Morning Brew August 30 2023

Good Morning,

Yesterday I asked if optimism will hold and the answer was yes. Risk sentiment soared on loser than expected job openings and disappointing consumer confidence numbers provided the dovish sentiment for stocks to take off. The Dow gained 0.85%, the S&P 1.45% and the Nasdaq 1.74% . The JOLTS came at 8.8 mio vs 9.5 mio expected and the consumer confidence was 106 instead of the 116 expected.

Tesla gained 7.7%, Nvidia 4.2%, Apple 2.2 Google 2.8%

Yields fell across the board with the 10 year US Yield as low as 4.11 now 4.14 – 20 basis points below last week. The USD Index fell to 103.62 to the 200d MA. EURUSD rose to 1.0865, Cable 1.2620 and USDJPY 146.25. Gold and Silver rose to 1935 and 24.60 and the XAUXAG ratio is worth taking a look at again.

We are entering a interesting 3 day period with lots of data and the first earnings release of UBS, where we will put our focus, it is most likely the most watched economic event of the quarter.

The Swiss KOF is expected at 91.5, the German CPI at 6%, US GDP at 2.4% and the Core PCE Prices at 3.8%. The Core PCE, the Feds key gauge of Inflation will be released tomorrow and is expected at 4.2% and the non-core at 3.3%.

What about UBS?

The Swiss Giant will report earnings and is expected to provide further details on the strategy to integrate Credit Suisse. The Key questions will be:

• the earnings: Due to one off effects, net profit could be as high as 33 bio.
• How high are the outflows at Credit Suisse and is UBS maintaining clients and assets?
• Jobs: UBS said it was expecting cost reduction of 8 billion, details on staff reductions are expected
• What will UBS do with the Swiss retail Bank? Sell, integrate or keep as is?

UBS has gained more than 50% off the lows in March and the numbers and announcement around it have the potential to have a massive impact on the financial industry in Switzerland, many people’s lives and of course the share price

Our Chartist Kim has written a great summary of the technical picture for the stock and Koen was so kind as to present us with three simple option strategy to consider depending on your belief for the results:

Technical Picture: UBS Group has during its strong uptrend since July performed two Gaps. Normally there are three gaps during a strong bullish trend: Break-away, Continuation and Exhaustion gap. An Exhaustion gap is a gap higher before the trend exhausts and trend reverses.
We are missing one. Could we see an Exhaustion gap when UBS report Earnings later this week?

Option positioning: Covered Call, Cash secured put; Buying long calls.

Due to the high expected volatility a simple covered call yields near 33% annualized so worth considering.

Wednesday 30 August
EXPIRY FOR MANY FUTURES
- Data KOF Indicator, DE CPI, US GDP and Core PCE
- Earnings PetroChina Co, Bank of China, Salesforce

Thusday 31 August
- Data DE Unemployment Rate, EU HICP & Unemployment rate, PCE Price Index, Initial Jobless Claims
- Earnings Dollar General UBS Group Dell Technologies, VMware, Broadcom

Friday September 1
- Data China PMI, Swiss CPI, DE & & EU PMI US Nonfarm Payroll, Unemployment Rate, ISM , Canada GDP

Expiries

Physically Settled Futures

• HGU3 will expire 30 Aug 2023 at 15:00 GMT
• KEU3 will expire 30 Aug 2023 at 15:00 GMT
• RRU3 will expire 30 Aug 2023 at 15:00 GMT
• SILU3 will expire 30 Aug 2023 at 15:00 GMT
• SIU3 will expire 30 Aug 2023 at 15:00 GMT
• TNU3 will expire 30 Aug 2023 at 15:00 GMT
• UBU3 will expire 30 Aug 2023 at 15:00 GMT
• XKU3 will expire 30 Aug 2023 at 15:00 GMT
• XWU3 will expire 30 Aug 2023 at 15:00 GMT
• Z3NU3 will expire 30 Aug 2023 at 15:00 GMT
• ZBU3 will expire 30 Aug 2023 at 15:00 GMT
• ZCU3 will expire 30 Aug 2023 at 15:00 GMT
• ZFU3 will expire 30 Aug 2023 at 15:00 GMT
• ZLU3 will expire 30 Aug 2023 at 15:00 GMT
• ZMU3 will expire 30 Aug 2023 at 15:00 GMT
• ZNU3 will expire 30 Aug 2023 at 15:00 GMT
• ZSU3 will expire 30 Aug 2023 at 15:00 GMT
• ZTU3 will expire 30 Aug 2023 at 15:00 GMT
• ZWU3 will expire 30 Aug 2023 at 15:00 GMT
• HOU3 will expire 31 Aug 2023 at 15:00 GMT
• RBU3 will expire 31 Aug 2023 at 15:00 GMT

Expiring CFDs

• CHINA50AUG23 will expire 30 Aug 2023 at 02:00 GMT
• HK50AUG23 will expire 30 Aug 2023 at 02:00 GMT
• SINGAPOREAUG23 will expire 30 Aug 2023 at 02:00 GMT
• TAIWAN95AUG23 will expire 30 Aug 2023 at 02:00 GMT
• OILUKOCT23 will expire 31 Aug 2023 at 15:00 GMT