Stocks drop, yields rise, lira pares losses, bitcoin surges

US stocks are dropping on lackluster volume, as investors anticipate the economy is about to run even hotter after President Biden lays out his long-term economic plan which will have to come with tax increases.  Massive government spending is sending Treasury yields higher and that is triggering a much stronger US dollar.  This is a shortened trading week given the Easter holiday and many traders are solely focusing on tomorrow’s speech from President Biden on infrastructure initiatives in Pittsburgh and Friday’s nonfarm payroll report.

The Archegos Capital aftermath is seeing a focus primarily on prime brokerages.  Wells Fargo shares popped after they issued a statement that no losses came from closing out our Archegos exposure.

The fallout from Archegos Capital margin call appears to be contained but the regulatory scrutiny will not go away anytime soon.  Every prime brokerage is looking at their books and could start pressuring family offices or hedge funds to bring down the leverage they are using.  Calls for greater transparency over how big money managers are spreading their trades across some prime brokerages will grow.  Lawmakers will want to see assurances that banks will not take advantage of knowledge of upcoming offerings or coordinate with other brokerages.  Calls for taking out some of the leverage out of the system will grow, but should not derail Wall Street’s overall optimism for US equities.

Turkey

Emerging market currency traders are seeing strong moves with the Turkish lira.  The Turkish lira has quickly become the favorite short trade in FX.  Yesterday, the lira plummeted after President Erdogan fired central bank deputy governor Cetinkaya.  This is the second firing in two weeks but sends a reminder that the CBRT has no independence.

The lira pared losses after new central bank Governor Kavcioglu stated that Turkey will continue to keep its benchmark one-week repo rate above consumer inflation.

Calls for record lows with the Turkish lira could grow with the 9-level likely to become very attractive in the short-term.

Bitcoin

Another day, another massive cryptocurrency endorsement from Wall Street.  Bitcoin is rising again after PayPal launched “Checkout with Crypto”, a new feature which significantly expands the utility of cryptocurrency.  So you are not necessarily holding Bitcoin with PayPal, but regardless this announcement is further proof of mainstream acceptance.  Bitcoin has tentative resistance at the USD60,000 level, but momentum from yesterday’s Visa news should be enough to keep the bullish trend going strong.

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