EQUITIES: Stocks Shrug Off US-China Tensions, Led By Defensives

Option desks reported decent SOFR & Treasury option volumes Wednesday, mixed flow segued to downside puts in the second half. Underlying futures firmer, testing highs late (TYM5 +8 at 112-13 vs. -13.5 high). Curves twisted steeper in late trade (2s10s +3.616 at 55.382). Projected rate cut pricing looks steady to lower vs. early morning levels (*) as follows: May'25 at -1.6bp (-2.6bp), Jun'25 at -17.1bp (-16.7bp), Jul'25 at -41.1bp (-38.1bp), Sep'25 -64.8bp (-59.2bp).

• SOFR Options:
  • Block, 10,000 SFRM5 95.75/95.93 put spds, 10.5 ref 95.91
  • -10,000 2QU5 97.25/97.31 call spds 1.5 ref 96.845 (unwind of buys from Apr 4)
  • +3,000 SFRU5 96.50/97.00 call spds 1.75 over 3QU5 96.87/97.25 call spd
  • -2,500 SFRZ5 96.68 straddles, 73.0 ref 96.69
  • 5,200 SFRM5 95.81/95.87 2x1 put spds
  • 6,000 SFRU5 95.68/95.87/96.00 put flys ref 96.30
  • Block, 2,500 SFRZ5/0QZ5 96.25 put spds, 4.5
  • 3,000 0QZ5 99.00/100.0 call spds ref 97.00
  • 2,500 SFRH6 97.25/98.25 call spd vs. 2QH6 97.00/98.00 call spd
  • Block/screen: 7,500 0QM5 97.00/97.25/97.50 call flys
  • 3,000 SFRM5 96.18/96.31 call spds ref 95.90
• Treasury Options:
  • Update, over 33,000 TYN5 108.5/109.5/110.5 put trees ref 112-09.5 to -12.5
  • 12,000 TYM5 110.25/111.5 put spds, 21 ref 112-06.5
  • 1,500 TYM5 109/110 put spds vs. 110.25/111.25 call spds
  • 1,500 TYM5 114/116/118 call flys ref 112-05
  • -19,500 TYM5 114 calls, 18
  • 3,600 TYM5 112.5 straddles, 157 ref 112-09
  • Block, 21,000 FVU5 111/114 call spds 29.5 vs. 109-07.75/0.20%
  • 6,250 FVM5 109.25 straddles ref 109-06.25
  • 9,000 wk3 TY 112.25 puts ref 112-09.5
  • 8,000 wk3 FV 109 puts, 31.5 ref 109-02.75 (exp 5/16)
  • over 8,200 USM5 120 calls & 9,200 USM 124 calls, partially spd
  • 4,000 Wed wkly TY 112.75/113 call spds (exp today)
  • 3,600 TYM5 109/110/111 put flys ref 112-06.5
  • over 12,000 TYM5 114 calls, 17-18
  • 1,250 FVM5 107.5/107.75/108.25 broken put flys ref 109-02.5

• RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg  
• RES 3: 0.6528 High Nov 29 ‘24
• RES 2: 0.6471 High Dec 9 ‘24
• RES 1: 0.6450 High Apr 29 
• PRICE: 0.6391 @ 16:50 BST Apr 30 
• SUP 1: 0.6344/6310 Low Apr 24 / 50-day EMA  
• SUP 2: 0.6181 Low Apr 11  
• SUP 3: 0.6116 Low Apr 10 
• SUP 4: 0.5915 Low Apr 9 and key support  

The trend condition in AUDUSD remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6310, the 50-day EMA. A clear break of this EMA would be a concern for bulls.

We've just published our preview of the April employment report (which is released Friday). PDF HERE

• Nonfarm payrolls are seen increasing a seasonally adjusted 135k in April in the Bloomberg survey after a stronger than expected 228k in March.
• Primary dealer analysts also see 135k whilst the Bloomberg whisper is weaker again, currently at 120k.
• April won’t benefit from the favorable weather and returning strikers that helped March employment growth.
• Immigration restrictions are likely to increasingly drag on employment growth ahead although this month’s report could be a little early.
• There’s a similar argument for any adverse impact from tariffs, especially with weekly jobless claims proving robust. That said, some forward-looking measures look bleak.
• The unemployment rate is widely expected to round to 4.2% again after inching up to 4.15% in March from 4.14% in Feb. AHE growth meanwhile is mostly expected at 0.3% M/M with some mild downside skew.
• A solid report shouldn’t change the narrative ahead of next week’s FOMC meeting but a weak report might.
• Markets are pricing in nearly 70% probability of a cut by June, with 41bp through the end-July FOMC. Just over 100bp of cuts are seen through year-end, and we’ve seen the lowest terminal rates since September’s 50bp rate cut (around 3.00% per SOFR) as the negative growth impact of US tariff policy is assessed.