Analysis
31 August 2009
John J. Hardy, FX Consultant, Saxo Bank
End of month fix moves clearly in evidence today and RBA on tap..
31 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Will a tumultuous Asian week to set the tone for the week? Last week's calm may have set up a storm for the week
Chinese equities in monster slide - Aussie tries to look the other way - but for how long? RBA up in Asia's Tuesday session tonight.
31 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The yen appreciated against most major currencies after the ruling party in Japan for the better part of the last 54 years, LDP, lost yesterday's election in Japan
31 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The USD finished last week on a soft note, with data releases more-or-less in line with expectations, while Wall St notched up its fifth straight close only marginally different from the open. Earlier, GBP had been given a leg up when Q2 GDP numbers were marginally revised to the upside (-0.7% q/q versus -0.8%) but the spike soon ran out of steam and GBP was soon back on the ropes.
28 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Risk/Equity markets makes a grand non-statement for the week....
The US equity market is notching its fifth straight day of "unchangitude" - all adding up to a big unch for the week, or perhaps more apropos as we head into the weekend featuring Japanese elections: a doji candlestick in which the opening and closing prices are virtually unchanged. The oracular interpretation of such a week? Uncertainty.
28 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Market trying to take USD to new lows for the cycle after equity comeback late yesterday.
AUDUSD toying with 12-month highs. Last year apparently never happened....
28 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
L’Oreal was out better than market expectations - operating profit and EPS were 8% above estimates.
Guidance confirmed sales but was shy on margin, although H1 is encouraging. Given H1 margin falls of 3.9% at E. Lauder, L’Oreal’s figures were clearly better than feared. With volumes down 6% and a higher share of media spend, H1 margins were helped by savings and raw material prices.
28 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Dell Inc., the world’s second-biggest maker of personal computers, topped profit and revenue estimates yesterday after slashing costs by contracting out production. Dell’s second-quarter profit was 28 cents a share, excluding some expenses. Analysts had predicted 22 cents on average.
Overall, the two key near-term bear arguments for the stock—gross margins and cash flow were countered
by the July quarter results.
28 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
UK GDP and US PCE Core and Personal Income as well as Personal Spending are among major data releases today.
28 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
It was a volatile end to the US session in currency markets yesterday with a nasty bear squeeze catching traders unawares. Prior to the late move, it was looking as if risk aversion cascading from the Asian session was going to be the theme of the day with the USD and JPY adopting a bid tone. This was reversed in the closing stages though there appeared to be no specific news catalyst to trigger it and it was suggested that thin markets, poor liquidity and a market overly-positioned in one direction were to blame.
27 August 2009
John J. Hardy, FX Consultant, Saxo Bank
A look at the moving and shaking in today's US Session and what it may portend for coming sessions...
27 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Directional momentum is tough to come by this week. Last shreds of EURUSD resistance still in place.
US jobless claims data is disappointing. SNB on the warpath - has USDCHF built a base for a solid rally now?
27 August 2009
David Karsbøl, Chief Economist, Saxo Bank
Headline GDP came out at -1% unchanged from the first estiimate and better than expectation of -1.5%. Still, net exports contributed with 1.6% point growth (since imports are dropping faster than exports) and government consumption contributed 1.27% (Federal, State and local).
The figures were relatively unchanged from the first estimate, and didnøt have any immediate effect on the S&P futures or FX. We are mainatianing our suggestion of selling the break of 1018 and buying 1037.
27 August 2009
Nick Beecroft, Senior Markets Consultant
The suspicion that commercial banks might have to pay the Bank of England for the priviliege of leaving money on deposit with the Central Bank is the Sterling market's current pre-occupation.
Short stg futures and gilts have reacted as one might have predicted and GBP looks very vulnerable, both against the Euro, but maybe even more-so against a USD which seems to be developing a strength of its own-with the last year’s tight inverse correlation with risk-appetite beginning to fail.
27 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Dexia SA the world's largest lender to local governments, said second quarter profit fell 47% after setting aside money for risky loans. Net income declined to €283m ($402m) from €532 m a year earlier.
