Recap 2014-10-15

Commentary:

Well, if it isn’t obvious, clear signs of panic today. One example of many: people are buying 2y notes at 30bps. In other words, betting that the Fed doesn’t hike for almost 2 years, even though the Fed says it thinks it will hike in less than 12 months. I mean, I understand buying treasuries for capital preservation, but why don’t people just go to cash or TBills instead of buying 2y notes? Is Ebola going to affect the solvency of the banking system?

Positives: the small cap Russell 2000 index, which lead the way lower, closed up on the day. The Dow Transports were also up on the day. High Yield was roughly flat. 30y yields are so low that, relative to equity valuations, the S&P hasn’t been this cheap since early 2013. The candle stick chart of the VIX.

Negatives: the SPX still closed lower, with a lower high and low. (the most important factor. SPX is now in the congestion range that prevailed for most of March-May) Oil lower on the day, although marginally.

Anyway, here’s a historical read on SARS and H1N1. Different from Ebola, obviously, with only a 10% mortality rate, but has a much quicker transmission vector via respiratory droplets. One research article estimated that H1N1 may have killed as many as between 284k-579k people, with 18k confirmed instances. Ebola currently has 4,656 laboratory confirmed cases. The H1N1 pandemic was first described in April 2009, and began to taper off in November 2009.

Finally, I missed this interesting bit yesterday:

Notable:

  • A second nurse in Texas has Ebola, but flew just hours before her diagnosis.
  • UK Employment was decent, with the ILO UER measure falling to 6.0% vs 6.1% exp and 6.2% prev. Weekly earnings were also strong, ticking higher to +0.7% vs 0.6% prev
  • US Retail Sales were weak, falling -0.3% MoM vs -0.1% exp. The control group declined -0.2% vs +0.4% exp
  • Empire Mfg dropped sharply to 6.17 vs 20.25 exp and 27.54 prev
  • US Core PPI declined to +1.6% YoY vs 1.7% exp and 1.8% prev
  • China CPI declined to 1.6% vs 1.7% exp. This was the lowest print since January 2010. Food prices were a large driver. PPI declined -1.8% YoY vs -1.6% exp and 1.2% prev

Upcoming:

  • Wed: New Zealand PMI, Consumer Confidence, RBA FX Transactions
  • Thu: EU CPI, US Jobless Claims, US Philly Fed, NAHB Survey
  • Fri: Triple Witching, Yellen Speaks, Canada CPI, US Housing Starts, U Michigan Confidence
  • Mon: German PPI, RBA Minutes, China Retail Sales, IP
  • Tue: US Existing home Sales, Japan Trade Balance, Australia CPI
  • Wed: BoE Minutes, US CPI, Canada Retail Sales, BoC, DoE Oil Inventory Report, New Zealand CPI, Japan PMI, China PMI
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