Short and sweet (sour) today…
Nothing is in the green – Risk-off is now in every asset as investors move to cash. With little guidance from Washington, and events/ schools/ countries (Italy) shutting down, the economic impact is not even close to being felt. Sell first and then ask questions reigns. Investors want to see fiscal support, and they are not getting it yet.
The freefall continues and unfortunately there doesn’t seem to be any catalyst to stop it anytime soon. President Trump decided to ban any travel from Europe to the US overnight (which has hit airlines since the open), the WHO declared the virus a global pandemic and Italy’s lockdown has broadened to closing all stores. Volumes remain higher on down days than up days too – not a good sign.
Live to fight another day…
Pandemic Pandemonium…Policy stimulus is supportive in general, but seemingly not enough until we get the so-called Corona pandemic under control. The House of Reps is expected to announce an economic relief package including insurance, paid sick leave, and family and medical leave in the bill today. However, The Dems don’t love President Trump’s tax cut proposal (“non-starter”). Oh well. But markets are not feeling any relief. Only a select, expected few — USD, Bonds and The Vix (and nat gas actually) are in the green.
In a word…WHOA…
Kris-Kross Market – Limit up, limit down, jump around! Equities will make ya…scratch your head. Futures were limit up pre-market amid talk of a stimulus package to come. Speaking to those on both of the buy and sell-side aisle early, to say Wall Street was skeptical the move would hold is an understatement. It didn’t, with the most beaten up names (Banks, Autos, Tech) leading but they and the market continue to lose steam.
Short-Circuiting – It’s never a good sign when everyone is brushing upon the circuit-breaker rules pre-mkt. US indices were open for ~4 minutes before the halts came into play. It was the first time they’ve been triggered since Dec, 2008. When the defensive sector are yielding losses of 4-5%, you know things have gone really sour. 4 different sectors are currently seeing DOUBLE-DIGIT losses. We did see some brief bargain-hunting in travel-related names and the oils; BRIEF. About that…
What a way to start the week!
European equities hit fresh 2020 lows after a weekend full of news in the COVID-19 and Oil space. Italy started the week with a quarter of its population in quarantine and Saudi Arabia launched a war for oil market share. All indices plunged at the open, V2X spiked (currently trading up +43%) and we are back to talking about support levels. FTSE 100 plunged at the open but support remains 6000? (was 5891 earlier but 6015 now). The Euro Stoxx 50 is trading below 3000, which targets 2908 (Dec 2018 low), but overall most of levels are now ~ 10% down from Friday’s close – please shout if you need any specific ones.
There is no doubt that technology is taking over our lives. We allow machine learning algorithms to select the news that we read, to recommend the TV that we watch, to drive cars, and (unwittingly) to decide the outcome of elections. As coined by Klaus Schwab in 2015, we are in the midst of the ‘Fourth Industrial Revolution’ and the pervasion of technology is only going to increase.
Originally pioneered in the ‘80s, pairs trading has become a staple amongst a wide range of investors – from day traders to tier-one asset managers. Despite its ubiquity, the approach to executing pairs has changed very little over time. While algo providers have put huge effort into developing liquidity-seeking algorithms and improving benchmark performance; until recently, very little has changed for pairs.
Liquidity is a good thing. Increasing the available liquidity in a stock makes it easier and cheaper to trade. Regulators are using this as a basis to push stocks more and more towards trading on traditional transparent exchanges…
Last year, Redburn introduced the world to the concept of the ‘Order Entry Requirement’, or OER. The idea is that for orders below a particular size it is not worth interacting with certain venues. Although this seems intuitive – there’s no point sending a small order to a block venue – quantifying the value is far more difficult.