We continue to believe that Dexia will experience margin pressure from higher funding cost and lower contribution from portfolio in run-off.
27 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Watch out for the GDP revisions today. Consensus is a revision of -0.5% for the Q2 GDP (previously at -1% annualized). We think that is likely, but priced-in.
26 August 2009
John J. Hardy, FX Consultant, Saxo Bank
A look at today's action and a the day's technical action in FX....
26 August 2009
John J. Hardy, FX Consultant, Saxo Bank
More positive data - this time German IFO - again fails to bring positive reaction. Commodity currencies and GBP suffering the most.
US Durable Goods Orders data is a positive read, for month-to-month trend, at least. Focus now on US New Home Sales now.
26 August 2009
David Karsbøl, Chief Economist, Saxo Bank
Despite the generally positively surprising data, stocks were rejected at new highs. The O/N market development suggests that risk-willingness is still intact with the JPY and US-T and CDS/Itraxx downYesterday's US figures were somewhat better than expected.
- The home price data showed some signs of stabilization with the S&P/Case-Shiller Quarterly HPI showing the first QoQ INCREASE since H1-2006. This increase, however, was not corroborated by the FHA and NAR price data. The Conference Board Consumer Confidence was at 54.1 - higher than expected (47.9).
26 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The data out of the US was on the strong side last night but risk appetite was not able to feast on the positive data. The S&P/Case-Shiller home price index was firmer at 141.86 vs. 139.91 while the US consumer confidence number came in at 54.1, much stronger than the 47.6 expected and 46.6 previously, while later the weekly ABC consumer confidence indicator was more tepid, holding steady at -45. The strong consumer confidence number appeared in stark contrast to the weak Michigan sentiment index reading reported just ten days ago but we will likely have to wait to see which prevails.
25 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Superstrength US data fails to keep the risk party going - a warning sign for the bulls out there. JPY crosses especially interesting on the close...
25 August 2009
David Karsbøl, Chief Economist, Saxo Bank
The Case-Schiller Home Price index was somewhat better than expected at 142K for June for 139k for May.
Year on Year the House Price Index for the US also fell less than expected. The quarterly figures showed the first quarterly increase since Q2 2006. However, these figures weren't corroborated by the NAS survey and June /July are generally strong months.
25 August 2009
John J. Hardy, FX Consultant, Saxo Bank
EURUSD and JPY crosses tick higher again ahead of key US confidence data. What can stand in the way of the bulls?
Confidence not likely improving as US frets about healthcare, lack of job opportunities. EURGBP breaks big resistance level.
25 August 2009
Nick Beecroft, Senior Markets Consultant
Multiple FED and ECB attendees at the FED’s Jackson Hole jamboree repeatedly took the opportunity, (both on-stage and in ad hoc interviews), to pour cold water on the market’s ‘animal spirits’ and to make it very clear that they expected to keep short rates where they are now for an extended period.
In which case, there are some great, relatively low-risk, high risk/reward trades in short-term interest rate futures.
24 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Having a look at broader risk measurements in world markets, we note that US and European stock markets printed new highs for the year - but other measures of risk don't jibe with the action here. Are dark clouds gathering?
24 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Friday risk blowout sees usual weak USD and JPY fallout, though reaction not as sharp as in the past.
Relatively quiet week ahead on the economic calendar. Confidence data out of the US and Germany the biggest focus.
24 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Better than expected Existing Home Sales Friday led equities higher and we expect this trend to continue into the European session today.
- US Existing Home Sales way better than expected on Friday. The problem is that a lot of that is caused by distressed sales (since the uptrend is hard to spot in New Home Sales) and the tax credit for home buyers that runs out at December 1st.
- S&P 500 forcefully broke the 1014 level and closed at 1026. The momentum in stocks is extremely strong and we now target 1121 (big picture 50% Fibonacci Retracement), unless we observe a deterioration in the credit markets again.
21 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Closing note for Friday - a look at news items and develops from today's North American session. FX response to uncorking of fresh US equity rally is limited. ..
