Friday May 1: Stocks Rebound Along with the Dollar

Stocks rebound after days of losses in the aftermath of positive data yesterday. The S&P and the Dow both gain 1% to 2,108 and 18,024 respectively. The 10 year finishes the weak at 2.11% while the dollar appreciates 0.7% versus peers and the euro falls to $1.121. April market the first month since June where the U.S. dollar fell. Data today showed that consumer confidence rose in April on top of increased consumer spending and wage gains. These factors are all bullish for the U.S. economy, and as a result the dollar strength may resume as the economy improves and the Fed begins to tighten. A BoAML economist believes that rates are likely to increase in September. Greek stocks rise 6.1% on optimism for a deal after Tsipras says he is confident a deal is close. The bund yield rises 20 bp on the week, and currently stands slightly below where it was when QE began.

Greece is negotiating with creditors over the weekend, as bailout talks have accelerated in pace in recent days. The country is attempting to negotiate a €240B bailout package from international creditors, mainly other countries in Europe. Stocks rose 6.1% in April representing optimism for a deal to come through. However UBS analysts still expect a 50 to 60% probability of default as labor market and pension reform as still barriers to a deal.

The british pound falls after weak manufacturing data and uncertainty ahead of the election next week. The pound fell 1.4% today to $1.5135 since Thursday. One strategist sees more downside with election ucnertainty not fully priced in. Volaty against the euro in the dollar has increased dramatically. Pound dollar volatility options are up 9.6% today alone, and are at the highest level since 2011.

Hedge funds went the wrong way on a trade related to the fall in bond prices. Net shorts in Treasury securities heading into this week were down 153,366 from the previous week. The 10 year Treasury yield rose 20 basis points on the week.

Friday May 1: Stocks Rebound Along with the Dollar

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