A menudo uno encuentra su destino justo donde se esconde para evitarlo.

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(Bloomberg) — Equities are enjoying a third day of gains, advancing after a President Donald Trump tweet of progress in trade negotiations with China during a phone conversation with President Xi.

China Central Television said on Weibo that Xi is open to talking with Trump about trade and other issues during the G-20 in Argentina.

A batch of optimistic earnings also helped lift shares, with DowDuPont rallying the most since 2015 on its results.

Key Headlines:

  • SNB’s Zurbruegg: No reason to move off current monetary policy
  • Saudi Prince told Kushner that Khashoggi was dangerous: WaPo
  • Trump did not consider replacing Powell, Kudlow says
  • BOE votes 9-0 to keep interest rate, asset purchases on hold

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The dollar fell on weaker manufacturing data and emerging markets flourished while the trade-sensitive.

Australian dollar rose nearly 2%. Sterling extended gains and gilts fell on a Times report a Brexit deal has been reached for banks despite European officials denying the story.

China’s yuan extended a rally which began in Asia on planned stimulus measures while oil extended a decline on reports of increased Russian output and gold jumped with emerging market assets.

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(Bloomberg) — Treasuries mostly rangebound in muted U.S. afternoon trading session, maintaining gains that were triggered by weaker-than-expected ISM manufacturing data and large block trade in 5-year futures. In eurodollar options, demand again emerged for downside protection focused around Mar19 97.00 put options.

  • Yields lower by 2bp in 2-year and 3-year sectors, and 0.5-1bp lower at the longer end; 2s10s steeper by ~1.5bp on the day; 10- year yields around 3.14%.

  • U.S. ISM manufacturing fell by more than forecast to a six-month low which supported Treasuries early in New York session.

Spread between new orders and inventories

  • Export-orders gauge fell for the third time in four months amid focus on U.S.-China trade relations.
  • U.S. morning session saw further gains across belly of the curve after large $620k/01 block trade in 5-year futures; 13,611 FVZ8 were blocked at 112-14.75 which steepened 5s30s curve back through 41bp level.

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  • Further upside across Treasuries was capped as U.S. stocks gained for third consecutive session, supported after President Donald Trump tweet on progress in trade negotiations with China and another batch of optimistic earnings.
  • In eurodollar options, there was again a buyer of EDH9 97.125/97.00/97.875 1x3x2 put fly, which lifted the structure at 1.5 ticks; same structure traded Wednesday in ~25k (bought between 1.25 and 1.5 ticks) which pushed open interest to almost one million in the 97.00 strike
    • Downside hedge targets FRA/OIS ~30bp, 2 Fed hikes (with no IOER tweak) to see EDH9 price in the region of ~97.00; also possible with an IOER tweak, 2 hikes and FRA/OIS at 35bp

Read more here: 

‘Spastic Spooz’: An (Implicit) Short Gamma Odyssey

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Bloomberg) — Six borrowers exited self-imposed earnings blackout and tapped the debt market Thursday, kicking off November issuance with $7.35 billion of new supply.

  • BP Capital Markets was first out of the gates with a two-tranche offering that launched at $2b.
    • Parent BP Plc earlier this week reported a surge in profit that beat estimates and gave the company confidence to fully fund its $10.5b U.S. shale oil deal with cash.
  • GM Financial is in the market with a $1.35b bond sale amid a new cost-cutting plan by parent General Motors Co. even as it reported strong quarterly results
    • Fellow auto captive finance issuer Daimler Finance North America priced a well- received deal yesterday; the combined orderbook was heard to have grown as high as $3.5b on a $1.75b two-part sale.
  • American Express, ONE Gas, GATX and New York Community Bancorp round out today’s docket to bring weekly volume to more than $17b, in line with estimates calling for $15b-$20b of issuance.
  • The pipeline for future issuers include Duke Energy Carolinas and Whirlpool Corp, which conducted investor meetings earlier this week.

 ISSUANCE STATS Day $7.350b WTD  $17.550b  MTD $7.350b  YTD $989.109b

DEALS

  • General Motors Financial Co Inc (GM) Baa3/BBB, $1.35b across 2 tranches
    • $1b 3Y Fixed at +130; +130#, +140 area
    • $350m 3Y FRN at 3mL+110; 3mL+110#, L equiv
  • BP Capital Markets America Inc (BPLN) A1/A-, $2b across 2 tranches
    • $1b Long 5Y at +83; +85a (+/- 2), +95-100
    • $1b 10Y at +110; +110#, +115-120
  • American Express Co (AXP) A3/BBB+, $3b across 3 tranches
    • $1.25b 3Y Fixed at +80; +80#, +low 90s
    • $1b 3Y FRN at 3mL+60; 3mL+60#, L equiv
    • $750m 7Y at +118; +120a (+/- 2), +130 area
  • ONE Gas Inc (OGS) A2/A
    • $400m WNG 30Y at +118; +130 area
    • Deal went straight to launch
  • GATX Corp (GMT) Baa2/BBB
    • $300m WNG 5Y at +140; +145a (+/- 5), +145 area
  • New York Community Bancorp Inc (NYCB) Baa2/BB/BBB-
    • $300m 10NC5 Fxd-to-FRN Sub at 5.90%; 5.875%-6.00%

