Santa Claus Rally Hits Some European Ice

Global market trade today has been dominated by reaction to the European Central Bank’s (ECB) decision and statement following their most recent meeting, which is being perceived as disappointing relative to expectations.

Currencies and Bonds are at the forefront of the day’s activity, with the Euro (Currency) seeing it’s largest one day move since 2009 (in percentage terms). FXE, the Euro ETF proxy, is up over 3.1% to 107.20 after closing below 104.00 yesterday.

1kd1Source: LiveVol Pro

FXE options have been trading on a 14% volatility, which is unequivocally near the high end of the 52 week range (typically trades between 8% and 15% vol). Since the ECB announcement, 30 day implied vol has fallen to about 11.5%.

The US 30 Year bond futures are lower by more than 4 full handles at 1PM Chicago time. ^TYX, listed on the CBOE, is making a noteworthy, 5.8% push higher to 3.08% yield. That’s compared to yesterday’s close below 2.91%. It’s interesting that the ^TYX has respected the 200 day moving average since May of this year with the exception of the few days in late August when we last saw global volatility spike.

1kd2Source: LiveVol Pro

Equity Indices across the Atlantic are a sea of red.

  • The Dec Futures for the FTSE 100 (United Kingdom) are down 3.15%


CBOE will list and trade options on the FTSE 100 12/22.

  • DAX (Germany) futures are off by 4.5%.
  • CAC 40 (France) futures are lower by 4.7%
  • Finally, Euro Stoxx 50 (Large Cap Eurozone Equities) futures are down 4.6%

These are the largest percentage moves for European Indices since August 24, 2015 when global markets were turmoiling on the heels of China’s Yuan devaluation. To this point, the ^SPX is “only” down about 1.45% and holding the 200 day moving average. On 8/24, the ^SPX dropped by 4%.

1kd3Source: LiveVol Pro

The Cash VIX is on session highs at 18.40, but the term structure is still slightly backwardated. During the August selloff, the Cash VIX got as high as 53 and the term structure was severely inverted.

The Federal Reserve will meet in less than two weeks with expectations still strongly pointing toward a 25 basis point hike (which would be the first US rate hike since the middle of 2006).

The “Santa Claus” rally hit the skids since we turned the calendar to December.