G3 Recap 11-03-10

Main Items:

  • The Fed announced it will buy 600bn in treasuries thru June 2011, @ 75bn per month. They will target 5-6 years in average duration
  • US ADP Employment rose 43k last month vs 20k expected and -39k previously
  • US ISM Non Manufacturing improved to 54.3 in Oct vs 53.5 expected and 53.2 previously.
  • US Domestic Vehicle Sales jumped to 9.27mm in Oct vs 8.9 expected and 8.8 previously
  • Republicans have a majority in the House but not the Senate, although they gained enough to prevent cloture. The 60 seat change in the House is the largest since 1948.
  • Research and development spending at major companies declined last year for the first time in more than a decade, according to a survey by management consulting firm Booz & Co – WSJ.


  • Chinese Non-manufacturing PMI slowed to 60.5 in Oct vs 61.7 previously. The HSBC measure strengthened to 56.4 vs 55.2 previously.
  • China’s biggest banks plan to raise more than a combined $28.4 bln in the coming weeks through rights issues in Shanghai and Honk Kong as they seek to shore up their balance sheets in the aftermath of a record lending spree – FT.
  • UK PMI Services improved to 53.2 vs 52.6 expected and 52.8 previously.
  • Recent Stern and RTL surveys suggest the majority of Germans are in favor of wage increases.
  • Australia Services PMI improved to 50.7 in Oct vs 45.6 previously


  • So QE2 was slightly larger than expected, but a bit weaker in the sense that it is less intense and will not have much of a direct impact on long rates. This was reflected in the sharp steepening in 5s30s today.
    I am not sure what to do ahead of NFP. With QE2 is out of the way, economic data will start to move markets again. The fact that most assets did not sell off today suggests that positioning is not egregiously long. Nevertheless, many indicators suggest that bullishness is fairly widespread, and technical oscillators suggest that a pause or a correction for risk assets. In other words, the risk/reward for the S&P doesn’t look particularly compelling at these levels.
    Gold had a surprising drop despite the rally in EURUSD. However, seasonals suggest the small correction over the past few weeks is normal, and we can look forward to a positive bias going into year end:

  • Tasty Crabs: http://www.telegraph.co.uk/news/worldnews/asia/china/8087616/Crab-vending-machines-for-Chinese-commuters.html

4 thoughts on “G3 Recap 11-03-10

  1. I’d say, shorting the S&P through options (e.g. bear spread) and hedging with some OTM VIX or VXX (to capitalize on contango) puts might play out nice. Looked even better before VIX dropped after FOMC, but still viable.

  2. There seems to be some problem with the comments – I posted one yesterday and it didn’t appear, probably went to spam or moderation queue. Could you, perhaps, look at your spam settings? Not being able to communicate is kind of unpleasant:)

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