Analysis
31 July 2009
John J. Hardy, FX Consultant, Saxo Bank
US economy shrinks less than expected in Q2, but initial reaction doesn't celebrate the news. More important data next week.
Bond markets are in rally mode, though reaction in the JPY crosses is so far inconclusive for those looking for a bearish reversal.
31 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
US GDP data tonight will likely keep markets cautious at month-end
31 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The importance of US GDP today for markets should not be underestimated. A better than expected earnings season so far, but long term earnings growth depends on long term GDP growth.
- Today is going to be all about the advance US GDP growth for the second quarter. The expectation is for
-1.5% QoQ growth, annualized from -5.5% in 1Q, but we worry that this is too optimistic given the lack of improvement in real economic indicators in the last three months (not sentiment based). In addition, GDP could also be hit by inventory reductions as companies prepare themselves for lower sales.
- The Treasury's auction of 7-year notes yesterday turned out to be quite successful contrary to the auctions of 2- and 5-year notes midweek. The market actually bought the notes expensively by 3bps, meaning that they paid more than the price prevailing at the time of the auction. This could, however, be due a short covering.
- Stocks are seen higher intraday today on optimism surrounding the US GDP out at 12:30 GMT, and positive Euro-Zone numbers will only add fuel to that fire. Brace yourselves for retreating stocks if GDP growth fails to live up to expectations.
30 July 2009
John J. Hardy, FX Consultant, Saxo Bank
RBNZ keeps rates unchanged, issues dovish outlook in attempt to weaken currency. AUDNZD jumps higher.
Lousy US treasury auction results keep JPY under pressure. EUR remains a weakling almost across the board, boosting Scandies.
31 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
PBOC says sticking to appropriately loose monetary policy; RBNZ leaves rates unchanged, talks down the NZD again.
Economic Data Highlights
- US Jun. Durable Goods Orders out at -2.5%, ex-transport +1.1% vs. -0.6%/flat expected resp.
- NZ RBNZ leaves rates unchanged at 2.5%
- JP Jun. Ind. Prod. out at +2.4% m/m, -23.4% y/y vs. +2.5%/-23.6% expected and +5.7%/-29.5% prior
- AU Jun. Building Approvals out at +9.3% m/m vs. +6.0% expected and revised -11.0% prior
30 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The bond auction effectively failed yesterday. We could see a reaction from equities today, but we will open higher. Watch out for German unemployment.
- FED reported yesterday that their regional representatives detected a slower pace of economic decline in June and July pointing towards a near rebound. This is most likely the case, but the interesting question is how fast we will rebound. We believe it will be surprisingly slow.
- US 5yr bond auction effectively failed yesterday. The bid-to-cover ratio was 1.923; anything below 2 is bad due to the setup of primary dealer system. There was simply not enough interest to subscribe the issue. US 7yr bond auction is up today. If it continues like this it will have severe impact on the equity markets as well as the long term growth prospects of the US due to higher funding rates.
- German unemployment is out today. Given that the expected increase is realized we could in the near term see a shift in German consumer confidence.
29 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Chinese stock market pressures Aussie, supports the greenback, and triggers tremors across markets.
Ugly US Consumer Confidence yesterday again wilting the green shoots theory. RBNZ on tap tonight.
29 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Durable Goods Orders released in the US and earnings from a number of big companies will direct equity markets today. We expect to close modestly lower than yesterday in Europe.
28 July 2009
John J. Hardy, FX Consultant, Saxo Bank
RBA's Stevens gives AUD a boost to new 9-month highs vs. the greenback. European currencies reluctant to join the party - a sign of weakness
JPY showing some resilience on bond recovery ahead of US treasury auction onslaught.
28 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The earnings season has kicked off and, so far, in Europe and the US two things stand out. First, earnings are better than expected – approximately 75% of the earnings releases so far in the S&P500 are better than expected. Second, company earnings are down YoY by approximately 26%.
So where does this leave us going forward?
28 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The equity rally appears to be slowing down and needed good news from New Home Sales before going higher yesterday.
