SFOT has decided to take the Easter long weekend off for the first time and ventured into some sort of hippie scene up North in the UK where there exist a famous football club and a somewhat odd band called the beatles came from. While the scene is hippie and alternative, SFOT has been offered some very interesting and creative view of things surrounding our everyday lives. Stepping back into reality today, the alternative way of live/views seems to have descended upon the market as well.
SGD
One of the most open economy in Asia showed a worse than expect GDP number of -11.5% YoY, perhaps one of the worse number ever seen. However, witness the impact of SGD strengthening almost immediately. Was there an even worse number expected on the streets of singapore or was this the maximum pain trade one can see? Can someone offer any alternative view?
Singapore GDP
SGD
If this is a preview of what Asia demand numbers might look like, then IEA's weaker demand forcast for Oil in 2009 should look overly optimistic. However, Oil seems to have shrugged off their lows within 2 hours of London coming back from vacation and roofs back up with a vengence. The strength this morning comes from middle distillate in Europe where cracks have rallied around USD1 from the low in about 3 hours. Where and why this buying is coming from, SFOT is yet to learn but will not go against what seems like an invisible hand at work at this moment. Perhaps it is best to let go of the pain trade before jumping into the bandwagon, if one can wait..
May09 ICE Gasoil crack today
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Welcome back SFOT! Not an avid soccer fan being on the other side of the atlantic, but seems like you are having a blast!
ReplyDeleteI dont think crude strength going into tomorrow can be determined based on fundamentals. Most of the price action around the 50 price mark is a delta hedge driven phenomena which should be behind us after tomorrow's expiry.
I legged into a few flies on the 50, 51, 49 marks.
Thanks. I would have no interest in this May contract other than being short it against almost anything else. Agreed right now it is probably very much option driven, hence i look only at Brent and other products for the feel.
ReplyDeleteSFOT,
ReplyDeletethe rally in SGD was largely based on 2 factors 1) while GDP numbers are worse than expected, there is large built in expecation that a export oriented economy like singapore (and Tawain) will lag larger export mkts Us/ China/ Eur.. since there seems to be a dead set belief that China is one the verge of a massive come back, yesterdays gdp numbers seem backward looking (my personal opinion is to the contrary)
2) positioning- large number of speculative positions were in the USD/ SGD pair looking for a about a 4% devaluation from the MAS, a recentering of their peg, and widening of the band. They only did the former, and this has caused a unwind by short term traders
IEA forecast look overly optimistic, GDp assumtion in the -1.5% seem over optimistic as well, most leading indicators point to about a -2.5 % contraction.
Personally, I believe China/ Brazil, seem the most vulnerable to gdp downgrades in H2
As far for the developed mkts, gdp trough should occur in line with peak in corporate defaults, between q3-q4.