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Of Margin Calls & Liquidations…

There will be more volatility to come as we head into the month and quarter end, with rebalancing flows and also reduced trading volumes ahead of the Good Friday long weekend.


What happens at Financial Year Ends?

The Japanese financial year closes on 31 march and sometimes “weird” market movements happen around this time. With the impending closing of accounting books, many Japanese entities and funds will want to reduce their balance sheet usage (by selling out assets) and to lock in the profits and losses for the financial year.


As markets reassess how soon European economies will be able to reopen, the jobs data (March nonfarm payrolls report) out of the United States will likely highlight the widening growth disparity between the two regions. The expected strong US data could help maintain the Dollar’s upward drive but ultimately, its path will be determined by whether or not risk appetite bounces back. Risk sentiment has been fragile of late as an increasingly bitter spat between the UK and EU over vaccine exports and revived Sino-US tensions have added to the downbeat tone set by Europe’s lockdown woes. But in a week where trading is expected to wind down ahead of the long Easter weekend, there’s not much on the horizon that could turn sentiment around except the impending start of a new quarter.


1. Currencies : Keep short USD and long NZD, & CNH. USDCNH is still stuck close to the top end of the 6.45–6.55 range for now. NZD is showing some encouraging signs of life.


As of New York Close 26 Mar 2021,

  • S&P 500 advanced +1.7% (futures intraday low: -0.17%) on Friday, thanks to a strong finish in the last hour of action. The Nasdaq100 gained +1.2% after briefly slipping lower (with an intraday low of -0.74% in its futures) in the afternoon. The Dow Jones Industrial Average (+1.4%, futures intraday low: -0.02%) and Russell 2000 (+1.8%, futures intraday low: -0.27%) also gained more than +1.0%. Tech stocks recovered strongly off the lows in the last hours of trading despite massive block sales from investment banks (Goldman Sachs, Morgan Stanley) supposedly triggered by margin calls of a big leveraged fund.
  • The gains were relatively broad, with ten of the 11 S&P sectors closing higher and eight rising more than 1.5%. The energy (+2.6%), information technology (+2.5%), materials (+2.5%), and real estate (+2.5%) sectors gained more than 2.0%, while the communication services sector (-0.3%) was the lone holdout.
  • Semiconductor stocks were a pocket of strength on Friday, evident by the +5.0% gain in the Philadelphia Semiconductor Index (+5.0%). They helped provide the boost in the technology sector, which started the day unchanged.


Tugs, dredgers still struggle to free ship blocking Suez Canal



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