21 August 2009
Ole S Hansen, Senior Manager, Saxo Bank
Weekly Commodity Update
Investors had a difficult week as commodity markets failed to show a unified approach leaving most markets range bound. The overall question is still how much risk willingness is out there.
21 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Strong German PMI's lift Euro and bolster risk appetite once again. Fed's Bernanke to speak at Jackson Hole conference.
Gold and oil join the "down with the US dollar" chorus. Risk bears seem to be beating a full retreat.
21 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Group results were a little better than our estimates of net loss of 3.6 bn. DKK vs. a realized result of 3.0 DKK bn. Within the segments, Maersk Line results were much better than expectations, but the other segments (especially oil) were largely in line.
21 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Net income for GAP in the second quarter was $228 million, or 33 cents a share, compared with $229 million, or 32 cents, a year earlier. Revenue fell 7.3 percent to $3.25 billion.
We are raising our F2009 and F2010 EPS estimates by $0.04 and $0.02 to $1.27 and $1.49, respectively, and our price objective from $20 to $23 to reflect the higher earnings.
21 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Some consolidation with a bearish leaning in markets yesterday and overnight. Asian shares are generally down (but Shanghai Comp is up) and the JPY is higher, but Itraxx/CDS prices are down.
20 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Risk comeback sees yet another direction change. But hyperactive Chinese equity action sees less reaction in FX than in days past.
Yesterday's USD sell-off disappoints the dollar bulls. Are we really headed back into a range?
20 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Rio Tinto Group, the world’s third-largest mining company, reported underlying earnings (excluding some one-time items) of $2.6 billion, missing the street’s estimate of $2.73 billion as a result of declining copper, iron ore and aluminum prices. Despite the management’s commitment to cut costs we are still skeptical on Rio Tinto, which is mostly due to the macroeconomic headwind that will hit Rio Tinto
20 August 2009
David Karsbøl, Chief Economist, Saxo Bank
The Norwegian Mainland GDP came out in the positive territory as we expected, but the overall GDP (i.e. including oil activities in the North Sea) were lower than expected.
The Bank of Norway is most interested in the Mainland GDP, since oil activities are notoriously volatile. Therefore, we believe that the rate outlook of Norway has improved slightly at this release.
20 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Royal Ahold NV, the largest Dutch food retailer, posted second-quarter profit that beat analysts’
estimates as price cuts lured more shoppers. We reiterate our Neutral rating. We view Ahold as a ‘recovered’, well-managed company, with a solid balance sheet.
20 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
A huge reversal of risk yesterday. After having threatened to make new lows in S&P500, risky assets rallied lead by commodities and HY bonds. The JPY was lower, but ITRAX/CDS prices were higher
20 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
It was another day of two halves yesterday as the US session saw a reversal of the risk-aversion theme that dominated the Asian close. Into the close, Wall St shrugged off the 4% fall in the Shanghai stock market earlier, firing ahead on the back of a surge in energy counters after latest data showed a hefty drawdown of crude oil inventories. As has become the norm, the move in equity markets dictated what currency dealers would do, and by the end of the US session the dollar gave back most of the gains it had secured in Asia and early Europe.
19 August 2009
GBP pounded on split BoE vote and opposition leader comments. Ugly equity sell-off in Shanghai boosts JPY, pummels risk.
Rallying government bonds sending JPY on a rocket ride. USD action still inconclusive.
19 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Deere & Co., the world’s largest maker of farm equipment, posted lower third-quarter profits, but still topped our estimates as a result of cost reductions and “strength” in U.S. demand for large farm machinery.
Net income fell to $420 million, or 99 cents per share, in the three months ending July 31, from $575.2 million, or $1.32, a year ago. Our estimate was in line with the street at 56 cents a share, excluding some items.
19 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Hewlett-Packard reported a solid third quarter last night, with margin upside across key segments.
Revenues and EPS of $27.45 billion and $0.91, were slightly ahead of consensus and far above our conservative expectations. The good news in the quarter was that margins exceeded our expectations in all key business units, and our fears of a substantial earnings shortfall have now eased considerably.
