Missile Lock on Earnings and Stress Test

So after hours the markets continued to rally with the Spoos up about 1.5% and Asian and European mkts following suit. Is it just me who finds it odd that Asian and in particular the Kospi was up on the day their Red neighbours launch a missile? Does the HSBC take up offset this? Ordinarily you would think that means oil holds its bid, but then you’d probably also expect mkts to trade off somewhat…which they haven’t. In any event risk assets just want to rally at the moment, so my money would be on oil staying above 50.

We’re at an interesting point across the risk asset spectrum with the AUD, NZD and cable all testing year highs and the equity market having corrected 25%, Vix trades thru 40 for the first time in, well a long time and gold selling off on the return of risk appetite and IMF selling down some of their stores. So where do we go from here? I find it very hard to be optimistic and from Monday till Wednesday afternoon last week, it was clear to all and sundry that this was just a bear market rally and we were rapidly on the way back down. Then comes a better ISM, G20 optimism (with some great backslapping pics of the world leaders), MtM changes (sort of) and everyone has forgotten about worries of banks failing stress tests, weaker jobs nos etc. Being short last week was to stand in front of a freight train and much of the activity we’ve seen across the street has been risk management in nature. Did they want to cover up here, no but, they had to. I’m not sure many believe the rally but there is certainly more fear around now about missing whatever more there may be…and maybe, just maybe, this time it’s different. It looks to me like a fantastic opportunity to top and tail yourself.

This week is pretty muted on the macro front, mortgage apps on Weds and Fed mins from the March Shock and Awe meeting later that eve. The wording was fairly explicit from that meeting so I’m not sure there’ll be much of note out of the minutes. Officials are meeting to discuss the stress test results on the 19 biggest banks in the US and while the final analysis isn’t expected to be completed till the end of the month, I’m sure the rumours will fester well before that. Although the Obama administration has said it won’t let any of the banks to fail the tests. Earnings season is nigh and I fear that a hearty dose of reality will be served up. For anyone who wants to be uber bearish, there’s an interesting piece in the Torygraph on beggar thy neighbour policies and how the SNB reacting to Swiss deflation could signal the start of the the next shoe to drop…

Looking through the HSBC hedge fund performance the other day, there are some good numbers in there YTD, although I suspect this last week will have dented that somewhat.