Equities across the globe are being led lower following news that JPMorgan Chase is facing a $2+ billion dollar trading loss from their Chief Investment Office, which is supposed to act as the banks treasury, acting out hedging programs.
JPM “Risk Group” Loses $2 Billion
The CIO at JPM has commonly been referred to as the world’s largest prop trading desk and dominates derivatives markets across the world. What is more worrisome; however, is the fact that JPM has not been able to close out the losing trades yet! Traders across the globe are going to smell blood in the water and it could be very difficult and costly for the bank to unwind a trade – time will only tell. JPM, heralded as one of the top run banks out there, is trading over 8% lower in pre-market trading.
The Canadian dollar has been a bit of a roller coaster this morning, initially falling a further 30bps from yesterday’s close on the JPM news; however, surprisingly strong employment data has driven the Loonie 70 points higher. The Canadian economy added 58K jobs in April, well above the expected 10K, though the unemployment rate rose as expected to 7.3% from 7.2%.
Inflation is easing in China as expected, falling from 3.6% to 3.4% year over year. This is a very positive development for the Chinese government; easing inflationary pressures allow the central bank more room to move in terms of stimulating the economy.
The TSX and Dow are both off 0.5%, led lower by the financial and basic materials sectors. Crude Oil is back below $96/bbl, down over 1% while Gold has fallen the same amount to $1,580/oz. The Euro has fallen one-cent against the Loonie and nearly 50 basis points against the USD.