- Equities continued higher on the back of better than expected earnings, but it seems at a slower pace. However good news from the US housing market (New Home Sales up by 11% - remember this a very volatile figure) seems to have put some confidence into equity markets. But the strong upwards momentum is on hold.
- Take a look at US bond auctions today as $69 bln. is about to be auctioned. The bid-to-cover ratio will important for market sentiment. We do expect for this time a good bid-to-cover ratio, but have a hard time seeing that this could continue.
- Today's important numbers are S&P/Case-Shiller price data from the US housing market and Conference Board
27 July 2009
John J. Hardy, FX Consultant, Saxo Bank
USD and JPY flailing for support as markets line up at the risk punch bowl for another round. Are consumers as confident as the market?
Big week for US treasury auctions with $115 billion on the block this week. Is weak USD trade getting crowded?
27 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The US close Friday was strong which has lead European equities higher this morning. Earnings continue to surprise to upside, but this is mainly due to low expectations; be careful at current P/E levels.
24 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Bernanke's testimony this week failed to provide much of a pivot point this week for FX. Could next week's record US treasury auctions finally shake this market out of the summer doldrums?
22 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Bernanke said yesterday that the economy is still too fragile to start implementing the FED’s exit strategy which after being announced made US Treasuries fall sharply.
22 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Fed Chief Bernanke’s testimony before the House panel last night stuck more-or-less to the content of the article that appeared in the WSJ earlier. However, what discrepancies there were tended to downplay the economic recovery theory. His comments that “a highly accommodative stance of monetary policy will be appropriate for an extended period” appeared to counter the need to present viable exit strategies, and this was compounded by his thoughts that unemployment will be a major factor in determining the state of the housing market during the coming months. His comments helped the longer-end of the US yield curve to ease back further, dropping some 13bp on top of the 5bp the day before. While equity markets finished in the black, FX markets were a tad more reticent and we saw some profit-taking after the recent moves.
21 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Bonds reacted strongly to Mr. Bernanke's rather muted and unsurprising testimony...
21 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The earnings season is off to a good start with 80% of the reported companies out better than expected. This will lead the equity market higher as the fundamental data is ignorred.
21 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Optimism remained the buzz-word of financial markets yesterday after a very slow start in Asia. News that CIT had avoided Chapter 11 through a private industry bailout was the initial catalyst and this was helped by yet another string of Q2 earnings forecasts that beat market expectations and further cemented by data releases - demand for Canadian securities was at a 5-year high, wholesale sales down a less-than-expected 0.3% and US leading indicators came in at +0.7% vs. +0.5%. Risk was embraced, with the USD sliding back down towards the June lows, enabling major currencies to overcome some technical resistance levels.
20 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Since market equity markets have rallied – but the lead of this rally has been within emerging markets. Compared to for example the US market, emerging markets has gone up by 51%, while the S&P500 has only realized gains at 33% in the same period. At first glance this is easily explained; the MSCI Emerging Market dropped significantly more than the S&P500 last fall. However this does not seem to justify the expectations that are currently priced into the emerging markets; the S&P500 is currently trading with a P/E around 14, while the MSCI Emerging Markets are trading with a P/E around 15. In other words investors are currently paying a premium at 7% when investing in emerging markets. This begs the question whether this is fair?
20 July 2009
John J. Hardy, FX Consultant, Saxo Bank
USD slips further and threatens test of lows for the year. Bernanke to make key semi-annual report to Congress tomorrow.
Are we nearing another pivot point? JPY crosses maintain rally on interest rate moves and sustained vertical ascent in risk.
20 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
10% of the companies have now reported in S&P500. Earnings are not growing, they are contracting in percentage terms over year-ago levels. However they are better than expectations and that is why equities are trading higher and will do so in the short term (during the earnings season).
20 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Friday produced a relatively subdued US session compared to the hype and excitement witnessed early in the week, even though the host of Q2 earnings releases continued to beat forecasts. Whether it was the Jakarta bombings taking the edge off sentiment, or a deeper assessment of the headline numbers suggesting more caution, or simply a case of traders taking a breather it is difficult to pinpoint, but nevertheless Wall St finished the day broadly flat.
