Article / 10 October 2016 at 8:28 GMT

From the Floor: Battered Trump bounces off the ropes — #SaxoStrats

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  • Trump earns hard-fought draw with Clinton in second presidential debate
  • USDMXN proxy returns above the 19.0 handle after debate — Van-Petersen
  • Oil hits the buffers after rejection at $52.80/b — Hansen
  • Iraq refuses to play ball with Saudis on production — Hansen
  • Gold looking for boost from returning Chinese — Hansen
  • Luxury sector could face challenging quarter — Garnry

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By Martin O'Rourke

Proxy this

In this strangest of years, Donald Trump once again demonstrated, if nothing else, his durability to emerge from the second US presidential debate snarling and kicking his way to a hard-fought draw with Democrat rival Hillary Clinton.

While that assessment might not fit with the narrative, the Republican nominee's gloves-off-battle with Clinton has probably gone some way to moving the agenda on from Friday's shockingly misogynistic tape recording of Trump at his bantering 'best' — at least that is until the next wave of revelations emerge of which, it is reported, there are more to come.

The evidence? That proxy for his electoral fortunes, USDMXN, actually re-established ground above the 19.0 handle during the Asia session after losing some 3% as Trump's cavalier attitude towards women was unveiled for all to see.

"USDMXN got to a low of about 18.91 on the back of those skeletons which has led to him losing a lot of endorsements from key republican figures like John McCain," says Saxo Bank's Asia macro strategist Kay Van-Petersen, speaking on daily global morning call. "While a lot of people might feel that last Friday's revelations are the final nail in the coffin of Trump, USDMXN actually managed to spike back above the 19.0 handle."

USDMXN might be some way from the all-time highs of just under 20.0 last month at the time of Clinton's health scare and Trump's team will no doubt be checking through the closet thoroughly in a perhaps pointless damage-limitation exercise, but van-Petersen still sees the currency pair as a short.

This time last year, USDMXN was just under 17.0 and two years ago, was below 14.0.

USDMXN rises above the 19.0 handle after the second US presidential debate
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Source: Bloomberg

Oil ceiling

Oil hit the buffers over the weekend after European benchmark Brent crude came up against a $52.80/barrel ceiling that proved to be as immovable as an irascible republican candidate who does not know when he is beaten after Iraq indicated it will be ramping up production for the rest of the year and into 2017.

"Iraq is Opec's second largest producer and this announcement has to raise question marks as to whether the deal struck in Algiers can be seen through," says Saxo Bank's head of equities strategy Ole Hansen. "Both Iran and Iraq have both indicated they are not attending this week's energy talks meeting in Istanbul and Russia also played down the deal so all of this is adding pressure on Saudi Arabia."

Brent crude's reversal at the June high of $52.80/b could usher in a fresh downside attack on $50/b, says Hansen, especially as the US rigs count also jumped to an eight-month high on Friday.

"Oil has hit a brick wall," the commodities chief said and with funds increasing the WTI oil net-long to a 17-month high in the wake of the Algiers deal, the return of the gross long to territory last seen in July 2014 before the oil selloff began speaks volumes.

Brent crude rebuffed at $52.80/bd




Source: Bloomberg

Gold is another undergoing a shift in its long position although on this occasion, it is the longs being cut by 22% in the wake of the break of $1,300/oz last week. That is still 32% above the May correction low, Hansen points out.

"Gold has actually suffered in the last two years during China's Golden Week and with Chinese buyers back in the market today, it will be interesting to see if we get a revival on the back of Chinese demand," says Hansen.

Red-hot Samsung

Now red hot usually signifies good news on the markets for any publicly-listed company but for beleaguered Samsung, the propensity of its Galaxy Note 7 model to catch fire is raising the possibility of a second recall.

Samsung, which already has a significant proportion of its goods sitting on Hanjin ships waiting to be unloaded while the South Korean shipper tries to worm its way through an insolvency maze, subsequently slipped 3% overnight and, with the likes of ATT and T-Mobile no longer taking the Galaxy Note 7, reports van-Petersen, it's threatening to be a very messy end of the year for Samsung with Christmas just around the corner.

Earnings season for Q3, meanwhile, kicks off this week and Saxo Bank's head of equities strategy Peter Garnry, is once again focused on the banking sector, despite having been stopped out on Wells Fargo and Bank of America. This time it's JP Morgan with his stop set further out.

Among those reporting this week are Alcoa, Delta Airline and Christine Dior. Garnry is somewhat nonplussed at the positivity around Dior's statement later this week and feels that the "luxury segment won't be that strong."

And finally....

Prodigal child of the global equities scene, the Shanghai Composite Index, barged its way back onto the stage Monday for a 1.45% rise as it plays catch up with the Hang Seng Index.

"The Hang Seng index has been driven by flows from the mainland," says Van-Petersen.
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Trump in the battle still — just. Photo: iStock

Martin O'Rourke is managing editor at Saxo Bank

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