19 August 2009
Nick Beecroft, Senior Markets Consultant
Yesterday’s UK inflation numbers lead to a late NYK ‘sucker’s rally’ in GBP/USD to around 1.6600 from 1.6450, but the figures were artificially ‘inflated’ by sterling’s weakness earlier in the year. Sterling has duly given back most of yesterday’s gains against the USD and looks very vulnerable.
19 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The strong performance by the German ZEW confidence indicators led the way to a slight shift in risk appetite yesterday, with a strong day for European equities providing the impetus for Wall St to register gains in the 1% region. A softer reading for US housing starts and building permits was a mild dampener and it may be significant that the S&P failed to regain the 1,000 handle again. The greenback was pulled this way and that – weaker initially after the ZEW data but rebounding back to mid-range by the close following the housing data. One more cloud was the weekly ABC consumer confidence numbers which were below expectations but above last week’s readings. It is still unclear whether they confirm or rebut last week’s Michigan sentiment data.
19 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Stocks could trade lower today as we saw signs of risk-reduction overnight: The JPY is higher, Treasury futures are higher, CDS/Traxx are higher and the AUD is under pressure.
18 August 2009
John J. Hardy, FX Consultant, Saxo Bank
18 August 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The US Producer Price Index came out worse than expected. The 0.9% monthly declines translates into a year-on-year decline of 6.8%. This together with the decline in the core PPI shows that the US is still deflating. Poorer than expected housing starts didn't worry the market as the S&P futures nudged higher despite the news.
18 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Home Depot earnings surprised - reaching 67 cents per share against our estimates of 59 cents. The company saw sales fall by 9% but clawed back on cost cutting. We have increased our earnings estimates for the full year to 145 cents a share, but remain cautious on a long position in this stock until the US housing market shows sustained improvement.
See the whole video comment at www.youtube.com/tradingfloorcom
18 August 2009
Mads Koefoed, Macro Strategist, Saxo Bank
Flat UK CPI figures for July eased immediate fears of deflation in the UK economy.
18 August 2009
Andrew Arnold, Trading Floor Editor
Vestas is maintaining its €7.2bn revenue guidance for the full year, but Christian Blaabjerg from Saxo Bank believes that the Vestas order book isn't strong enough.
18 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Despite better than expected Empire Manufacturing from the US - equities dropped in yesterday's session. This was on the back of a report saying that profit margins in US corporations are weak.
17 August 2009
John J. Hardy, FX Consultant, Saxo Bank
China's equity meltdown sees risk aversion spike. USD and JPY take the rest of the G-10 currencies behind the shed for a lesson.
Move in USD strength now confirmed. A poorly positioned market will be squeezed mercilessly if risk aversion maintains a head of steam.
14 August 2009
Ole S Hansen, Senior Manager, Saxo Bank
Commodity traders spent the week digesting the continued situation with opposing factors pulling the market in both directions. Momentum has been incredible with the strongest stock market rally since 1938 which shows it could go higher, but a word or warning is not out of place.
Deflation concerns have begun to emerge as the US showed the steepest decline in CPI for 60 years. Worries about future inflation will still be a theme for many but for now this is being pushed further and further out.
17 August 2009
David Karsbøl, Chief Economist, Saxo Bank
Stock futures, commodities and HY-bonds are down. JPY and Treasuries are up. Chinese stocks are down 16% over the past two weeks.
- With the failing of Colonial Bank Group and four other banks on Friday, we estimate that the FDIC itself is now insolvent and will have to ask the Treasury for more money.
- US Capacity Utilization increased 0.5% over the reading for June, but the CPI figures continue to prove our deflationary scenario with headline CPI now running at -2.1% YoY.
- Broad-based risk-aversion on Friday: Continuation of strength in treasuries and the JPY. The CRB index was down 3% and stocks went lower on Friday. Also some skepticism in high-yields bonds and AUD.
- The futures are indicating more downside today. Look out for a break below 992 in S&P 500 today.