17 July 2009
Alan Plaugmann, Deputy Head of CFDs and Listed Products, Saxo Bank
One of the first lessons I was taught in markets, was that of supply and demand being the key defining factors of the market. This is still true, but sometimes largely ignored in the wake of general market sentiment and also over exuberance.
16 July 2009
John J. Hardy, FX Consultant, Saxo Bank
There is something profoundly fishy about the intermarket action and we again underline that the latest moves - also in FX - smack of desperation or a squeeze on lack of sufficient participation rather than something we should be hanging our hats on.
16 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The stock markets and the VIX rose in yesterday’s session and the three-day rally appears to be heading for a full stop today. With so many alleged green shoots these last three days – particularly earnings reports – the VIX could signal that the equity markets are getting nervous; watch out for today’s Jobless Claims numbers.
16 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Markets headed towards the risk appetite stratosphere yesterday as the US Q2 earnings season continued to surprise to the upside. The positive sentiment was further bolstered by some above forecast data. US industrial production recorded a less-than-expected fall, at -0.4% vs. an expected -0.6%, while the empire manufacturing index rose to -0.55 vs. -5.0 expected and -9.4 previously. Minutes of the June 24 FOMC meeting saw growth forecasts for 2009 revised marginally upwards to -1.5 to -1.0 range from -2.0 to -1.3% previously but members still remained cautious about the future, with the “quite weak” economy still vulnerable to further shocks. Nevertheless, Wall St powered higher and the break below the 200-day MA on the S&P now seems a long-distant marker! It may be worth noting however that yesterday’s S&P rally was accompanied by an uptick in the VIX index. A warning sign?
15 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Intel forecasts sparks desperate global rally in risk. USD and JPY longs sent scurrying for cover.
Recovery hopes on earnings suddenly burn bright again - will this move fade as quickly as all of the other ones of late?
15 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Intel posted better than expected earnings yesterday and made futures trade significantly higher. However after scrutinizing the report it is due to superior cost management and not improved sales.
14 July 2009
John J. Hardy, FX Consultant, Saxo Bank
The Goldman Sachs risk rally - buy the rumor sell the fact? US Retail Sales look worse than they appear on the surface
14 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Goldman is reporting today and US equities rallied yesterday on the back of better than expected earnings. We expect that the major investment banks will pose better than expected earnings, but retail banks will suffer. Pls. notice that the PPIP program has been reduced to 4% of its original scope and this will force banks to recapitalize sooner than expected.
14 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
What started off as a relatively quiet session in Europe with GBP the star performer (in a negative way) and markets playing the “risk off” trade performed a smart u-turn once the US session kicked in.
13 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
- University of Michigan Consumer Confidence came out at 64.4 vs. 70.0 expected again supporting our view that the ABC consumer confidence leads the Conference Board Confidence and the U. of Michigan Confidence fairly well. The markets, however, did not react too much to this disappointing news.
- The IMF is discussing a new package to the Central and Eastern European countries with at least three new countries applying for aid for the first time. With risk aversion slowly returning in the markets, this news could drive the European equity markets down today on an otherwise quiet day.
13 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Weekend press did not have much positive news for the UK, and consequently the pound. UK’s Telegraph reported that the IMF has warned that the UK could not afford the vital stimulus required by the economy over the next 18 months due to the precarious state of its public finances. In its recent paper presented to a G20 meeting, it highlighted that every other G20 country apart from the UK and Argentina had been able to budget for temporary spending increases or tax cuts next year to pull their respective currencies out of recession. The news underlines prior warnings from S&P about the dire state ok UK finances and the risk of a possible ratings downgrade. Meanwhile the UK’s Times reported that Lloyds Banking Group is poised to write off as much as GBP13 bln on its loans to commercial property, businesses and mortgage holders. GBPUSD broke through recent lows early in the Asian session and looks set to extend its fall.
