2024-08-07 19:34

Canadian dollar gains 0.3% against the greenback Touches its strongest since July 22 at 1.3719 Price of U.S. oil settles 2.8% higher Bond yields rise across the curve TORONTO, Aug 7 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as investors assessed whether the recent sell-off in the currency had run its course and despite the Bank of Canada worrying about the outlook for the domestic economy. The loonie was trading 0.3% higher at 1.3750 per U.S. dollar, or 72.73 U.S. cents, after touching its strongest intraday level since July 22 at 1.3719. The currency was extending its recovery from a near two-year low at 1.3946, which it hit on Monday when Canadian financial markets were closed and markets globally turned volatile. Winding down of yen-funded carry trades and concern the Federal Reserve has waited too long to cut interest rates spooked investors in recent days. "That volatility we saw in stocks on Monday, when Canada was effectively out, probably was the low point for the Canadian dollar," said Shaun Osborne, chief currency strategist at Scotiabank. "The market is extremely short Canadian dollars ... that should be a bit of a warning light on the dashboard that the CAD sell-off has possibly gone a bit too far." Speculators have raised their bearish bets on the Canadian dollar to an all-time high, recent data from the U.S. Commodity Futures Trading Commission showed. Ahead of their decision to cut rates last month, BoC governors fretted that consumer spending in 2025 and 2026 could be significantly weaker than expected, minutes of the meeting showed. MSCI's gauge of stocks across the globe (.MIWD00000PUS) , opens new tab rose, while the price of oil , one of Canada's major exports, bounced back from multi-month lows on concerns that an escalating conflict in the Middle East could hurt oil production. U.S. crude futures settled 2.8% higher at $75.23 a barrel. Canadian bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 5.5 basis points at 3.172%. Sign up here. https://www.reuters.com/markets/currencies/c-notches-2-week-high-market-volatility-subsides-2024-08-07/

2024-08-07 19:28

ATLANTA, Aug 7 (Reuters) - Tropical Storm Debby brought unrelenting rain to the U.S. Southeast as it drifted off the Carolinas on Wednesday, threatening the region with dangerous flooding before picking up speed in the coming days and moving north. At least six people have died in Florida and Georgia in the wake of the storm, which made landfall on Florida's Gulf Coast on Monday as a Category 1 hurricane and headed northeast. It is expected to next menace the Southeastern and mid-Atlantic coasts for days. Governors in the Carolinas, Florida and Georgia have declared states of emergency. The storm has already left neighborhoods and communities underwater with widespread flooding washing out streets and inundating homes across the region. "All North Carolinians across our state need to be prepared for a deluge," North Carolina Governor Roy Cooper said at a briefing at the state's Department of Emergency Management on Wednesday. Officials in Charleston, South Carolina, lifted a citywide curfew on Wednesday, saying crews on standby were not needed to conduct any rescues overnight as the worst of the storm passed through. Even so, the storm could still deliver another 3 to 9 inches (7.6 cm to 23 cm)) of rainfall to the Carolina coast, the National Weather Service said. That would bring rain totals to 25 inches (64 cm) in South Carolina and 15 inches (38 cm) in southeastern North Carolina near Wilmington and coastal Georgia. Debby was about 55 miles (85 km) southeast of Charleston on Wednesday afternoon and moving northeast about 3 miles per hour (5 km per hour) toward the Northeast, with maximum sustained winds of 60 mph (97 kph). It was forecast to make landfall again further north in South Carolina on Thursday morning, the National Hurricane Center said. Debby's greatest threat remains the sheer volume of rain it is dumping on the Eastern Seaboard and the potential for flooding that could continue into next week. In South Carolina, 15 homes had suffered major damage and one had been destroyed as a result of Debby's flooding. Parts of Virginia were expected to get 3 to 7 inches (7.6 to 17.8 cm) of rain through Friday, while 2 to 4 inches (5.1 cm to 10.2 cm) were forecast for parts of Maryland, Pennsylvania and upstate New York through Saturday, with risks of flash floods, the center said. "This is certainly an extreme rainfall event," said Neil Dixon, a National Weather Service meteorologist in Charleston, noting that daily rainfall records have already been broken in the area. "In that respect, the flooding has been something that we haven't seen in many years." Emergency management officials were keeping a close watch as the rainwater drained into the numerous river systems that snake through the Carolinas. The National Water Prediction Service forecast that seven waterways would reach major flood levels before the weather event runs its course. Sign up here. https://www.reuters.com/world/us/tropical-storm-debby-stalls-off-carolinas-bringing-unrelenting-rain-region-2024-08-07/

