Forex
30 April 2009
David Karsbøl, Chief Economist, Saxo Bank
For the first time since March-April, the Saxo Bank Business Cycle Indicator is now showing a (minor) improvement. But it is still too early to start talking about a bottom in the market.
The primary reason is a slight improvement in the US sub-index of the Global Index. Almost all other of the remaining national sub-indices of the indicator are showing deteriorating conditions from primo April to primo May. Only New Zealand and Australia show better conditions.
30 April 2009
David Karsbøl, Chief Economist, Saxo Bank
Whether GDP rises or falls it is always interesting to look a little bit deeper into the figures at some of the GDP ratios.
One of my favourites is the ratio of total outstanding credit to nominal GDP.
If you look at the graph you can see that total credit is still growing and has reached 360% of GDP indicating that the deleveraging of the bank system might have begun but that the government bailouts are resulting in yet more debt.
30 April 2009
David Karsbøl, Chief Economist, Saxo Bank
Daily Stance
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US Q1-09 GDP declined at a 6.1% annualized rate. Nominal GDP has now declined 2.32% from the top in Q3-08. Strangely, Personal Consumption was up 2.2% annualized. That is pure BS – tax receipts are massively down. Both imports and exports are collapsing, but Net Export was positive and contributed to the GDP. Durable Goods were also a major contribution. That also doesn’t make any sense with construction activities collapsing.
- Swine-flu Alert overnight raised by WHO to level 5 out of 6. Pandemic is imminent.
- Corporate Bond Spreads increased from Monday, but commodities went higher. We are neutral on stocks despite the momentum, because of the weak data.
29 April 2009
David Karsbøl, Chief Economist, Saxo Bank
Annualised quarter on quarter figures for US GDP came out worse than expected in the first quarter of 2009.
While most analysts were hoping for -4.7%, the figure came out at -6.1% compared with -6.3% in Q4 of 2008. Saxo Bank’s expectation of -5.5% was closer to the mark. Both our fundamental weekly index and fundamental monthly index were both showing the level of economic activity was worse on average and considerably worse in Q1 2009 than in Q4 2008.
29 April 2009
John J. Hardy, FX Consultant, Saxo Bank
The swoon in risk appetite triggered by the initial swine flu scare has already been reversed as the market has made a decision that it is a non-story. We certainly hope that the market is correct on this matter, but are also fearful of the potential effects on everyone if this sanguine assessment proves premature.
The influenza virus is extremely dangerous when it comes out in a deadly variant, especially as it can spread swiftly before victims show signs of flu symptoms. The incubation period of the disease is usually two days, but can be anywhere from one to five days and a person is most contagious starting before symptoms are even evident.
29 April 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Expectations that the US quarter on quarter GDP numbers for the first quarter of 2009 will be better than Q4 are wildly optimistic. If you look at the long term and short term indicators they are actually lower than last quarter. That doesn’t give much support to a fall of around two percentage points.
Our prediction is for a minus 5.5%. There is an expectation in the market that GDP will be minus 4.7% down, compared with minus 6.3% last quarter.
28 April 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Daily Trading Stance
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Swine flu raised to a 4 on the 1-6 WHO scale overnight. Luckily still not a pandemic, but a “4” is too high to be entirely comfortable.
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The WSJ reports that regulators have told BofA and Citigroup to raise “billions” more in capital after preliminary results from the so-called stress-tests. Today the market cap of the two are 57B and 17B respectively.
- Crude Oil and Commodities are down and treasuries are trading higher. Of special importance: the JPY TWI is spiking higher, indicating more risk-aversion.
- We are sticking to our thesis that the top is behind us now, although DAX might be lifted higher by better than expected Deutsche Bank results.
27 April 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The spread of swine flu to US cities has led to a sell-off over the weekend. Futures are indicating the US market down by around 1.5% from Friday’s close. We are sticking to the thesis that the top is behind us for now. Our CDS price indicator has also jumped higher in the past couple of days.
Crude Oil is selling off after having been rejected at the 20 DMA. Gold holding above 900, but so far hasn’t managed to break trendline resistance around 916.3.
UK GDP figures on Friday were worse than expected, but the Retail Sales showed some strength.
24 April 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Currently investors in equity markets are anticipating a normal recession and a subsequent normal recovery, sparking stock market gains as economic data points towards a bottom. However they are unprepared for the deflationary impact of the balance sheet recession as consumers boost savings to lower debt destroying growth prospects for years. We expect equities to head south in the medium term.
24 April 2009
David Karsbøl, Chief Economist, Saxo Bank
23 April 2009
Andrew Arnold, Trading Floor Editor
10-year rates edging higher. We should expect more QE-interventions soon which could put a lid on currencies, especially GBP and CHF. But also CAD and USD could be hurt by more QE. Stocks edged lower in the US session and we should be looking for a test of the 827 level in S&P500 within this week. The US authorities are scheduled to deliver the methodology of the so-called “stress-tests” of the US banks tomorrow.
23 April 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
23 April 2009
John J. Hardy, FX Consultant, Saxo Bank
GBP had a brief period in the sun recently as strong Q1 operating earnings at US banks and a massive rally in world financial stocks offered sterling a lifeline. But Chancellor Darling’s budget announcement yesterday poured could water on the sterling’s rally as it reminded the market of the dire fiscal position of the UK government.
21 April 2009
Andrew Arnold, Trading Floor Editor
Stocks declined around 4% in the US session, led by financials. Commodities and EURJPY and EURCHF considerably lower, while Treasuries are rallying. Riksbank and Bank of Canada rate decisions today.
22 April 2009
David Karsbøl, Chief Economist, Saxo Bank
Pressure on the US Treasury auctions - and the US budget - is on the increase according to The Market Ticker's Karl Denninger.