Equities: Nomura: This Was 'Death Past Times Papercuts' Mixed Amongst Hedge Fund Redemption Panic

From ZeroHedge:

One twenty-four hr catamenia afterward the midterm elections, when the Dow soared past times over 500 points on abysmal volume, the formerly bearish narrative straightaway turned to how wonderful gridlock is for stocks, amongst Wall Street of a abrupt certain that based on historical patterns - according to which the marketplace has levitated into year-end every unmarried fourth dimension afterward midterms - this yr would last no different.

So much for certainty: equally of today, all the post-Midterm gains are gone...

... in addition to the marketplace has resumed its downtrend, downwards 6% since October, compared to a 10% drib for the Nasdaq equally tech stocks got liquidated en masse as persuasion has ane time once to a greater extent than sharply turned against anything that has to practise amongst growth.

Alongside the seemingly random liquidation inwards the tech sector, investor fears are rising, manifested non solely inwards slumping prices simply too inwards the surge of the 30-day vol inwards the Nasdaq 100 which according to Bloomberg has tripled inwards 5 weeks, ascent to the highest since 2011. As a result, day-to-day swings are at nowadays averaging 1.7%, one-half a pct bespeak to a greater extent than than inwards February, equally prices for options protection inwards tech accept give the balance of the marketplace past times the near inwards vii years, using the departure inwards implied vol betwixt the Nasdaq in addition to the S&P 500.

But spell at that topographic point were many immediate reasons for today's 600 points plunge inwards the Dow, including the surge inwards the dollar to fresh 2018 highs, the guidance cutting in addition to a alert from a telephone substitution Apple supplier confirming that iPhone involve is tumbling, fears over ascent rates, political turmoil inwards Italia in addition to incertitude over Brexit, slowing profits increment in addition to ascent negative earnings pre-announcements, the unspoken catalyst behind today's volume dump near probable has to practise amongst the previously discussed Nov fifteen volume redemption twenty-four hr catamenia faced past times hedge funds, one which nosotros said portends a Nov fifteen bloodbath equally underperforming hedge funds duet themselves for an avalanche of redemption requests. And all this happened equally bond markets were on vacation, farther accentuating the already illiquid equity moves....

Confirming this, Nomura's Charlie McElligott wrote afterward the closed that what was already a sloppy province of affairs inside the U.S. Equities-space "got fifty-fifty messier, equally the (negative) performance-driven de-risk / “de-gross” of the past times calendar month has escalated." Specifically, today saw a "somewhat idiosyncratic" laid of circumstances "pile-on" into the already-stressed surround surrounding the imminent HF “redemptions notice” date, accentuated past times the next "death past times papercuts" factors inwards stocks:

• The 5% implosion of Apple in addition to its supply-chain next LITE’s guidance-slash on "meaningfully reduced shipments" from ane of its largest customers (-30.3%), implicating Apple in addition to reduced involve for iPhones. The word crushed the entire supplier infinite (AMS SW -22.4%; CRUS -13.8%; KN -10.2%; AMD -9.4%; SYNA -8.2%; IFX GR -7.1%; AVGO -6.4%; STM IM -6.4%; QRVO -6.3%) equally the three-year “hiding place” inwards the Apple phenomenon breaks-down.
• The ongoing devastation inwards "Growth"-heavy long portfolios (“Cash / Assets LONGS” are -3.8% on the day, “R&D / Sales LONGS” -2.9%), equally good equally large gains inwards “Value” market-neutral strategies, where despite genuinely somewhat lower “Value LONGS” on the day, the Growth companies which brand upward “Value SHORTS” inwards the market-neutral element strategies are existence crushed—e.g. “EBITDA / EV SHORTS” are -4.1% today, “Predicted E/P SHORTS” -2.4%
• Another unwind of pop hedge fund positions has to practise amongst the de-betaing of portfolios inwards a hurry: "beta longs" are -3.1% on the day, in addition to -15.8% QTD, the lawsuit of unwinding “long high beta, brusk depression beta” bets, which has rationally corresponded amongst the Equities L/S hedge fund surgical procedure swoon, equally it captures that many funds were long-er the marketplace than they realized...

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