2024-08-07 19:21

Brazil's real hits two-week high Weak copper prices weigh on Peru, Chile's FX Mexico, Peru policy decision due on Thursday Latam stocks up 1%, FX up 0.5% Aug 7 (Reuters) - The Mexican peso jumped against the dollar on Wednesday, a day ahead of key inflation data and a monetary policy decision, with most Latin America assets continuing to recover lost ground after a recent sell-off intensified at the start of the week. Mexico's currency gained over 1%, stabilizing after a four-day decline, recovering from a near two-year low touched on Monday. As a key beneficiary of yen-funded carry trades, where investors borrowed cheaply in the Japanese currency to invest in higher-yielding ones, the peso was one of the worst hit as yen gains saw many of those trades unwind. Despite the day's gains, the peso remains around lows last seen in March 2023. The country's inflation figures are due on Thursday, right ahead of a central bank decision wherein the interest rate is expected to be held steady at 11% amid price pressures and the peso's recent weakness. "The good news for Mexico is we expect the U.S. Federal Reserve to cut rates in September, easing pressure on the currency," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. "But as a bellwether for EM currencies, any bad news in terms of a risk-off environment will hurt it." The MSCI currencies index (.MILA00000CUS) , opens new tab edged up to a near one-week high, with Brazil's real also gaining 0.7% and hitting a two-week high intraday. Benchmark stock indexes in Brazil (.BVSP) , opens new tab and Mexico (.MXX) , opens new tab gained 0.4% each, with the MSCI stocks gauge (.MILA00000PUS) , opens new tab also in recovery to hit a near one-week high. Meanwhile, Argentina's stocks (.MERV) , opens new tab reversed early course and fell 0.6%. The equity market in Colombia was closed for a public holiday. Meanwhile, a near 2% drop in copper prices hit top exporter Peru's sol , down 0.7%, and kept the Chilean peso around the flat line. Peru's monetary policy decision is also due on Thursday. In July, its central bank held interest rate in a second consecutive monthly pause, citing stubborn core inflation. Some of the other economic data on investors' radar for the week included Chile, Colombia and Brazil's respective inflation data and Mexico's industrial output. Elsewhere, El Salvador's sovereign bonds rallied a day after the International Monetary Fund said the two sides had made headway in talks toward a fund-supported loan program. Nigeria's central bank sold $876.26 million at 1,495 naira to the dollar at its first retail auction for end users, firmer than where the currency is trading at on the official market. Key Latin American stock indexes and currencies at 1903 GMT: Sign up here. https://www.reuters.com/markets/latin-american-stocks-extend-recovery-mexican-peso-snaps-four-day-losing-streak-2024-08-07/

2024-08-07 19:08

Aug 7 (Reuters) - Demecan Group, one of Germany's largest cannabis producers, recently completed its latest round of funding, bringing its valuation close to 100 million euros ($109.24 million), a person familiar with the matter told Reuters on Wednesday. The funding round was led by Florida-based Trog Hawley Capital, marking the first institutional investment by a U.S.-based investor in Demecan. While financial details on the latest funding were not known, according to the source, the company managed to raise a "high seven digit number", mostly in equity and some debt. Germany, the largest medical cannabis market in Europe, is drawing overseas investments at a steady pace after it decriminalized cannabis possession in April. Demecan is one of a handful of German companies allowed to grow cannabis and raised , opens new tab 15 million euros via loans and equity in 2022. The company intends to use the latest investment to improve its online selling platform, among other things. Trog Hawley Capital did not immediately respond to a Reuters request for comment. ($1 = 0.9154 euros) Sign up here. https://www.reuters.com/markets/europe/cannabis-producer-demecan-nears-100-million-euro-valuation-after-fresh-funding-2024-08-07/