10 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Another day sees another reversal in the market action as yesterday's mysterious sell-off in the US dollar reversed just as handily starting overnight in Asia and extending into the European session. Volatility in the JPY crosses shows no sign of ebbing as the shocking sell-off on Wednesday showed signs of resuming again after a vicious squeeze to the upside in JPY crosses yesterday...
10 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
Claims data out yesterday failed to deliver. While initial jobless claims went below the 600K mark, a number of factors influenced the results - most importantly seasonal adjustments.
09 July 2009
John J. Hardy, FX Consultant, Saxo Bank
The action yesterday was all about the Japanese Yen as extensions in the moves of JPY-supportive background factors (weak commodities, equities and strong bonds) and a couple of specific news items conspired to create a dam break.
09 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
- Alcoa Inc. announced its Q2 results in the aftermarket and they were better than anticipated by the analysts. EPS came out at -0.26 vs. -0.38 expected and -0.54 in Q1. Equities stand to gain as the results will most likely calm investors down regarding the growing fear that the earnings season will disappoint.
- The Baltic Dry Index dropped 3.4% indicating that the commodity rally has been driven in anticipation of the Chinese stimulus package and not by real demand for these commodities.
- Euro-Zone GDP came out as expected yesterday at -2.5% QoQ. Exports dropped 8.8% suggesting that a recovery in the Euro-Zone is still premature.
09 July 2009
John J. Hardy, FX Consultant, Saxo Bank
The USD is finding plenty of support from the enormous fall in crude prices. The chicken-and-egg aspect of crude oil prices and the dollar is always difficult to untangle, but crude has been severely hit by the combination of risk aversion and new threats by the US regulatory agencies to curtail speculation in the futures market. This latter development has most certainly aggravated the severity of the drop in prices and offers therefore a supporting hand to a further rise in the greenback. Also reflecting the fading of the "devaluation trade" for the USD is the action in the gold market, where gold is close to breaking to a new low since mid-May.
08 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
- The stock markets took another tumble on Tuesday on speculation that the four month long rally starting in March has been running on farfetched earnings expectations. With the earnings season about to start in earnest next week, we believe that realized earnings will fall short of the expectations priced in the market. We also note that the VIX shot up from 29.00 to 30.85 yesterday for a 6% increase.
- The S&P500 tested the 200DMA for the second day in a row and this time broke through the support at 885-887 and we expect another day in the red for stocks. If the S&P500 breaks through support around 878 also (as indicated by the future) we could be headed for sub-850 numbers really soon.
- GBP went down yesterday against most other large currencies, and we wonder if the momentum of the UK stimulus is already wearing off. The cable is a sell into rallies today.
07 July 2009
John J. Hardy, FX Consultant, Saxo Bank
Another day brings yet another disappointment for the trend-seekers in the FX market, as risk appetite across markets recovered exactly as the US S&P500 touched its 200-day moving average. The reversal creates all of the usual technical arguments for a continuation in the direction of risk appetite for at least a day or two - for example, EURUSD higher - but it feels like this market has lost all trust in
07 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
- ISM Non-Manufacturing Composite came out yesterday at 47.0 vs. 46.0 expected and is edging closer to the threshold value of 50.0 indicating expansion.
- The US stock markets ended on a high note with both S&P500 and DOW closing in positive territory. The S&P500 tested the 200-day moving average around 887 and recovered well to end the day 0.5% higher. The European stock markets are expected to trade slightly higher today due to the strong US finish.
- The EUR traded lower against USD and JPY for most of yesterday, but recovered well at the end of the session. We expect the EUR will depreciate against both the USD and JPY today.
07 July 2009
John J. Hardy, FX Consultant, Saxo Bank
After the long holiday weekend in the US, the markets have largely picked up where they left off on Thursday - on a sour, risk averse note. Equities were down even further ahead of the US open and especially commodities have taken a beating. The 15% drop in crude prices in 4 days has been a spectacle to behold, and bonds are remaining stable in the US and on a rallying stance in Europe. All of this adds up to a strong USD and a very strong Japanese JPY. One of the sharpest movers in this environment has been GBPJPY, as GBP has found weakness on risk aversion and the dive in financial sector stocks. After trading above 160 last week, GBPJPY printed down close to the 153.00 handle in today's trade - a remarkable acceleration. So the moves in FX have fulfilled our expectations finally here in the short term - but despite the building momentum, we're still relatively within the ranges in some of the USD majors and there is plenty of wood yet to chop if we are to see the preferred scenario of an outright USD bull market again.
