NY ROUNDUP – Wednesday, April 2, 2014

微xin： USOPTIONS

COMMENTS

· Equities put in another day for the faithful and make new highs yet again. The bourses came cruising out of the gate following consensus ADP numbers and positive revisions as investors focused their sights on the end-of-week employment metrics. The good spirit was almost universally felt as all but one sector finish in the green (Utilities small -0.16%). SPX and Nasdaq now +2.5% for the year, while DJIA is back to flat. Closing levels: SPX 4276.46 (+0.3%); DJIA 16573.00 (+0.2%); and Nasdaq 4276.46 (+0.2%).

· The VIX is basically unch, -0.01 to 13.09.

· EURUSD drifts lower ahead of tomorrow’s ECB. Perhaps some anticipation of easing tomorrow – but selloff in US rates also gave the dollar a boost. USDJPY goes out near the day’s high as length is added in advance of Friday’s NFP. The dollar makes modest gains against EM too. Only TRY bucks that trend. USDTRY to a new low for 2014. On the flipside for the day are NZD and RUB with weakness driven by milk and the resumption of FinMin FX purchases respectably.

· Appetite for risk assets lit the match and US rates took off as the set up for NFP began to materialize. Morning flows echoed the broader move as the UST desk saw better selling, though it was felt mostly in futures. Data failed to turn heads but selling continued into the morning before USTs hit a lull at lunch and dribbled marginally cheaper over the course of the day. The desk saw demand for left side gamma as accounts looked at short dated expiries on 5s. Further out the surface, expiries on longer tenors met resistance despite little flow on the day. We expect this vol flow to continue as more accounts position for payrolls.

· The earthquake in Chile overnight sent copper markets rearing higher as shorts quickly covered their positions.. prices pulled back later in the session to finish only +20bps as reports showed that Chilean mines were only marginally impacted by the quake. Energy markets quickly pulling back in early morning trading with Libyan rebels reporting that they were meeting with Libyan govt. officials to discuss the reopening of Eastern Libya ports which have been closed for several months.. nothing concrete seems to have come from the meetings but the threat of more crude in the European market kept the Brent complex lower for the rest of the day – flat price finished down 92c at $104.70/bbl. DOE’s out today relatively constructive for WTI with Cushing drawing by another 1.2mm bbls and a total crude draw of 2.4mm bbls, while refinery runs moved 1.7% higher and gasoline stocks drew more than expected at -1.5mm… WTI structure and flat price finishing weaker on the session, mainly dragged down by the Brent weakness.

· Tomorrow brings US Non-man ISM, Claims, Markit Composite PMI, and Trade Balance; Services PMI for the Euro Area, the US, and Brazil; Composite PMI for the UK, Germany, France, Italy, Spain, Russia, and Brazil; Eurozone Retail Sales; and Turkey CPI. In terms of policy, the ECB will decide on monetary policy, and GS is calling for a small cut in the refi rate to 0.10% (from 0.25%) and/or new liquidity measures.

HIGHLIGHTS

· Reuters: Fed’s Lockhart says sustained three percent growth would warrant rate hike

· WSJ: Private-Sector Adds Jobs, Moderate Job Growth Seen

· Reuters: IMF’s Lagarde calls on ECB to ease monetary policy

· ADP Employment Change: 191K – lower than expected. Consensus 195K. Previous 178K.

CURRENCIES

CURRENCY VOL

FLOWS (BONDS, EQUITIES, COMMODITIES)

US BONDS – 10 YR UST Down -0-13 at 99-18 YTM 2.802% 30 YR UST Down -0-22 at 99-20 YTM 3.645%

DJIA Up +40.39 at 16,573.00 (+0.24%) S&P Up +5.38 at 1,890.90 (+0.29%) NASDAQ Up +8.42 at 4,276.46 (+0.20%)

GOLD Up +10.10 at 1,290.10 (+0.79%) WTI Down -.34 at 99.40 (-0.34%)

AMERICAS

· Reuters: Fed’s Lockhart says sustained three percent growth would warrant rate hike. “The U.S. economy needs to be growing at roughly 3 percent in annual terms to justify a hike in interest rates by the Federal Reserve in the second half of next year, a top Fed policymaker said on Wednesday. In comments to a business event in Miami, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he thinks the economy will perform that well beginning in the current quarter. The faster economic growth, he said, would help some part-time workers get more hours at their jobs and also goad more people who are out of work to restart their job hunts. Lockhart said he thought growth would trend at around a 3 percent annual rate in the second quarter of this year and beyond. Signs of weak growth in the first quarter, he said, would likely prove temporary because they were due to a severe winter.”

· WSJ: Private-Sector Adds Jobs, Moderate Job Growth Seen. “U.S. businesses last month returned to the modest pace of hiring seen before harsh winter weather curtailed job growth, a survey of private-sector hiring said Wednesday. Private-sector payrolls in the U.S. increased by 191,000 new jobs in March, according to a national employment report compiled by payroll processor Automatic Data Processing Inc. ADP -0.05% (ADP) and forecasting firm Moody's Analytics. The result came in near the 200,000 new jobs predicted by economists surveyed by The Wall Street Journal. The report also flashed an optimistic sign for the pace of hiring by revising February figures to 178,000 new jobs from the 139,000 reported a month ago.”

· Bloomberg: Yellen Jobs Dashboard Shows Rate Rise Far on Horizon: Economy. “More than two-thirds of the gauges on Janet Yellen’s labor-market dashboard are still showing worse readings than before the recession, reinforcing her belief that the economy will need “extraordinary support” from the Federal Reserve for “some time to come.” Only two of the nine indicators flagged by the new Fed chair -- payroll growth and layoffs -- are back to where they were in the four years leading up to the last economic downturn. The seven others, including joblessness, underemployment and labor-force participation, have yet to return to their 2004-to-2007 averages.”

WORLD

· Reuters: IMF’s Lagarde calls on ECB to ease monetary policy. “The European Central Bank should ease monetary policy to combat the risk of “low-flation” that could crimp euro zone output and consumer spending, the head of the International Monetary Fund said on Wednesday. IMF Managing Director Christine Lagarde said the world's economy should pick up pace above 3 percent this year and next. She warned, however, that the recovery from the global financial crisis remained weak and that a prolonged period of sluggish growth was a risk. She cited slow price growth in the euro zone, geopolitical tensions in places like Ukraine, and market volatility as factors that could drag on growth in the short-term. “In 2013, global growth was about 3 percent; we project modest improvements in 2014 and 2015, although still remaining below past trends,” Lagarde said in remarks prepared for delivery at the Johns Hopkins School of Advanced International Studies.”

· WSJ: Cyprus Bailout Remains on Track. “Cyprus remains on track to implement its bailout program, the European Union's executive said in a report Wednesday, with the country expected to return to growth next year. In its third review of the country's €10 billion bailout program, the European Commission said “Cyprus' program remains on track.” “Fiscal targets for 2013 have been met with considerable margin due to both continued prudent budget execution and a less severe recession that anticipated,” the report said. The commission maintained its forecast that the country's economy would shrink 4.8% this year and grow 0.9% in 2015. Cyprus' economy is thought to have shrunk 6% last year. The commission also said that despite very high levels of nonperforming loans, “signs of stabilization are emerging in the banking sector, although significant challenge remain.”