| January 31, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | The valuation reset rippling through markets
Christian Mueller-Glissmann - Financial Times
At the beginning of 2022, investors faced a very unfavourable starting point for investing â both equities and bonds were expensive, with valuations close to the highest levels in more than 100 years.
At the same time, already elevated inflation accelerated further, forcing central banks to tighten policy aggressively. This triggered a sharp increase in US yields, which weighed on most assets except the dollar and drove a material valuation reset. Equity valuation multiples fell alongside the rising bond yields.
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US stocks notch gains as traders weigh shift in pace of rate rises
George Steer - Financial Times
US stocks edged higher on Tuesday with central bankers on either side of the Atlantic poised to raise rates to their highest levels in 15 years.
Wall Street's benchmark S&P 500 rose 0.5 per cent and the tech-heavy Nasdaq Composite gained 1 per cent by midday trading in New York.
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Last year's stock-market volatility has carried over into January. Here's what that might mean for the rest of the year
Joseph Adinolfi - MarketWatch
U.S. stocks are off to a strong start this year, but the choppiness that characterized last year's tumult has yet to subside, which could portend more volatility ahead.
Last year, the S&P 500 SPX, 1.01% logged 122 daily swings of 1% in either direction, according to data shared by DataTrek's Jessica Rabe. That's the most since 2008, and 12 more than in 2020, when the advent of the COVID-19 pandemic sent markets into a tailspin, but also a torrid recovery.
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Strong Volume Year Expected for Listed Derivatives
Shanny Basar - Traders Magazine
Global listed derivative volumes are expected to remain strong in 2023 after reaching a record last year, according to data tracked by Liquidnet.
2022 global listed derivatives volumes (excluding single stock options) reached 71.1 billion contracts, an increase of 47.7% from the previous year according to Liquidnet's 2022 Listed Derivatives Review. However, options trading on Indian indices accounted for 20.2 billion contracts of growth, almost all of the global increase of 22.5 billion contracts exchanged globally last year. Removing India from the data reduces total global growth to 7%.
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Adani Group Saga Is Credibility Test for India's Markets, Institutions; How New Delhi reacts will greatly affect foreign investors' perception of the country's attractiveness
Megha Mandavia - The Wall Street Journal
The sprawling conglomerate built by Gautam Adani is under attack by short seller Hindenburg Research, which successfully deflated electric-vehicle maker Nikola Motors in 2020. At stake is both Mr. Adani's empire and, potentially, India's own ambitions to position itself as a credible alternative to China-as a manufacturing giant and a must-have part of an emerging-markets portfolio. U.S.-based Hindenburg Research, which last week said it held short positions in Adani Group through its U.S.-traded debt and offshore derivatives, has accused the conglomerate of accounting fraud and stock manipulation through opaque offshore entities. Adani Group denies the allegations and says the short seller is trying to smear its reputation and derail a public stock offering. Shares of the group's companies have plunged since Hindenburg's report, wiping out nearly $64 billion in market value. Hindenburg's report comes amid a $2.5 billion secondary share sale by Adani Enterprises that closes on Tuesday.
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FTSE Russell says monitoring information on Adani Group over Hindenburg report
Reuters
Global index publisher FTSE Russell said on Tuesday it was aware of short-seller Hindenburg Research's report on the Adani Group and associated securities and that it was monitoring the information.
"Adani index constituents within the FTSE Russell indices will continue to remain eligible in accordance with the underlying index methodologies," it said in a notice published on its website.
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Federal Reserve Might Need a New Excuse to Stay Hawkish
Jonathan Levin - Bloomberg
The Federal Reserve is running out of good excuses to stay hawkish. Energy costs have retreated; prices of core goods have declined; and the housing market is cooling quickly. The last redoubt of high and volatile prices is the wage-sensitive category of consumer prices dubbed core-services ex-housing: expenditures including medical care, communication services and hair cuts. If you take the Fed's word for it, the key to taming inflation in that category is to reduce wage pressure.
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IMF Raises World Economic Outlook for First Time in Year With China Reopening
Eric Martin - Bloomberg
The International Monetary Fund sees a "turning point" for the global economy as it raised its growth outlook for the first time in a year, with resilient US spending and China's reopening buttressing demand against a litany of risks.
Gross domestic product will likely expand 2.9% in 2023, 0.2 percentage point more than forecast in October, the fund said Tuesday in Singapore in a quarterly update to its World Economic Outlook. While that's a slowdown from a 3.4% expansion in 2022, the IMF said it expects growth will bottom out this year before accelerating to 3.1% in 2024.
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FX Volatility Remains High After Event-Driven 2022: BofA
Colin Lambert - TheFullFX
Bank of America's latest FX market structure analysis finds that conditions in the FX market remained elevated after several events in 2022, with the cost of trading on public platforms significantly higher over the year.
The bank's latest Global FX Microstructure paper - 2022 in Review - looks at market conditions across the year and finds that while markets reverted after the initial shock of the Russia-Ukraine conflict, the impact of the UK budget chaos and Japanese FX intervention in Q4 were much longer lasting.
