from our trading desk:
• The commodity sell off continues in “the softs” while Silver, Gold, and Copper are rallying sharply off their lows. Sugar is down 2.6%, Corn is down 1% and Cotton down just less than 1%. TIPS spreads have been drifting lower, while the S&P has been rallying, presumably due to the move in commodities.
• Interesting that despite the S&P’s higher today, defensive sectors are being bought and cyclical sectors underperforming. Healthcare and telecom are two of the best performing sectors while semis and transports are two of the worst performing. Large caps are outperforming Small Caps. Value is slightly outperforming Growth.
• Autos act well in front of auto sales tomorrow.
• It’s a big week for US economic data. ISM this morning, vehicle sales this evening and payrolls on Friday (+190k consensus) are the highlights. It seems like the biggest threat to risk assets is stronger than expected economic numbers. Why? Last week’s trading was dominated by a weak US Dollar, and stronger than expected data could lead to a reversal of this trend. The S&P was up 1.96% for the week, but was up only 0.20% in EUR terms. With the feedback loop of “a weak USD leading to stronger commodity prices leading to stronger equities” well entrenched, it pays to watch these correlations closely.
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