volatile
One way to gauge whether daily market volatility is on the rise would be to monitor the U.S. stock market's volatility index (VIX). The VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's (CBOE) Volatility Index ($VIX) - a popular measure of the stock market's expectation of volatility based on S&P 500 Index ($SPX) options. If the U.S. stock indices are more volatile day to day, then it's likely other markets are, too, including grains and livestock futures.
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Currency Volatility Set to Wipe Out Emerging-Market Carry Trades
Matthew Burgess and Prima Wirayani - Bloomberg
Emerging market investors are turning increasingly wary of carry trades as the threat of tariffs from the Donald Trump administration and the prospect of further dollar gains squeeze returns. Latin American currencies, often bought as part of such trades, face pressure from domestic fiscal issues along with the prospect of trade tensions with the US, according to Mackay Shields and Pictet Asset Management. Carry trades involve borrowing in currencies from countries with relatively-low interest rates, like the yuan or yen, and investing those funds in markets with higher rates.
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| | | | | | Miscellaneous | | | FOBO, or fear of becoming obsolete, is the new business buzzword. Here's what you need to know.
Polly Thompson and Spriha Srivastava - Business Insider
Rapid AI advances present an alluring opportunity for businesses to boost productivity and efficiency.
But while CEOs battle their FOMO and race to adopt the new technology, their employees are experiencing a different side of the AI revolution - FOBO, the fear of becoming obsolete.
/jlne.ws/4h9lFRS
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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