17 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
In the latter stages of last week we saw increasing evidence that the US consumer was not yet ready to buy into the great recovery story. Following on from Thursday’s disappointing US retail sales numbers, a leading indicator of consumer sentiment, the University of Michigan Confidence Index, also showed disappointing tendencies. Expectations were for an improvement of some three points on the index, from 66.0 to 69.0, but in the end we saw a deterioration of almost the same magnitude, with the index coming in at 63.2.
16 August 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The recession ended in both Germany and France in the second quarter if GDP is used as an indicator.
14 August 2009
David Karsbøl, Chief Economist, Saxo Bank
What a difference half a year makes. From record bearishness at the beginning of March to a perception of a virtual forest of green shoots now. French and German GDP even showed positive QoQ growth for Q2 and US GDP is said to be stabilizing at -1% annualized growth in the same quarter.
Although we believe that stocks can go higher in the short term, we do feel that the current multiples don’t incorporate the massive, macro economic imbalances that still exist. While the consumers are finally deleveraging (fearing job loss and having no home equity), the governments are taking over and continuing the debt issuance like there was no tomorrow.
14 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Chinese equity weakness, US bond strength pressures JPY crosses anew. What happened to the EURUSD sell-off?
USD limps weakly into the weakly close as risk aversion fails to come to its rescue so far...
14 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
- Stocks went higher in the US session despite Retail Sales being somewhat lower than expected. Watch out for a break of 1014, which is the 38.2% Fibonacci Big-Picture Retracement. The risk-reward favors a short position in stocks here.
- Some signs of risk-aversion: JPY strength continues and treasuries perform well in the 30-year auction yesterday: 2.54 Bid-to-cover vs. Avg. 2.08 (Prev. 2.14). At the same time, HY bonds are down the most since 7th of July.
14 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
It was certainly a day of two halves yesterday with early inputs promoting a greater appetite for risk. German, French and EU Q2 GDP numbers all surprised to the upside, with Germany and France posting positive q/q growth and as a result players were content to trade from the long EUR side, hence dragging other major currencies with it to the detriment of the dollar.
13 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Mixed message from the Fed gave the risk trades the green light once again overnight - at least until the ugly US Retail Sales data this morning.
JPY crosses reversing once again on weak US numbers and boost from a fresh US Treasury rally.
13 August 2009
David Karsbøl, Chief Economist, Saxo Bank
- The FOMC decided yesterday to signal a gradual end of Quantitative Easing by October. The USD spiked higher, but ended lower after the release. Treasuries edged higher.
- Our take: This stock market rally has been driven by liquidity stemming from QE. The Fed now believes that we are in a recovery – otherwise they wouldn’t dare to signal an end to QE. The fall and winter will prove whether they are right.
- Pay special attention to the Retail Sales (headline probably boosted by the cash-for-clunkers program) and Business Inventories today. German and E-Z GDP also important.
- Corporate CDS prices have been improving (trending lower) since the beginning of May. The last two days, though, the Itraxx increased by 8%.
13 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
12 August 2009
John J. Hardy, FX Consultant, Saxo Bank
The FOMC statement released today was mostly on the hawkish side of expectations on the surface of the initial statement at least....deeper reading changes the impression somewhat.
12 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Currencies nervous ahead of FOMC meeting. JPY crosses spiked to new lows but have recovered sharply.
What will Bernanke have to say? USD rally pushed back somewhat as market awaits new monetary policy statement.
12 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Saxo Bank has updated its cross asset portfolio and is suggesting four new stocks to short sell: Masco Corp, Renault, ITV and Nippon Paper Group.
12 August 2009
Nick Beecroft, Senior Markets Consultant
Euribor fixings headed lower again today, following a hiatus last week, when the 3-month only fell 0.5bp over the five days, and even rose 0.2bp from Friday to yesterday.
Today, 3-month fell 0.4bp from yesterday. There have been distinct signs that the primary focus of the FX market may be making a fairly seismic shift from its almost complete inverse correlation between the USD and general risk appetite.