06 July 2009
John J. Hardy, FX Consultant, Saxo Bank
US Market Wrap: US equities recover into close, taking down USD and JPY ralling attempt
06 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The US Independence Day holiday ensured a quiet close as the end of the European session approached on Friday, though the same theme of risk aversion resulting in USD and JPY strength that had been witnessed in Asia continued. GBP remained on the weak side, suffering the after effects of the dire Q1 final GDP number from Thursday though the EUR’s slide was slightly tempered by reported demand from an Asian central bank and a large option expiry.
03 July 2009
Andrew Arnold, Trading Floor Editor
Saxo Bank's asset allocation model underlines the bearish stance that the bank's research department has taken in the recent 'green shoots' debate since the market upturn in March.
03 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
It is still not the end of the bear market. Consumer confidence and other ‘green shoots’ leading indicators have led markets higher until now, but have now turned into yellow weeds as hard facts based indicators have not recovered as fast as expected.
03 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
-
The market was taken by surprise at the release of worse than expected Nonfarm Payrolls (out at -467K vs. -365K expected). The Unemployment Rate was lower than expected at 9.5% and the “broad” unemployment (including unwilling marginally attached and part-time workers) rose to 16.5%.
-
- Crude Oil is factoring in some weakness here and threatens to break the 66ish support level. Be ready for serious downside if that happens.
- S&P 500 broke lower and closed at 896. The US market is closed today (due to 4th of July tomorrow) and with the lack of important data releases today, markets are likely to be relatively quiet. Only important release is the E-Z Retail Sales.
03 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Markets had set themselves up for a shock into the non-farm payrolls number, with analysts quite optimistic for a better number. However this was not to be and the headline number disappointed with 467k jobs lost in June compared with 365k expected. The unemployment rate also crept closer to the 10% magnet, rising 0.1% to 9.5%. Optimists may wish to point out that the rate was below forecast and registered a slower increase than seen in previous months. Average Earnings were flat for month-on-month comparisons, a low that has only been matched about five times since the early 1990's. Average weekly hours declined to a new record low of 33.0 hours. The weekly claims number provided no cause for cheer, with yet another 600+ reading, even as Continuing Claims fell rather sharply.
02 July 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
- The ADP Employment Change was somewhat worse than expected, as we anticipated – dropping 473K vs. -394K expected. Stocks shrugged off the bad news and went higher, but were rejected intraday. The fear is that the Nonfarm Payrolls today will be worse than expected as well and that the expectation for the Unemployment Rate of 9.6% is too low. We expect 9.8%.
- It is notable that Crude Oil is under pressure – despite USD weakness. EURUSD now at 1.41 and gold performing well at 940.
- Auto Sales were also disappointing yesterday – showing no rebound yet.
02 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The dollar was already on the back foot as the European session got under way following extremely dovish comments from Fed’s Janet Yellen. European PMI data also seemed to favour the respective currencies over the greenback, with EU PMI at 42.6 vs. 42.4 expected while UK PMI rose to 47.0 from 45.4 the previous month. Sweden reported a sharp turnaround as well, with the PMI jumping into expansionary territory above 50.
01 July 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The disappointing Conference Board Consumer Confidence (out at 49.3 vs. 55.3 expected) led to a strong sell-off in stocks, but they came back somewhat late in the US session. Today’s figures are setting up for further disappointment, since the expectations for the ADP Employment Change are way too rosy. Expect a figure around -550K, which could lead to a test of 900 in the S&P500.
01 July 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Heavy data slate today will look to confirm, or rebut, the green shoots theory.
The first half of 2009 closed with a quick change in direction for the greenback after the US consumer confidence numbers for June disappointed.
|
|