Last week’s surge in equity prices was lead by financials which received a boost from increased liquidity from the major central banks and a reduction in interest rates from the central bank of China. Data and official commentary confirm that the slowdown in the Chinese economy is gaining pace and that the government has moved into a defensive stance. The non-manufacturing PMI came in at 52.5 in November, down from 54.1 last month, which comes on the back of last week’s manufacturing PMI which printed at sub-50 for the first time since early 2009.
With China moving into a easing mode, financial institutions should benefit but remain volatility as European issues remain in the headlines. Peripheral yields have dropped substantially, with the Italian 10-year dropping from over 7% to 6.2% at the beginning of this week. The likelihood of a ECB bazooka to end the current crisis is not very high, but the market is pricing in a calm in the storm which is leading to strong returns for financials.
JP Morgan is the strongest of the major financial institutions, and is likely to benefit as global banks improve.
The trade is to purchase a daily binary option call on a daily close above 34.05
Signal Summary
Asset : JP Morgan
The trade : Binary Call Option
Expiry time : End of day
When : On a daily close above 34.05
The result : In the money