12 August 2009
Robin Bagger-Sjöbäck, Research Analyst
12 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Equity markets fell back yesterday on the back of nervousness regarding the FED statement at 18:15 GMT on quantitative easing. We believe in soft wording and no specific guidance.
- Good results from the 3-year auction yesterday. Bid/Cover at 2.89 vs. 2.7 average. No noticeable impact on yields.
- Credit: Moody's downgrades 163 CMBS classes due to Maguire exposure. JPM downgrades MBIA (toxic bond insurer) and states that bank profits won't improve in H2.
- Some signs of risk aversion: Strength in JPY and treasuries, stocks and commodities selling off yesterday. The market is looking for tonight - FOMC statement for guidance on the FED QE program and whether it will continue after Sep/Oct. We believe in 'soft' wording and no specific guidance.
- Stocks will probably trade in a range ahead of the FOMC tonight, but watch out of a break below 992.
12 August 2009
Mads Koefoed, Macro Strategist, Saxo Bank
- US Stock markets retraced a bit yesterday, but did show a remarkable strong rebound after touching the 1000-level. We expect equities to continue surging in the short run. Be aware though that we are still trading at very low volume.
- The JPY rose for a second day yesterday against the EUR on the back of reports showing that the Chinese Industrial output grew less than expected and exports fell.
- Look for wholesale inventories in the US today – this is important.
12 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
With all eyes on the FOMC announcement later today, markets continue to trade with a slight risk aversion undertone. Wall St headed lower and the S&P capitulated under the 1,000 mark for the first time since the beginning of the month. On the data front, US Q2 non-farm production came in better than f/c (+6.4% vs. +5.5%) and labour costs were below expectations (-5.8% vs. -2.5%) but hidden behind the positive headlines is the theme of companies enhancing profitability by slashing costs, at all costs.
11 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Yen comes storming back as US bond market rights itself ahead of tomorrow's FOMC. Key EURUSD level at 1.4100 for short term.
Commodity currencies flailing for support. AUD to drop on metals and equity rout?
11 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The earnings season is coming to an end and economic data releases are also in short supply. However, watch out for wholesale inventories at 14.00 GMT
- US Stock markets retraced a bit yesterday, but did show a remarkable strong rebound after touching the 1000-level. We expect equities to continue surging in the short run. Be aware though that we are still trading at very low volume.
- The JPY rose for a second day yesterday against the EUR on the back of reports showing that the Chinese Industrial output grew less than expected and exports fell.
- Look for wholesale inventories in the US today - this is important.
11 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
With an almost bare data slate overnight, it was left to sentiment, order flows and equity markets to determine FX direction. Wall St corrected some of Friday’s gains, and it looked to be a broader “risk-off” day in the normal manner of things, ie. the dollar gaining as equities softened. GBP was the major under-performer overnight as the last QE expansion from the BOE weighed on the pound. In addition, UK press was particularly negative over the weekend, one piece warning that the UK could witness a “lost decade” of growth, Japan-style. Another piece centred around the BOE’s quarterly inflation report due on Wednesday, suggesting that speculation was increasing that the BOE’s economic growth forecasts would be downgraded. There was further negativity from the Times reporting that Lloyds Banking Group was considering a GBP15-20 bln rights issue to reduce its reliance on the government’s asset protection scheme. All in all, the pound slumped to its lowest level this month. EUR was a touch more hesitant but still failed to hold onto the 1.42 handle while USDCAD rallied as oil prices slid back towards $70.
10 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Key days ahead for USDJPY as FOMC meeting likely to help decide whether rally is overambitious or a sign of more to come.
USD shaking off past behavior as positive employment sees USD strength. EURUSD looking to follow up on correction lower this week?
10 August 2009
Ole S Hansen, Senior Manager, Saxo Bank
Weekly commodity update
Last week several commentators began talking about stock markets being ripe for renewed weakness while risk appetite as seen through currency moves still indicated healthy interest. As the summer begins to fade and traders return to their desks the markets somewhat looks like an accident waiting to happen.