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| | | | | | Exchanges | | | CME Group to Launch E-mini Russell 2000 Tuesday and Thursday Weekly Options on February 27
CME Group
CME Group, the world's leading derivatives marketplace, today announced it will expand its suite of weekly options expiries for its E-mini Russell 2000 futures with the launch of Tuesday and Thursday weekly options on February 27, pending regulatory review. These new weekly options contracts will complement the existing Monday, Wednesday and Friday Weeklies, as well as End-of-Month and Quarterly options on Russell 2000 futures.
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Cboe's Mini-SPX Index Options: A Gateway To Option Affordability And Tax Benefits
Jad Malaeb - Yahoo Finance
Cboe Global Markets Inc. (BATS: CBOE), the proprietor of the world's largest options exchange, has Mini-SPX (XSP) Weekly Options in its portfolio of market-defining products.
Since 1973, Cboe's innovation has defined many of the market's popular constituents, including the Volatility Index (VIX), electronic communication networks and options contracts listings. As the retail trading community rose to new heights in 2021, Cboe's existing portfolio includes XSP, an index option product tracking the Standard & Poor's 500 Index (SPX).
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| | | | | | Regulation & Enforcement | | | Market Structure Expert Larry Tabb Dissects SEC's Revamp of Trading Rules
Jesse Westbrook and Robert Schmidt - TABB Forum
Capitol Account Co-Founders Jesse Westbrook and Robert Schmidt caught up with one of the leading voices in U.S. equity market structure, Larry Tabb, Head of Bloomberg Intelligence's market structure team. In this Q&A, learn why Mr. Tabb equates the SEC's recent release to change trading to a game of 52-card pickup, which businesses he thinks will come out ahead and how he keeps himself busy when he's not opining on market plumbing.
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Ex-Citi Analyst Who Exposed Libor Takes Aim at Its Successor; Scott Peng says limits on term SOFR use are skewing market; Issue likely to worsen unless changes are made, Peng warns
William Shaw and Alex Harris - Bloomberg
Over a decade ago, Scott Peng was one of the earliest voices to call out the scandal-ridden London interbank offered rate. Now, he's sounding the alarm over its successor. Peng says guidelines designed to limit who can use derivatives tied to the Secured Overnight Financing Rate are inadvertently heaping risk onto banks' balance sheets, echoing warnings from TD Securities and JPMorgan Chase & Co. Left unchecked, he says, it could pose a significant risk to the smooth functioning of financial markets.
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From FTX to Adani Group, Fraud Allegations Are Going to Rise
Kaja Whitehouse - Business Insider
A rising tide lifts all boats. And when the tide goes out, you get to see who is swimming naked. That's Warren Buffett's curious way of saying that everyone looks smart when the money is flowing. Once it stops, some people will get caught with their pants down.
Just take a look around and you will find no shortage of companies that have fallen (or are in danger of falling) from grace â from FTX to student loan fintech Frank, which JPMorgan says concocted almost four million customers to induce the bank to buy it. (Founders of both companies have denied any wrongdoing.)
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Regulators Promise Tough Stress Test for European Banks
Patricia Kowsmann - WSJ
Stress-test season for European banks is in. Regulators are promising the toughest exam yet.
The annual exercise will include 70 banks, covering roughly two thirds of banking-sector assets in the European Union and Norway. They will be tested for their ability to withstand worsening geopolitical developments, higher commodity prices and the resurgence of the coronavirus pandemic, the European Banking Authority said.
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| | | | | | Strategy | | | The Explosion of Zero DTE Options
Cboe (Video)
In today's #Vol411, Cem Karsan @jam_croissant talks about why traders have turned to shorter-dated #options to capitalize on realized #volatility given the relative underperformance of implied volatility.
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| | | | | | Education | | | Energy/Electricity Futures, Options, and Derivatives Training Program: Gain an Understanding of Natural Gas, Oil and Electricity Financial Instruments (Houston, United States - April 13-14, 2023) - ResearchAndMarkets.com
Press Release
The "Energy/Electricity Futures, Options, and Derivatives" training has been added to ResearchAndMarkets.com's offering.
This proven program is for energy and electric power professionals who are looking for a comprehensive and clearly explained understanding of natural gas, oil and electricity financial instruments, the markets they trade in, and how these powerful tools can be used to manage risk and structure profitable transactions.
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| | | | | | Events | | | The IFM is hosting a virtual course, Derivatives Markets Go Green: ESG, Emissions Trading & More on February 23 and 24, 2023, at 09:00 AM CST, and then again May 2 and 3. Sponsored by the Institute for Financial Markets, the course provides foundational information about ESG markets, government and investor expectations, and what factors are driving growth and product innovation. It will also show how these unique types of derivatives can be used to manage the financial risks related to ESG. You can learn more and register here. ~SAED
| | | | | | Miscellaneous | | | Explainer: Adani vs Hindenburg: What you need to know
Reuters
U.S.-based short-seller Hindenburg Research severely criticised Indian conglomerate Adani in a Jan. 24 report ahead of its flagship company's $2.5 billion share sale, triggering a $70 billion rout in the group's domestically listed stocks and a sell-off in its bonds listed overseas.
Here are some of the points raised by the report, and Adani group's responses.
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