These Five Things Will Get You Started in the Morning

In this week's edition: What people are talking about right now, what the Fed will do in May, what the world's largest gold miner will reveal, and what a doctors' strike in the UK means for the economy. 

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May Hike

It was announced Friday during a holiday-shortened session that strong employment data had increased the odds of the Federal Reserve adjusting rates by another quarter-point in May. During the week, swap contracts referencing Fed meeting dates were repriced to levels that indicated there was a greater than 80% chance that the Fed would raise its policy rate range to 5%-5.25 percent on May 3. Following the collapse of bank shares that began following the collapse of several institutions, it was almost impossible for the Fed to raise its policy rate in May. It is important to stress that since March 24, the sector has stabilized. Separately, Dr. John Williams, the president of the New York Federal Reserve, rejected the notion that the central bank's aggressive interest-rate increases had precipitated the recent financial strains highlighted by the failure of several banks.

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The World's Largest Gold Miner

With the purchase of its Australian rival Newmont Mining for A$29.4 billion ($19.54 billion), the gold mining giant has sweetened its offer to open its books. Using a new offer of 0.4 shares of Newmont for every share of Newcrest owned, shareholders of the combined company would own 31.1%. By the time the deal is concluded, the company would be the world's largest gold miner, encompassing operations in North and South America, Australia, West Africa and Papua New Guinea. Newmont would also be exposed to copper at a time when analysts are predicting that copper shortages in the coming decade will be another major challenge for the company, a metal that is essential to the clean energy transition.

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In The Absence Of A Doctor,

A fresh four-day strike by junior doctors is threatening to cripple England's health service, putting Prime Minister Rishi Sunak's struggle to resolve months of labor unrest that has slowed the country's recovery from the pandemic to an all-time low. There will be a walkout of tens of thousands of junior doctors across England for 96 hours beginning at 7 a.m. on Tuesday, which will involve qualified medics in clinical training, who will be walking off the job for 96 hours. There is a lot of concern among police and hospital leaders that the British Medical Association's push for compensation will cause unprecedented disruption to the National Health Service following the Easter break, with many students still on annual leave during the school holidays.

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We've Averted A Crisis...For Now

An individual with knowledge of the Federal Home Loan Bank system has reported that in the last week of March, the Federal Home Loan Bank system issued $37 billion in debt, a sharp drop from its $304 billion issue two weeks earlier. The fact that the market has fallen so dramatically from its peak earlier in the month is one of the earliest signs that the banking crisis may be subsiding. As much as there is still much to be done in terms of lending by the Federal Home Loan Banks of America, it's evident that advances and debt issuance are falling, which means that member banks have either met or reduced their need for cash, along with the fact that most depositors are no longer taking their money out of banks.

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Here's What's Coming Up...

As a result of holiday-thinned trading, European stocks are expected to gain traction as their Asian peers. A two-day special session will be held by the Swiss parliament to discuss the Credit Suisse-UBS deal and regulatory changes. The IMF releases its report. There will be a special session held for two days by President Biden in Northern Ireland and Ireland. There are expected results for Norwegian and Danish inflation. Motor Oil and Jumbo's earnings results are also expected.

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Survey results from the MLIV Pulse

This week’s MLIV Pulse survey is all about the future of work. If you were a high school student this year, would you encourage young people to pursue a career in finance? What career would be least likely to be replaced by artificial intelligence in the future? If you are entering the finance industry this year, what is a competitive starting salary for a starting position? You can contribute anonymously by clicking here.

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This Week's Readings

Over the past 24 hours, here are a few things that have caught our attention. 

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• An investigation into Goldman Sachs' misrepresentation of swap prices led to the company paying $15 million. 

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• With this latest move to thwart the bid for the company, Teck has slammed Glencore's track record.

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• The Winklevoss twins lend $100 million to the cryptocurrency platform Gemini as part of its funding round.

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• A rise in the cost of living has forced British households to cut the luxury of dining out and luxuries.

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• There has been a rise in tensions between France and China, leading French legislators to visit Taiwan.

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• A $15.5 million license plate bought by a Dubai resident has become the world's most expensive license plate.

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• By 2030, the G-7 nations will have phased out coal power by encouraging the use of renewable energy sources.

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• In conclusion, here is Mark's interest this morning, and what might be of interest to you

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As we head into this week’s Consumer Price Index report, leveraged accounts have been holding back the most short positions in S&P e-mini contracts since August, and that net short position is steadily growing over the past few months. Based on this data, I believe some newly acquired positions are already under water, which indicates an inflation miss could lead to the biggest reaction since short covering is most likely to occur.

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A price level of implied volatility for 4,200 call options is currently cheaper than the price level for at-the-money options on the S&P 500. As the chart price points are showing up steadily heading towards 4,200, equity bears may be relying heavily on a thick area of chart price points to cap gains — as has been generally the case since early February. This implies a bit of complacency on the part of equity bears.

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In the absence of strong commitment, equity trading could remain choppy without strong commitment today, since traders will rely heavily on the CPI report for this week’s most important event. It is most likely that the Federal Reserve is going to have to rely more on the upcoming inflation report than anything else to decide whether they are going to take a pause on interest rates next month.