10 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
After Friday's party in equity markets we are heading for a day with profit taking/retracement. We are most likely going to see a retest soon, but we believe this was it.
- US figures on Friday led to optimism after the NFP came out at -247K vs. -325K expected and the Unemployment Rate was at 9.4% vs. 9.6% expected (actually dropping 0.1% since June). However, consumers continued to deleverage - consumer debt decreased by $10.3bn.
- S&P 500 briefly traded above the 1014 level, but closed at 1010.
- Futures prices on the VIX show market expectations of a 13% increase over the next five weeks. Highest since August 2008 - and a danger sign for stocks.
10 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The US non-farm payrolls were the major focus for financial markets on Friday and did not fail to live up to expectations in terms of surprises and impact. Coming in at -247k, the non-farm payrolls numbers was well below market forecasts of -325k (though some had gone even as low as -150k) but more of a surprise was the fall in the unemployment rate to 9.4% from 9.5%. The headline numbers made good reading, recording the smallest contraction since the Lehman collapse in April 2008, with equity and bond markets reacting in a prescribed fashion – Equities higher, bonds lower and US yields pushing up.
07 August 2009
John J. Hardy, FX Consultant, Saxo Bank
US Nonfarm Payrolls and Unemployment Rate surprise to the upside. JPY disappears over a cliff.
Market seems to be tiring of weak USD theme, as the USD initially storms higher despite equity rally and bond sell-off.
07 August 2009
David Karsbøl, Chief Economist, Saxo Bank
As indicated by John, the July figure might be special due to eventual adjustments (and revisions), but the number might also be special in itself, because such a dramatic improvement from the recent trend in labour markets is expected.
07 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Markets are looking towards US job data today and a better reading in Nonfarm Payrolls. We could see a better than expected numbers and this will drive equity markets higher.
- Important triggers today: NFP, Manufacturing Payrolls, Unemployment Rate (also in Canada), German Industrial Production. Especially the NFP will be important due to the “Birth/Death-adjustment” in July.
- News on Treasury Auctions: It has been revealed that the Fed has purchased as much as half the issued treasuries in recent auctions from the Primary dealers only days after the auction. This is extremely worrying and implies that the “good” 7-year auction last week was just as miserable as the failed 5-year auction. BEWARE of long-term rates, if this story grabs a hold in the market.
- S&P 500 still hasn’t tested the 1014 level.
07 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The Bank of England grabbed the headlines yesterday when it surprised markets with a GBP50 bln expansion of its pool of funds available for its asset purchase plan to bring the total to GBP175 bln, GBP25 bln above the previous ceiling. In addition, the Bank gave an extremely dovish assessment of the state of the UK economy, saying the recession was deeper than previously thought. The comments poured cold water on the bullish sentiment that had been building following recent better-than-expected business surveys. The Bank also indicated that weak lending was probably a major factor in the decision, saying that despite easing credit conditions, lending to businesses had fallen and money growth remained weak. GBP was forthrightly knocked off its perch as the “punish the printers” trade re-emerged.
06 August 2009
Robin Bagger-Sjöbäck, Research Analyst
The total loss for ARM’s and Alt-A mortgages could climb to over $1.2 trn by 2012, adding to the estimated $1 trn already lost on subprime mortgages.
After having seen the first wave of delinquencies and foreclosures mostly related to subprime mortgages, option ARM’s and Alt-A mortgages are next in line
06 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Despite interest rate announcements today the most important data release is factory orders from Germany. The whole recovery hypothesis depends on better numbers than the last reading.
- US ADP showing a considerable improvement, but still horrible. ISM Non-Manufacturing out at 46.4 vs. 48 expected - still showing contraction in 8 out of 10 sectors = still recession.
- E-Z Retail Sales showing YoY out at -2.4%. Watch out for German Factory Orders today.
- S&P 500 came back strongly after a sell-off intraday caused by the weak ISM figure. 1014 still important resistance likely to be tested this week.
