January 2025 is in full swing and has brought with it a fresh wave of market turmoil amid fears over the cost of borrowing across the UK. This week, Elina Asimakopoulou a senior cross-asset execution trader discusses how she is navigating the latest concerns in UK Gilts and where she sees opportunities across dislocated markets.
In global markets, Asimakopoulou tells Trader TV what data signals she will be paying attention to this week for signs of rate fluctuations or credit stress and also unpacks her approach to auto-execution and voice trading in highly volatile conditions, as seen in early 2025.
Looking ahead to January 20, the cross-asset execution trader shares her thoughts on what to expect from on the US president-elect, Donald Trump’s, inauguration day and how markets could react.
Interview Transcript:
Jo Gallagher Welcome to Trader TV This Week your insight into how trading desks can prepare for the week ahead. I’m Jo Gallagher. Today I’m joined by Elina Asimakopoulou, a senior cross-asset execution trader, to discuss the main topics and events leading this week. Elina, welcome to the show.
Elina Asimakopoulou Hello, Jo thanks for having me.
Elina Asimakopoulou We’ve already had a really busy start to January with high debt issuance and also fears across the UK Gilt market. How are you navigating these trading conditions?
Elina Asimakopoulou Well, if we take, as example, the UK, the last week was quite a rocky week, especially for yields as they are in higher levels and we had a weaker pound also. But at the same time opportunities occur because we have dislocations. Dislocations create opportunities, particularly in sectors such as commodities or energy.
With elevated rates we need to focus on high-quality bonds, avoiding interest rates sensitive ones and watching out for re-evaluated credit risks in corporate debt. Smart hedging is key, especially when it comes to equities and credit to manage volatility so we need to stay cautious but at the same time opportunistic. Lastly, we will have an interesting end of the month because we have the Fed on the 29th (of January) the day after we have the ECB, and a week after that, the Bank of England. It’s going to be pretty interesting.
Elina Asimakopoulou Just to expand on that. What kind of data signals will you be monitoring across the course of this week?
Elina Asimakopoulou Well, first of all, inflation. So we have the CPI and the PPI on Wednesday for the US and the UK. These will be critical for showing the trend and consequently how the central banks will react. If inflation persists that means that tightening is the most possible scenario so for us this is important. Another element that we will see is the employment report. So last week we had a rather unpleasant surprise from the US when it came to an NFPs (Non Farm Payrolls) that was reflected in the markets instantly. So now this week we are waiting the jobless claims in the US and also labour data when it comes to the UK.
Another element will be the corporate earnings of the companies who are waiting 20 companies out of 500 from the S&P. So this is another key element for us, especially in sectors such as technology, financial, and consumer staples. Also, another element is the global economic indicators. So, for example, China will announce the GDP, the economic growth, and the industrial production.
Also, the last element will be the bond yields in general and how these reflect actually what we are discussing so far. So inflation and central banks and employment reports, how does it reflect to the market? We will be watching the movements on the UK and US sovereign field curve in order to better understand the market expectations for rate fluctuations or signs also of credit stress, particularly considering the high debt issuance that we have at the time being.
Elina Asimakopoulou How do you then break down your auto-execution and your voice trading strategies under these January conditions?
Elina Asimakopoulou There are two elements when it comes to trading. The first one is the decision-making process and secondly is the pure execution strategy. When it comes to the execution strategy for auto trading, there are no big changes. So the model is already protective enough for the investors. There is no need for a temporary model calibration because we have some volatility in the market for a day or two or a week or two. It is structured in efficient way in order to respond to the needs of the low-touch flows. So if the volatility strikes, that means that the flow’s DNA changes so that it goes from low touch to high touch. So we will not shape the model to the flows basically the flows to the model.
Saying that we always keep an eye on the KPIs, of course, my point here is that we interfere when and if necessary. And this is not the case for the time being. So when it comes to voice trading, every trader has this subjective element in his trading strategy when it comes to execution. However, there are some guidelines basically based on just common sense. For example, if I take a scenario of a change in, I do know, China’s real estate legal framework and the investor takes a decision to go long on this market, well in that case, we will be more discreet. We will use voice trading through chats or telephone, whatever that is, in order to limit the market slippage and we will avoid short offers, etc..
So we want to make the minimum noise that we can possibly make, and that’s why the relationships with the dealers are crucial to us. At the end of the day, it’s an OTC (over-the counter) world. We need to have good relationships.
Elina Asimakopoulou We also have a very big date coming up on January 20th with the US inauguration. What are your expectations in terms of market activity, and volatility and how are you preparing?
Elina Asimakopoulou I don’t expect big market volatility. Historical data show that there is no big changes in VIX. When it came to the first inauguration of Donald Trump back in 2017 and the same thing for Biden in 2021.
I think that we will have higher volumes. I think futures with a US focus will go up. Same thing for the US stock market. When it comes to bonds there might be a small correction, but it will be a temporary one. So I think from a market sentiment perspective, it will be a positive day.
Elina Asimakopoulou Thank you Elina for your insight, and of course, you for watching this has been Trader TV This Week.
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