As headlined here in the past weeks, currencies are seeing some big moves at present with GBP suffering Brexit and Covid nerves, EUR undergoing some pre-ECB meeting nerves ahead of tomorrow and USD seeing a correction. Definitely timely to put protection in place and the deployment of sage of Limit Orders. GBP seeing daily swings of 1%+ and yesterday 2% which is keeping SGM-FX’s newest Client Desk recruit, Edwin not only in his all-terrain Reeboks but on his toes.
SoftBank Call Option Purchase Programme
SoftBank has reputedly bought around USD50 Billion of call options on Technology Stocks with a further USD 4 Billion in the past week. The great thing about very large trades(and this one is a monster) is that selectively leaking news about them makes the price movement self-fulfilling as others scramble to avoid missing out or to cover short positions. The effect on stocks such as Tesla has been nothing short of spectacular. The less great thing is that exiting such positions is far harder. An example of that took place 26 years ago in the fixed income market. A hedge fund had amassed a colossal long position in interest rate futures contracts in the course of 1993 and as the market started turning and their margin calls started increasing, they and also the other market participants who had climbed aboard that trade, decided to sell their long positions. As everyone headed for the exit, prices tumbled and the result was classic bull squeeze carnage. Clearly technology stocks have little in common with interest rate futures, but the lessons of any marketplace apply and for investors in technology stocks while putting their parachutes on may be premature, they should certainly buckle up for what could well be severe turbulence. Yesterday saw falls of almost 3% on Nasdaq, 6.73% in Apple, 3.7% in Alphabet, 4.39% in Amazon and 4.09% in Facebook.
Last night WTI Oil dropped over 3% to $38 a barrel to its lowest since July on demand concerns. On Monday Saudi Aramco cut the official October selling prices for Arab light oil which the market took as a sign that demand was stalling. Next OPEC meeting is scheduled for September 17. Forecasts vary widely but the more optimistic market watchers expect WTI to get above $45 by year end in a scenario with Covid vaccine availability and demand picking up.
Today would have been soul singer Otis Redding’s 79th birthday had his life not been tragically brought to an early close in a plane crash at the age of just 26 in 1967. That year Otis Redding had appeared at Monterey Festival alongside many other stars including Jimi Hendrix and Janis Joplin and just 3 days before his death had recorded “Sittin’ on the Dock of the Bay”-here’s a reminder of one of the all-time great songs released in 1958:
Sittin’ in the morning sun
I’ll be sittin’ when the evening comes
Watching the ships roll in
Then I watch ’em roll away again, yeah
I’m sittin’ on the dock of the bay
Watchin’ the tide roll away, ooh
I’m just sittin’ on the dock of the bay
Wastin’ time
I left my home in Georgia
Headed for the Frisco Bay
‘Cause I’ve had nothing to live for
And look like nothing’s gonna come my way
So, I’m just gon’ sit on the dock of the bay
Watchin’ the tide roll away, ooh
I’m sittin’ on the dock of a bay
Wastin’ time
Discussion and Analysis by Humphrey Percy, Chairman and Founder
Data Day Despite salient data already having been published in China and France so far this morning, we are far from finished with the deluge of data due to reach the market today. The most important of which will be those that we have signposted in earlier briefings: Eurozone and US inflation figures. Given just […]
Eurozone That was a surprise: yesterday the EU announced that inflation had fallen to 2.4% which was considerably better than the 2.7% that markets had expected. Despite the ECB saying it was far too early to cut rates, the market has pencilled in the first cut for April. Before getting carried away it should be […]
UK Labour market The Bank of England yesterday broke cover to drive the message home that due to the UK’s labour market remaining tight, it was premature to start talking interest rate cuts and it was not just Governor Bailey who was calling for higher for longer interest rates but also his MEPC colleague Jonathan […]