- EURUSD important resistance at 1.4447. A break could lead to 1.46 in a fairly short time, which would be supportive for gold, silver and oil.
06 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Did we see the first chink in the armour of the recent bull trend yesterday? US data was lukewarm at best but disappointing overall. Non-manufacturing ISM data could not match the euphoria of its manufacturing counterpart and disappointed with a 46.4 reading versus 48.0 expected and 47.0 last. Business activity saw a significant pull back and, perhaps more topical, the unemployment/new orders also edged lower. On the same theme, the ADP employment report prior to that was slightly disappointing, coming in at -371k versus -350k prior though optimists will likely focus on the fact it was the smallest drop since last October.
05 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Average US consumer not feeling the love from risk-happy markets. Dissonance is reaching extreme levels.
Event risk onslaught continues today with US ISM Non-manufacturing number. BoE and ECB on tap tomorrow.
05 August 2009
Macro numbers from Europe and US will direct markets today. Especially Non-farm Manu.fact. Composite and ADP Employment Change. We expect ADP Employment Change to disappoint.
- US Personal Income out at -1.3% MoM in June and -3.4% YoY. Spending still 'sound' at 0.4% MoM.
- Pending Home Sales look positive, but they are driven by the $8,000 tax credit, which runs out at Nov 30.
- S&P 500 edged higher and closed at 1005. Look for 1014 (38.2% Fibonacci).
- Watch out for important US figs today. We expect the ADP to disappoint.
05 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
It was a day for risk bulls to take their foot off the pedal overnight, though the built up momentum kept on rolling along. The performance on Wall St was distinctly muted even though data indicated that the US consumer was showing signs of coming out of his shell. Personal spending exceeded income in June and the savings rate dipped to 4.7% from 6.2% previously, though it was joted that most of the increased spending was driven by rising gasoline prices. Pending home sales also rose a staggering 3.6% m/m compared with expectations of +0.7% yet Wall St only managed marginal gains, and most of those in the closing stages.
04 August 2009
John J. Hardy, FX Consultant, Saxo Bank
Ugly Aussie Retail Sales so far trumping RBA rhetoric and weighing on AUD. Can risk rally survive minefield of event risks for the rest of the week?
GBPUSD tries at 1.7000 barrier. JPY attempting a comeback after yesterday's blowout.
04 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Yesterday we closed above the psychological important 1000-level and despite futures trading a bit lower we are up for another round of surging equity markets on better than expected earnings.
04 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
PMI readings across the board continued to indicate a healthy recovery in the global economy in July. The corresponding rally in equity markets brought the familiar currency correlation back into focus (i.e. the USD and JPY get trashed while the commodity-bloc currencies benefit) and this saw the USD index slide to its lowest levels since September 2008 as the S&P500 mounted the 1,000 mark for the first time since November. Whether we wish to label the latest move as “irrational exuberance” of the beginning of a new era it looks like Friday and the US non-farm payroll data may hold the key.
03 August 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
- US GDP Friday was on the surface better than expected, but far worse if you do some digging into the numbers. The expectation was -1.5% QoQ and the realized was -1.0%. However the prior number was revised lower from -5.5% to -6.4%; and furthermore personal consumption (which amounts to 70% of GDP) dropped to -1.2% from 0.6%. This is not a recovery.
- US banks that have been bailed out are returning the favor by stepping up purchases of Treasuries, helping to temper a rise in borrowing costs (notice the drop in yields). However, this will only be a short term phenomenon as the amount of Treasuries issued in one week amounts to the total liquidity that those banks possess.
- Watch for US macro numbers today and earnings from Barclays and HSBC.
03 August 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
While the headline US GDP numbers for Q2 were above forecast, financial markets were not in over-ebullient mood afterward, with US equities barely making headway on the day. The sharp downward revision in Q1 numbers (to -6.4% from -5.5%) was probably a contributory factor for the additional caution. The USD selling that was spotted (normally associated with a “risk on” mood) was more likely a function of month-end fixing demand and an IMF report on the state of the US economy suggested that the greenback was “moderately overvalued”.
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