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Bloomberg) — Phillips 66 Wood River refinery in Ill. has one of 2 FCC units shut for unplanned repairs this week, a person familiar with operations said. MARKET NEWS: 

  • Exxon Baytown Hydrocracker Is Said Shut Following Rain Storm
  • Total Port Arthur Is Said at 50% as SRU May be Shut a Week 
  • Valero Benicia Flaring Due to Mechanical Issue: Filing
  • Oil Sinks to Six-Month Low as U.S. Supply Surge Eases Iran Fear
  • Propane Demand Remains Stable as Exports Decline
  • Marathon Weighs Combining Pipeline Units Post-Merger

PRICES: Atlantic Coast differentials vs Nymex as of 4:30pm ET

  • 83.5 CBOB +0.45c to Nymex +0.55c
  • 84 RBOB -0.58c to +0.63c
  • ULSD +0.13c to +0.25c
  • Jet fuel +0.13c to -2.0c

Gulf Coast differentials vs Nymex as of 4:30pm ET

  • 85 CBOB +0.07c to -5.13c
  • 84 RBOB unch at -3.75c
  • ULSD +0.63c to -4.75c
  • Jet fuel unch at -8.5c

Oil Analytics refining margins (as of prior session) 

  • East Coast Forcados cracking -67c to $8.46/bbl
  • Gulf Coast Maya coking -64c to $7.42/bbl

Nymex futures and cracks 

  • Gasoline December futures -3.49c to $1.7165/gal.
  • Diesel December futures -5.06c to $2.2008/gal.
  • 3-2-1 front month crack spread -7c to $15.18/bbl

Gasoline Arbitrage 

  • Front-month U.S.-Europe RBOB-Eurobob swap spread +1.95c to -1.65c/gal

Baltic Exchange freight 

  • TC2 U.K./Continent-USAC (37k tons) +0.56 WS points to WS 112.78
  • TC14 USGC-U.K./Continent (38k tons) -2.5 WS points to WS 143.13

(Bloomberg) — Soybean and soybean meal rallied, erasing losses earlier in the session, after President Donald Trump said in a tweet that he had a “long and very good conversation with President Xi Jinping of China.”

Corn also rose. Futures of soybean for January increased the most since Aug. 16.

The oilseed and meal made from it to feed hogs and chickens have become a focal point in the trade war between the U.S. and China. China slapped a 25% tariff on U.S. supplies in July and turned to alternative sources such as Brazil.

Drivers  

Trump  Spoke With China’s Xi on Trade, Says Talks Going ‘Nicely’ President Donald Trump said he had a productive conversation with Chinese President Xi Jinping on trade and North Korea ahead of a highly anticipated meeting planned between the two leaders at the G-20 summit this month Those discussions are moving along nicely,” Trump wrote on Twitter Thursday.

China’s soybean imports  from U.S. drop 86% y/y in September At the same time, purchases of Brazilian soybeans rose, according to China’s customs agency U.S. to release weekly export data at 8:30 a.m. in Washington Click here  for analyst estimates in survey President Donald Trump’s tariff war has scrambled U.S. trade routes  as soybeans pile up Pacific Northwest route replaced by southern flow to Gulf Some traders are benefiting from regional price differences China’s pigs may not face  such a strict diet  after all Farmers can boost feed to hogs because of rising pork prices Soybean usage may decline less than expected on new norms

Prices

Soybean futures for January delivery on the Chicago Board of Trade jumped as much as 3.3% to $8.80 a bushel, the biggest intraday increase since Aug. 16. The price had dipped as much as 0.7% earlier in the session amid concerns about lower U.S. exports Soybean meal futures for December delivery rose as much as 1.8%. 

Market talk

“Looks like this tweet has sparked this rally,” Michael McDougall , senior vice president at ED&F Man Capital Markets in N.Y., says in an email Prices for the commodities China buys from the U.S., including soy and meal, jumped and then were followed by gains in corn, Mark Schultz , chief market analyst for Northstar Commodity Investment, says by phone The start of the month and a shift in sentiment after the market had been leaning so bearish given lack of soy exports to China recently also may have bolstered the spike, he says “China imported significantly more soybeans from Brazil in September than last year,” Commerzbank says in emailed note “This is disastrous news for U.S. farmers, who are just harvesting a record soybean crop and are likely to have trouble finding alternative buyers”

Other Markets

Corn futures rose as much as 2.1% while wheat gained 1.4%.


-R.W.N II, yours in 322.

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