BRAZIL: Additional View on Hawkish Copom Rate Hold, XP Sees First Cut In March
Dec-11 17:05
- As noted earlier, last night’s Copom statement continued to strike a hawkish tone, as the committee did not offer any signs that it is considering a start to the easing cycle at the next meeting in January. As a result, many analysts now expect the first cut to happen in March, possibly with a 50bp move, although some see scope for an even later start. (See the MNI review here.)
- A further sell side-view from XP Investments is here:
- XP interprets the few changes in the policy statement as a more hawkish signal from the BCB. The current strategy of maintaining the Selic rate for a fairly prolonged period does not mean that interest rates will remain unchanged for a very long period ahead. But, neither does it indicate, in XP’s view, that the Copom is considering any change in the short term, especially since the assessment of the economic scenario has changed little compared to the previous meeting.
- XP continues to project that the Copom will begin a cycle of rate cuts in March. They expect six consecutive reductions of 0.50pp, bringing the Selic rate to 12.00%. In real terms, the real interest rate would be around 7.5%, above what XP considers the neutral level (5.5%), reflecting the expected fiscal challenges for the next presidential term.
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US STOCKS: Midday Equities Roundup: Tech Shares Retreat, Weighing on Nasdaq
Nov-11 16:58
- Stocks are mixed Tuesday, the DJIA outperforming weaker in SPX eminis and Nasdaq ahead midday. Generally muted activity on the Veterans Day holiday - while AI valuation concerns hampered chip makers again. Otherwise, risk sentiment was stable ahead of Wednesday's House vote to re-open/fund the government through Jan 30.
- Currently, the DJIA trades up 295.33 points (0.62%) at 47664.09, S&P E-Mini Futures 15.75 points (-0.23%) at 6840.5 Nasdaq down 184.6 points (-0.8%) at 23343.99.
- Reversing Monday's support - technology stocks led declines in the first half: Lam Research -4.20%, Hewlett Packard Enterprise -4.08%, Vistra -3.96%, Oracle -3.89%, Dell Technologies -3.82%, Micron Technology -3.65%, Teradyne -3.44% and NVIDIA -3.18%.
- Consumer Discretionary and Communication Services sector shares followed: Tesla Inc -2.62%, Tapestry Inc -2.55%, Chipotle Mexican Grill -2.17% and Garmin -2.01%; Meta Platforms -1.41%, Live Nation Entertainment -0.61% and Alphabet Inc -0.55%.
- On the positive side, a mix of Energy and Health Care sector shares led advances in the first half: Paramount Skydance +10.36%, Dexcom +5.62%, Viatris +5.26%, Align Technology +3.78%, Devon Energy +3.66%, Merck & Co Inc+3.46%, International Flavors & Fragrances +3.38% and ConocoPhillips +3.37%.
US 10YR FUTURE TECHS: (Z5) Bear Threat Remains Present
Nov-11 16:56
- RES 4: 114-02 High Oct 17 and the bull trigger
- RES 3: 113-29 High Oct 22
- RES 2: 113-18+ High Oct 28
- RES 1: 113-02 High Nov 5& 7 and a key near-term resistance
- PRICE: 113-00 @ 16:47 GMT Nov 11
- SUP 1: 112-09+ Low Nov 5
- SUP 2: 112-08+ 38.2% retracement of May - Oct Upleg
- SUP 3: 112-08/06 100-dma / Low Sep 25 and a reversal trigger
- SUP 4: 112-02 Trendline support drawn from the May 22 low
A short-term bear theme in Treasuries remains in place. Attention is on a reversal trigger at 112-06, the Sep 25 low, and the 100-DMA, at 112-08. A clear break of these price points would expose a trendline support at 112-02. The trendline is drawn from the May 22 low. Resistance to watch is 113-02, the Nov 5 and 7 high. Clearance of this level would highlight a potential bullish reversal.
US TSY OPTIONS: Large Jan'26 10Y Call Buyer Returns - Extending Duration
Nov-11 16:23
- +47,000 TYF6 114 calls, 29 ref 112-31.5/0.30% - open interest 51,680 coming into the session
- Extending duration: Same acct (likely) bought hundreds of thousands of Dec'25 low delta calls in the last couple months - but Dec expires in 10 days - so they are repositioning in January now:
- paper +50,000 TYF6 113.5 calls, 27 yesterday and last Thursday: +100,000 TYF6 113.5 calls, 30-32 vs. 112-18/0.32%)