2024-08-07 18:16

Hedge funds betting against volatility down 10% on Aug. 5 ETFs that shorted the VIX down sharply in August LONDON, Aug 7 (Reuters) - A wager that stock markets would stay calm has cost retail traders, hedge funds and pension funds billions after a selloff in global stocks, highlighting the risks of piling into a popular bet. The CBOE VIX index, which tracks the stock market's expectation of volatility based on S&P 500 index options, posted its largest-ever intraday jump and closed at its highest since October 2020 on Monday as U.S. recession fears and a sharp position unwind have wiped off $6 trillion from global stocks in three weeks. Investors in 10 of the biggest short-volatility exchange traded funds saw $4.1 billion of returns erased from highs reached earlier in the year, according to calculations by Reuters and data from LSEG and Morningstar. These were bets against volatility that made money as long as the VIX (.VIX) , opens new tab, the most-watched gauge of investor anxiety, remained low. Wagers on volatility options became so popular that banks, in an effort to hedge the new business they were receiving, might have contributed to market calm before the trades suddenly turned negative on Aug. 5, investors and analysts said. Billions flew in from retail investors but the trades also garnered the attention of hedge funds and pension funds. While the total number of bets is difficult to pin down, JPMorgan (JPM.N) , opens new tab estimated in March that assets managed in publicly traded short volatility ETFs roughly totaled $100 billion. "All you have to do is just look at the intra-day rate of change in the VIX on Aug. 5 to see the billions in losses from those with short vol strategies," said Larry McDonald, author of How to Listen When Markets Speak. But McDonald, who has written about how bets against volatility went wrong in 2018, said publicly available data on ETF performance did not fully reflect losses incurred by pension funds and hedge funds, which trade privately through banks. On Wednesday, the VIX had recovered to around 23 points, well off Monday's high above 65, but holding above levels seen just a week ago. VOLATILITY'S RISE One driver behind the trading strategy's popularity in recent years has been the rise of zero-day expiry options - short-dated equity options that allow traders to take a 24-hour bet and collect any premiums generated. Starting in 2022, investors including hedge funds and retail traders, have been able to trade these contracts daily instead of weekly, allowing more opportunities to short volatility while the VIX was low. These contracts were first included in ETFs in 2023. Many of these short-term options bets are based around covered calls, a trade that sells call options while investing in securities such as U.S. large-cap stocks. As stocks rose, these trades earned a premium as long as market volatility remained low and the bet looked likely to succeed. The S&P 500 rose over 15% from January to July 1 while the VIX fell 7%. Some hedge funds were also taking short volatility bets through more complicated trades, two investor sources told Reuters. A popular hedge-fund trade played on the difference between the low volatility on the S&P 500 (.SPX) , opens new tab index compared to individual stocks that approached all-time highs in May, according to Barclays research from that time. Hedge-fund research firm PivotalPath follows 25 funds that trade volatility, representing about $21.5 billion in assets under management of the roughly $4-trillion industry. Hedge funds tended to bet on a VIX rise, but some were short, its data showed. These lost 10% on Aug. 5 while the total group, including hedge funds that were short and long volatility, had a return of between 5.5% and 6.5% on that day, PivotalPath said. 'DAMPENED VOLATILITY' Banks are another key player standing in the middle of these trades for their larger clients. The Bank of International Settlements in its March quarterly review suggested that banks' hedging practices kept Wall Street's fear gauge low. Post-2008 regulations limit banks' ability to warehouse risk, including volatility trades. When clients want to trade price swings, banks hedge these positions, the BIS said. This means they buy the S&P when it falls and sell when it rises. This way, big dealers have "dampened" volatility, said the BIS. In addition to hedging, three sources pointed to occasions where banks hedged volatility positions by selling products that allowed the bank to even out its trades, or remain neutral. Marketing documents seen by Reuters show that Barclays (BARC.L) , opens new tab, Goldman Sachs (GS.N) , opens new tab and Bank of America (BAC.N) , opens new tab this year were offering complex trade structures, which included both short- and long-volatility positions. Some, according to the documents, do not have a constant hedge built into the trade to buttress against losses and are protected "periodically," the papers say. This might have exposed investors to higher potential losses as the VIX spiked on Aug. 5. Barclays and Bank of America declined to comment. Goldman Sachs did not immediately respond to a request for comment. "When markets were at near highs, complacency became rife, so it’s not surprising investors, largely retail, but also institutional, were selling volatility for the premium," said Michael Oliver Weinberg, professor at Columbia University and special advisor to the Tokyo University of Science. "It’s always the same cycle. Some exogenous factor causes markets to sell off. Those that were short vol will now be hit with losses," he said. Sign up here. https://www.reuters.com/markets/us/traders-lose-billions-big-volatility-short-after-stocks-rout-2024-08-07/

2024-08-07 17:17

NEW YORK, Aug 7 (Reuters) - Investors avoided trendy short-dated equity options and looked to longer-tenor contracts for protection during a meltdown in U.S. stock earlier this week, exposing the limitations of so-called 0DTE options in guarding against sustained market gyrations, data showed. Traders have flocked to S&P 500 contracts with zero days to expiry - known as 0DTE contracts - since their 2022 launch, with the category sometimes accounting for more than half of daily S&P 500 options volume. While the contracts are often thought of as vehicles for traders to speculate on short-term market moves, they are also used by institutions and retail investors to protect against market volatility. Investors, however, spurned the contracts on Monday, when the S&P 500 sank 3% and the Cboe Volatility Index (.VIX) , opens new tab logged its largest intraday jump before closing at a four-year high. 0DTE options' share of total S&P 500 options volume fell to 26%, down from its average share of 48% this year, according to data from OptionMetrics. "What we've seen here is a shift from short-term hedges to people saying, 'oh, my gosh, I need something longer dated'," said Jim Carroll, portfolio manager at Ballast Rock Private Wealth. Analysts pegged the move on a variety of factors. The surge in volatility caused options dealers to price 0DTE contracts at sky-high levels to manage their own risk. That raised the appeal of longer-term contracts, which, while also pricey during the selloff, were more palatable to investors since the protection they afford is more lasting, market participants said. "The market seemed unable to price these options at such high levels of volatility," said Garrett DeSimone, head of quantitative research at OptionMetrics. "This would also explain the absence of volume.” Volume in the short-dated contracts rebounded to about 42% the day following the selloff, as markets calmed, data from Trade Alert showed. In the throes of the selloff, investors fearful that the volatility surge would be sustained saw little value in holding short-term contracts, said Craig Peterson, CEO of options research firm Tier 1 Alpha. On Monday, 0DTE options volume was 26% lower than the same day a month ago, while non-0DTE options volume jumped 42%, OptionMetrics data showed. "It's difficult to hedge longer-term risk with a one-day option,” Peterson said. “I think that's what's really been driving people back into those longer-dated tenors." Sign up here. https://www.reuters.com/markets/us/traders-spurn-zero-day-options-this-weeks-market-tumble-2024-08-07/