Show less
Morning Call: Softer dollar boosts commodities, stocks
21 September 2018 at 7:40 GMT
Morning Call: Markets stabilise as trade tensions ease
20 September 2018 at 8:28 GMT
Morning Call: Chinese shares surge as trade war rages on
19 September 2018 at 8:36 GMT
Today’s FX chart analysis - video
John J Hardy
18 September 2018 at 10:28 GMT
Morning Call: Trump hits China with tariff plan
18 September 2018 at 7:29 GMT
The week ahead in macro
Kay Van-Petersen
17 September 2018 at 8:11 GMT
Macro Monday week 38: Keep Global Macro and Carry On
Kay Van-Petersen
17 September 2018 at 8:02 GMT
Morning Call: US yield curve lifts, boosting dollar
17 September 2018 at 7:23 GMT
Technical analysis webinar – A view of the market: Larsson
Kim Cramer Larsson
12 September 2018 at 14:44 GMT
Morning Call: Chinese shares fall further
11 September 2018 at 8:36 GMT
Morning Call: USD, SEK in focus
10 September 2018 at 7:49 GMT
The week ahead in macro
Kay Van-Petersen
10 September 2018 at 7:37 GMT
Morning Call: Is Japan next?
07 September 2018 at 7:35 GMT
Video / 12 December 2016 at 8:29 GMT

From the Floor: China sells off as crude surges — #SaxoStrats

   • Further production cut talk sees WTI crude gain 5% to $54.50/barrel
   • Eleven non-Opec nations, including Mexico and Russia, agree to cuts
   • Total production decrease adds up to 558,000 barrels/day: Moltke-Leth
   • 'This could take 1.8m b/d off the market in H1'17': Hansen
   • Chinese equities sell off as forward yield curve shifts dramatically
   • Shenzhen Composite loses nearly 4.8% of its value in one session
   • Chinese 1-year yields surge by 10 bps to 2.6%
   • USDJPY breaching key level pre-European open: Hardy

By Michael McKenna

European bourses are opening in the green this morning on a risk-on surge linked to the production cut-spurred rally in crude oil. Chinese shares, however, were unable to take part in the rally that saw WTI gain 5% to $54.50/barrel proved unable to halt the largest stocks selloff in six months for mainland exchanges.

The bearish shift, which left the Shanghai Composite down by just shy of 2.5% and the Shenzhen Composite down by nearly 4.8%, came on a variety of factors, most notably a shift in the forward yield curve, a crackdown on equity purchases by insurance firms, and concerns over the outlook for the mainland property market.

“The last time we saw such a shift in the Chinese forward yield curve was in August of 2015,” says Saxo Bank Global Sales head Christoffer Moltke-Leth, adding that “one-year yields surged 10 basis points to 2.6%” as inflation expectations rose.

Beyond the massacre seen in Chinese shares, however, the phenomenal rally put in by crude oil following the announcement of a production cut agreement by 11 non-Opec nations boosted risk sentiment into the European open even as Asian shares remained bradly lower on Chinese contagion.

“The cuts announced today will see a 558,000 barrel/day reduction in oil output, says Moltke-leth, with Saxo Bank head of commodity strategy Ole Hansen adding that the cuts could “take 1.8 million b/d off the market in the first half of 2017”.

Hedge funds, says Hansen, bought 81,000 lots of WTI crude futures in the week ending December 6, an increase mainly spurred by short-covering.

Additionally, notes Saxo bank’s head of commodity strategy, the US rig count rose to the highest level since January last week as US shale producers continue to respond to rising crude prices.

In FX markets, reports Saxo Bank head of forex strategy John J Hardy, the oil rally saw AUDCAD dramatically give way in the wake of Hardy’s December 2 statement that the pair would be an interesting candidate for those looking to trade the oil trend while avoiding the USD strength that continues to weigh on USDCAD.

Elsewhere, says Hardy, today’s European open saw traders push USDJPY determinedly higher (the pair is now trading around the 115.87 level, just shy of the 116.00 Big Figure).


Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank

EURUSD is another pair, adds Hardy, that could be entering a key pivot area as the benchmark pair’s trendline continues to point to the 1.05 area ahead of this week’s Federal Open Market Committee meeting.

With the US dollar remaining very strong into Wednesday’s meeting, where a 25 bps interest rate hike is widely expected, Ole Hansen reports that gold is under pressure.

“The positive risk sentiment is another factor weighing down XAUUSD,” adds Hansen.

Finally, Saxo Bank’s commodities head tells us that the cotton net-long position has reached a record high on temporary Indian supply concerns while John Hardy points to a thin data calendar ahead of the Wednesday FOMC session, with Tuesday’s Swedish and UK CPI prints the main items of note.

Was today's Shanghai selloff just the beginning of a larger rout? Photo: iStock

Michael McKenna is an editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail