Analysis
30 June 2009
Andrew Arnold, Trading Floor Editor
Market optimism is misplaced and recovery will be flat-to-w-shaped predicts Saxo Bank, the trading and investment specialist, in its third quarterly financial outlook for 2009.
Saxo Bank states that any prediction of imminent global economic recovery is premature. The fundamental imbalances that pushed the developed world into the financial crisis remain unaddressed, and the bank advises investors to “buckle up for a bumpy ride” when the summer ends
30 June 2009
David Karsbøl, Chief Economist, Saxo Bank
The earnings recession is far from over. Earnings and businesses in general still have to adapt to the new economic landscape of savings, according to a Saxo Bank research note released today.
That means cost-cutting, streamlining, wage deflation, unemployment, capital destruction and margin-squeeze across the board.
30 June 2009
Mads Koefoed, Macro Strategist, Saxo Bank
We expect consumer confidence to drop to 51 or below.
- Everybody is happy. Buy stocks, especially if S&P 500 breaks 930 - the future is already close.
- Today's figures are important with the Conference Board Consumer Confidence most likely to be a trigger event. It made a major, positive surprise for the May figure, but due to the rather low ABC consumer confidence figures, we expect it to drop to 51 or below today. Also watch out for the German Unemployment and UK GDP figures.
- Crude Oil making a massive comeback has risen more than 6% since yesterday's low.
- Look out for EURUSD, if it breaks 1.4138... could take gold above 950
30 June 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Will history show that Q2 2009 was the turning point for the global economy?
Financial markets look to be still pinning massive hopes on this outcome with the closing stages of the second quarter seeing an extension of the recent sentiment of increasing risk appetite, with JPY crosses still in the ascendency overnight and “risk currencies” back in vogue.
29 June 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Dollar weakness that was evident at the end of last week appeared to reverse during the Asian session this morning, with the USD index gaining some 0.3%.
A repeat of China’s murmurings about a replacement reserve currency were put on the back burner after PBOC’s Zhou assured at the weekend that China’s reserves policy was always quite stable and consistent relative to liquidity and returns and that “there aren’t any sudden changes”. The comments gave some early-week relief for the dollar.
29 June 2009
Mads Koefoed, Macro Strategist, Saxo Bank
- US Personal Income MoM (May) rose unexpectedly on Friday (+1.4%), but that was due to extraordinary social welfare payments. Excluding this effect, personal income dropped 0.1%. On the same note, the US savings rate increased to 6.9% of disposable income (not including the paying down of debt, so the savings rate is actually even higher). The highest level since 1993). The savings rate is negatively correlated to aggregate profits, so one should expect weak profits over the next couple of quarters/years.
- Commodities are under pressure due to USD strength and treasuries are really well after the ECB EUR 442 bn lending operating last week.
26 June 2009
John J. Hardy, FX Consultant, Saxo Bank
China is back rattling its saber on the issue of its dependence on the US dollar, calling for a "super-sovereign" currency modeled on the IMF SDR's, in which the basket is slightly less weighted toward the dollar. Haven't we been here before?
26 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The injection of cheap liquidity from ECB and the prolonging of credit facilities by FED will make markets trade higher in the short run.
- The US GDP figures were generally as expected, but Jobless Claims were disappointing.
- The Fed yesterday released a press statement that it would prolong (to 2010) and change some of its credit providing facilities in order to ensure easy credit conditions to households and financial markets. This statement led to a general lift-off in all asset classes (including treasuries) - but the USD was down. Combined with the cheap EUR 442 bn credit expansion from the ECB earlier this week, we believe that the Fed's initiative should stimulate to even more risk-taking today and possibly into next week. Buy on dips into next week.
- Watch out for the PCE figures today. We believe that they could be lower than expectations, lifting bonds higher.
26 June 2009
John J. Hardy, FX Consultant, Saxo Bank
Equities rallied strongly into the North American close and knocked the USD well back from the strongest levels it posted after the FOMC meeting.
The final auction of the week - this time for $27 billion of 7-year notes - from the US treasury saw heavy bidding and interest rates also headed lower.
25 June 2009
John J. Hardy, FX Consultant, Saxo Bank
Interest rate differentials suggest EUR trades at a very significant premium above "fair" levels - particularly versus the likes of the JPY. Here is the EURJPY chart once again, where we focus on a daily close either above the 21-day moving average (blue) or below the 55-day moving averager (in red) for the next directional signal, with an obvious bias to the downside due to the fundamental situation and the structural technicals.
25 June 2009
John J. Hardy, FX Consultant, Saxo Bank
USD showing some fight again, but persistent ranges need to fall for stronger directional signal.
25 June 2009
John J. Hardy, FX Consultant, Saxo Bank
The overriding technical question for the moment is when we are ever going to break out of these ranges that have contained the market in their vice grip for weeks now.
25 June 2009
John J. Hardy, FX Consultant, Saxo Bank
The FOMC statement was very much a fizzle as an event risk, as the new monetary policy statement was mostly a series of tweaks to the existing one.
The market reacted most strongly to what was not there perhaps: there was no expansion of the previous asset buying programs the Fed has previously announced and no worry expressed about the steeply rising rates at the long end of the yield curve.
24 June 2009
John J. Hardy, FX Consultant, Saxo Bank
- but will it say anything interesting? EURCHF explodes higher on suspected SNB intervention. ECB goes nuclear, pumps almost half a trillion Euros of one-year funds into banks.
24 June 2009
Ole S Hansen, Senior Manager, Saxo Bank
Crude stocks expected minus 950K, compared with minus 3874kl ast week.
For Gasoline, up 1000k, compared with minus 3385k last week.
For Distillates, up 850k compared with 308k last week.
24 June 2009
John J. Hardy, FX Consultant, Saxo Bank
Yesterday's daily GBPUSD candlestick chart shows a bullish reversal, though it is tough to invest confidence in setups like these considering the fibrillating and constant direction changes in this market over the last two weeks. The 21-day moving average has yet to fall on the close. Looking higher, there is still reasonably large room within the range to trade. The 1.6200 level is looking more important than ever. To the upside, 1.6660 is the high for the cycle.
24 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The Weekly ABC Consumer Confidence was yesterday out at the lowest level since February 9th. This points towards a possible correction in the equity markets.
23 June 2009
John J. Hardy, FX Consultant, Saxo Bank
The market is apparently not willing to overreach itself ahead of the FOMC meeting tomorrow. AUDUSD sell-off turns tail after dipping its toes through support. GBP rally ends with a bang.
23 June 2009
John J. Hardy, FX Consultant, Saxo Bank
EURGBP saw a strong reversal late yesterday after touching its lowest levels since November of last year. The bullish reversal suggests the pair could take things higher again toward 0.8575 or even 0.8635 (the old low from February).
23 June 2009
John J. Hardy, FX Consultant, Saxo Bank
Sour mood in Asia sees JPY bulling stronger across the board. USD moves more restrained ahead of huge FOMC event risk.
23 June 2009
Mads Koefoed, Macro Strategist, Saxo Bank
Reported current and forward PE-ratios of 14.1 and 15.1, respectively, for the S&P 500 suggest fairly cheap equities, but these metrics are distorted. A more reasonable trailing twelve months (TTM) PE-ratio incorporating both non-operating earnings and negative earnings in the denominator results in a much higher ratio of 126.
23 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Equities could retrace a bit during today's trading after yesterday's sell-off. However it does not change our view we are in the short term heading towards a downwards correction.
22 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Watch out for higher rates this week due to US Treasury auction. Positive stock trend, but the fundamental case for lower stocks is still on.
- This week is interesting, because the US Treasury plans to auction $104 bn of Treasury Notes and an additional $61 bn of Bills. That amounts to $8.58 trillion USD on an annualized basis. Watch out for higher rates.
- The trend in stocks is still positive and we still recommend buying on dips and the reflation trade is still on - judging by commodities, credit spreads etc.
- But the fundamental case for lower stocks remains intact. Insiders have been net sellers for 14 straight weeks now.
19 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
With no important data out today the better than expected US numbers from yesterday will drive markets higher in Europe.
- Buy on dips is back. S&P 500 rallied - especially led by banks - and stays above its 200 DMA.
- Long-end rates shot higher as Leading Indicators and the Philly Fed were out better than expected.
- Short-term risk indicators have gone considerably higher in the past week, but commodities are holding up and 10-year break-even inflation expectations are moving higher -anticipating a continuation of the reflation trade.
18 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
UK Retail Sales and US Initial Jobless Claims and Leading Indicators will set direction in markets today.
- Yesterday's CPI YoY out at -1.3% vs. -0.9% expected. Biggest decline since 1950. This is confirming our deflationary/disinflationary scenario. Bad for corporate margins.
- S&P 500 briefly traded below the 200 DMA (today at 904.50), but closed above.
- CDSs on most Financials have been edging higher in the past week. Same goes for CEE country CDSs. Other risk indicators also pointing higher.
17 June 2009
Robin Bagger-Sjöbäck, Research Analyst
As of December 2008, approximately half of the total US population, or 156 million people, paid income taxes. Considering that GM alone has received around $50.7 billion (Pro Publica) through different bailout programs from the U.S government (more correctly from U.S taxpayers) means that with a $325 equity stake each U.S taxpayer literally owns 0.000000385% of the new GM (not including GMAC - $12.5 billion or GMAC Mortgage - $633 million).
17 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
A string of important macronumbers will be out today from various countries. Look especially for US CPI for market direction - current expectation in markets are -0.9% YoY, but we expect -1.0%.
- The S&P 500 closed down at 912 after Obama's pledge to overhaul the financial regulation of especially financial shares. These shares led the market higher since March and they could be in for a real rollercoaster ride in the coming weeks. Obama also said that unemployment might reach 10% this year (which is obviously true, but a deviation from the past assertions).
- Watch out for US CPI figures today. We believe that they will confirm our deflationary/disinflationary scenario.
16 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The ECB said yesterday that Euro zone banks face additional loses of about $300 bn this year and next as continental Europe’s severe recession intensifies, putting strains on the financial sector.
Interestingly, the ECB did not estimate the write-offs European banks needs to take sooner or later to narrow the margin between the book value and the market value of their toxic assets.
16 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Optimism is not enough; since March we have had a rally in equities and commodities spurred by 'green shoots'. However yesterday's sell-off means that markets have returned to valuing hard facts.
- S&P 500 closed below an important trendline yesterday, but above the 200 DMA (909.86)
- The sell-off in equities/buying in bonds yesterday was spurred by two things: 1) ECB said that European banks face additional losses in the area of $283 bn. this year as the recession intensifies and more to come in 2010, 2) Empire manufacturing from the U.S. showing manufacturing is shrinking suggesting that the U.S. economy has months to go before hitting the bottom.
- Look for important macro numbers today from the US (industrial production and capacity utilization), Germany (ZEW-figures) and UK (inflation)
15 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Equities started overnight to trade lower in Asia on the back of valuations.
As we have been saying for a while, valuations are far too high at current levels - in the German DAX30 the expected earnings growth 12 months down the road is 24%, while the expected earnings growth is 20% for S&P 500 and 49% for Nikkei 225.
We don’t think this is even close to being realized.
15 June 2009
Ole S Hansen, Senior Manager, Saxo Bank
Weekly Commodity Update
Crude Oil continued it’s month long rally fuelled by momentum and continued verbal intervention from OPEC. Near month Crude is sitting more than 120% above the February lows and only now has questions been raised about the impact on the fragile economic recovery?
15 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Germany and France resist calls for stress test results to be published.
- Finance ministers from the G8 on Saturday signaled their cautious belief that the worst of the global financial crisis might be over and began for the first time to discuss 'exit strategies' to counter the growing threat of inflation. We could see a reversal in stimulus packages.
- Stress tests for banks were also discussed, but divisions over the issue - with France and Germany resisting calls for more transparency over publication of results. Look for any news from European banks on this as it could trigger a sell-off.
- University of Michigan Confidence was out lower than expected Friday - 69.0 vs. 69.5 expected. The acceleration in the upswing in survey based indicators is wearing off. Sharp reaction in markets is expected when it stops increasing.
12 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
According to commodities, the JPY and CDS prices - the reflation trade is still on.
- The S&P 500 is still ranging and not able to close above the 950 level, despite better than expected Retail Sales yesterday. According to commodities, the JPY and CDS prices, the reflation-trade is still on.
- Yesterday's 30-year auction results were better than expected with a healthy foreign participation (around half).
- Watch out for the Euro-Zone Industrial Production today.
11 June 2009
ECB’s financial stability expert, Dejan Krusec, released worrying news when he said that European banks are only strong enough for a V-shaped recovery.
11 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The CRB Index about to break higher again. This market is dominated by reflation-hopes with a strange twist of risk-premiums.
- 10-year yields making new highs, and the auction result from yesterday resulted in a 3.99% yield. 10-year Break-even inflation rates moving higher as well. Now at 208 bps.
- Chinese exports YoY out at -26.4%, but countered by Fixed Asset Investments of 32.9% YoY. Japanese GDP declining at a 14.2% annualized rate.
- The S&P 500 Future is indicating a non-eventful break of the trendline resistance (today at 936.55). Judging by other risky assets, stocks are still a buy on dips.
- Watch out for US retail sales today.
10 June 2009
Ole S Hansen, Senior Manager, Saxo Bank
Crude oil has continued to show a strong relationship to the dollar and stock markets and continued upwards.
Minor corrections earlier in the week were reversed as stocks strengthened and the US dollar weakened. The market is currently testing important levels of $71.75, which is the high from November 2008.
10 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Texas Instruments decision to revise earnings expectations upwards, also helped move the S&P500 above the downward trendline and brought new life to the equity markets.
TI's revision has been taken as a sign that the upcoming earnings season will be better than had been hoped.
10 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The S&P500 closed above the trend line resistance yesterday and could be on its way to 1,000.
- The S&P500 managed to close above the trendline resistance yesterday and the futures is trading higher this morning. We could be set for a ride towards the 1000-level.
- Court allows Chrysler deal with FIAT - the appeal by Indiana Pension Fund was rejected by US Supreme Court.
- IMF was out yesterday pointing towards the German banking systems is under severe stress - especially the regionally owned Landesbanken.
09 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Will the S&P500 close above the trendline resistance today?
- Yesterday, the German Factory Orders (APR) declined by 37.1% YoY vs. -33% expected. The Japanese and Australian Manpower surveys for Q3 were both lower than for Q2.
- US 30-year FNM Mortgage passed 5% (up from 4% in just 3 weeks) for the first time since November last year. Thereby the affordability of US homes has deteriorated massively in a very short time.
- The S&P500 still didn’t manage to close above the trendline resistance (today at 940.31), but it still trades above the 200 DMA (today at 916.60).
- Some signs of risk-reduction: USD strength, a small uptick in Treasuries, JPY TWI strength, Junk Bond Yields rising a tad and the CRB stalling. Not a flood of risk-aversion, but the changes are hinting at a turn in sentiment. We need to get a close in the S&P500 above the trendline resistance soon if the rally should continue.
08 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The key worry in the market right now is higher long-term interest rates – not because of inflation, but because of risk premiums and irresponsible fiscal policy. This brought US equity markets lower.
- The S&P500 Future broke the trendline resistance in the European session after the better than expected NFP on Friday. However, a continued sharp jump in the long end yields led to worries about the ability of the Fed to reflate the economy and the index closed BELOW the trendline resistance (today at 942.20). In other words: A fake break, which should be considered bearish. A re-test of the 200 DMA (today at 918) should be in the offing.
- The key worry in the market right now is higher long-term interest rates - not because of inflation, but because of risk premiums and irresponsible fiscal policy. Mortgage rates are exploding. The 30-year US national average has gone 50 bps. higher in two weeks. This is not leading to a stabilization of the housing market.
04 June 2009
The S&P500 is now caught in a thin range between the trendline resistance (today 946) and its 200 DMA (today 922). We need a close above the trendline resistance or below the 200 DMA to get direction.
- The S&P500 is now caught in a thin range between the trendline resistance (today 946) and its 200 DMA (today 922). We need a close above the trendline resistance or below the 200 DMA to get direction. We believe that earnings will disappoint and lead stocks lower, but we respect the strength in stocks until now and stocks could easily turn higher again.
- Latvia showed a failed bond auction yesterday and is unofficially beginning to discuss an extremely costly depegging from the EUR. The CDS price on Latvia is rising, but still only half of the March high (1200 bps). Generally, corporate CDS prices are low, but the increase in notional CDS's outstanding in the past week suggests that key players are positioning for a pull-back in stocks.
- Commodities are also on the retreat and the USD showed the biggest one-day increase since Feb 26.
03 June 2009
Ole S Hansen, Senior Manager, Saxo Bank
Crude oil is up 10% since we broke the 200 daily moving average last week. That was the trigger for the additional strength we have seen recently, combined with the continued weakness in the US dollar.
02 June 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
S&P500's close above the 200 DMA yesterday marked an important step towards testing the 1014-level. We need to close above the 947 level today in the coming days in order to test this level.
- S&P500 closed above the 200 DMA yesterday with strong momentum in the intraday trading on the back of solid US numbers. In order to reach the next level at 1014 we need to close above 947.
- Strong stocks, a weak dollar and better-than forecasted economic data yesterday send cobber to its strongest level since October. Same pattern in Crude. Investors set aside current soft demand and seized on data hinting at stronger consumption ahead.
- Short End Debt offerings - do not fall in love with the idea that everything is improving, alias the Green Shoots Theory. Foreign Governments and general bond buyers don't believe in it. They are willing to lend on very short terms for almost nothing and foreign governments are piling into the short duration offerings.
- Look for US Pending Home Sales today. We still haven't seen the US housing market recover and we need to see this before we could talk about a recovery.
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