EQUITIES: Stocks Sink as Nvidia Reverses Opening Gap
Equity markets continue to reverse off the strong open, more than erasing the run higher in stocks ahead of the NFP print - itself wholly based on the 5% rally in Nvidia pre-market.
- With Nvidia now lower on the day, the market is sinking with it. Weakness here is coming despite the better-than-expected earnings and guidance, as well as the spate of sell-side price upgrades after the report.
- Instead, it's likely profit-taking on the opening gap and the reversal in Fed rate cut-pricing for December on that NFP print (trimmed to ~11bps from post-data levels of ~13bps). Fed comments seen the data print have been expectedly hawkish: Hammack - rate cuts may prolong inflation, Barr - concerned that inflation still at 3% - which could also be weighing at the margin.
- Nvidia's fade off highs is dragging other majors with it: AMD, Oracle, Qualcomm and other AI- and chip-tied names are softer - meaning the headline index looks softer despite 3/5 names holding higher on the day.
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EURUSD TECHS: Trading Above Last Week’s Low
- RES 4: 1.1919 High Sep 17 and a bull trigger
- RES 3: 1.1820 High Sep 23
- RES 2: 1.1775 61.8% retracement of the Sep 17 - Oct 9 bear leg
- RES 1: 1.1730 50.0% retracement of the Sep 17 - Oct 9 bear leg
- PRICE: 1.1612 @ 15:20 BST Oct 21
- SUP 1: 1.1602/1542 Low Oct 9 and the bear trigger
- SUP 2: 1.1516 76.4% retracement of the Aug 1 - Sep 17 bull leg
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
The latest recovery in EURUSD signals a potential reversal and undermines a recent bearish theme, suggesting the corrective cycle between Sep 17 - Oct 9, may be over. Note that moving average studies are in a bull-mode position - for now - highlighting a dominant medium-term uptrend. A resumption of gains would open 1.1775 next, a Fibonacci retracement. Key support and the bear trigger lies at 1.1542, the Oct 9 low.
OPTIONS: Upside Lean Remains Across European Rate Options Tuesday
Tuesday's Europe rates/bond options flow included:
- DUZ5 107.40/107.50cs, sold at 1.25 in 10k
- RXF6 128.50p, bought for 32 in 3.4k
- ERH6 98.00/98.0625/98.125/98.1875 call condor, paper pays 0.5 in 2.25k
- ERH6 98.125/98.25cs vs ERZ5 98.0625/98.1875cs, bought for 2 in 1.5k
- ERJ6 98.25/98.43/98.62c fly, bought for 2.25 in 5k
- ERM6/ERZ5 97.9375p calendar spread, bought for 1.75 in 4k
- ERU6 98.50/75 1x1.5 call spread, paper pays 1.0 for 5k
- 0RH6 98.25/98.50/98.75c fly, bought for 2.5 in 5k
- SFIG6 96.40/96.55cs 1x1.5, bought for 2.5 in 3k
- SFIH6 96.50/96.55cs, bought for 1.25 in 2k
BONDS: EGBs-GILTS CASH CLOSE: Light Bull Flattening Ahead Of UK CPI
European long-end yields fell slightly Tuesday, with UK CPI data looming.
- The highlight of the session was the release of UK September public finance data which showed a slightly lower-than-expected public sector net borrowing figure plus downward revision to August.
- That saw the UK yield curve bull flatten, mirrored across EGBs, and accelerating in mid-afternoon after US President Trump said on social media that there was a possibility of allies potentially "going into Gaza with a heavy force".
- The German curve bull flattened, with the UK's twist flattening.
- Periphery/semi-core EGB spreads closed slightly wider.
- Wednesday's scheduled highlight is the UK inflation data release - MNI's preview is here. As we note in the preview, despite some BOE MPC members appearing to have more entrenched views, we think that this data release will have huge importance for the prospects for a Q4 cut.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is unchanged at 1.908%, 5-Yr is down 1.3bps at 2.155%, 10-Yr is down 2.5bps at 2.552%, and 30-Yr is down 3.6bps at 3.128%.
- UK: The 2-Yr yield is up 0.4bps at 3.858%, 5-Yr is down 0.9bps at 3.944%, 10-Yr is down 2.7bps at 4.478%, and 30-Yr is down 4.3bps at 5.266%.
- Italian BTP spread up 0.3bps at 79.2bps / French OAT up 0.7bps at 79.2bps
