SignalPlus Macro Research (20230719): Cryptocurrency market continues to be weak, volatility drops to a low point.
Retail sales as a whole were significantly lower than expected (0.2% growth compared to the expected 0.5%), but internal data revealed a completely different situation, with the control group (excluding automobiles, gasoline, and building materials) growing by 0.6%, well above the expected 0.3%, and the data for May was also revised significantly upward.
US Treasury yields reached a high point when the retail sales data was released but fell flat during the remaining trading hours. In addition, yesterday was a relatively calm trading day. On the other hand, the risk sentiment in the stock market continued to rise, with Microsoft introducing (expensive) new pricing for its Office AI Co-pilot, causing its stock price to rise 3.8% during intra-day trading and reaching a new all-time high, which also boosted the overall technology sector.
Meanwhile, strong earnings from BoA and Morgan Stanley boosted the financial sector, and Charles Schwab's optimistic assessment of the outflow of high-cost deposits injected confidence into the overall regional banking sector. Charles Schwab's stock price rose by 14%, while the KBW Regional Banking Index rose by 3.5%, reaching the highest level since March.
Similar to the first quarter, despite the challenging macro environment, the profitability of US companies so far remains impressive, and companies can still benefit from a weak US dollar, which will help their future earnings prospects.
In Japan, the macro focus has been on the Nikkei index, which has risen by 25% so far this year. The Bank of Japan has maintained liquidity by keeping the near-term policy outlook unchanged. Borrowing a quote from John Maynard Keynes, Governor Ueda stated that the Bank of Japan "will not change its policy unless the facts change", with "facts" referring to the possibility of achieving the 2% inflation target.
Currently, Japan's CPI inflation has reached its highest level in nearly 30 years (latest CPI + 4.3%). There are also rumors of foreign capital buying domestic stocks and real estate on a large scale. We can argue whether Japan has reached a turning point. However, after the Bank of Japan made the decision to maintain the status quo, Japanese government bonds and the USD/JPY both rebounded, showing the market's willingness to embrace rising risk appetite in this hot summer.
In the cryptocurrency field, as the ETF application frenzy subsides and regulatory optimism wanes in a still weak market, major cryptocurrencies continue to retreat from recent highs.
In terms of volatility, implied volatility continues to decline. As BTC fails to hold above $30,000, volatility momentum has also declined to recent lows. In addition, open interest data shows that traders continue to sell out-of-the-money options to enhance the profitability of their spot positions. There is a significant amount of call options sold/negative gamma risk near the $31,000-$32,000 strike price.
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