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From the Floor: 'Economy can only disappoint from here' — #SaxoStrats

#SaxoStrats
   • Dollar 'quite resilient' after poor nonfarm payrolls release: Hardy
   • Airliners, property shares show strength in China, Hong Kong
   • Economic surprise index at 14-year high, mean-reversion in focus
   • COT data show funds piling into commodities in week to January 2
   • Energy shares move higher as oil prices climb: Garnry

SaxoStrats
By Michael McKenna

Saxo Bank head of equity strategy Peter Garnry thinks macro data are set for a correction, and last week's poor nonfarm payrolls and ISM non-manufacturing releases from the US could represent the start of such a move.

"We are seeing the Citi economic surprise index at 14-year highs," says Garnry, "and this index has a strong tendency to mean-revert. In our view, we can't do any better [in a macro data sense] than right now, so the economy can only disappoint from here".

Garnry qualifies his statement by noting that he remains "on the bandwagon" for now, stating that he is currently "positive on equities.... but only in the very, very short-term".

Today's Asian session saw last week's momentum weaken in Hong Kong with financials turning lower; property shares and airliners remained supported, however, with Garnry reporting that the latter comes on the back of a Chinese decision to allow air travel firms greater latitude in setting fares.

In FX, Saxo head of forex strategy John J Hardy points to notable resilience in USD following Friday's underwhelming jobs release, stating that a buoyant greenback is this week's pain trade with 1.20 and 1.1950 in focus for EURUSD.

"My favourite trade on dollar strength, however, is short AUDUSD," says Saxo's forex chief.

Time for the Aussie to turn over?
AUDUSD

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Source: Saxo Bank

Saxo head of commodity strategy Ole Hansen reports that the sector is seeing some bullish activity into 2018 with the latest COT data showing hedge funds piling into 21 of 26 tracked commodities in the week to January 2; the largest such flows were seen in natural gas, gold, silver, wheat, and sugar.

While gold prices look healthy above $1,300/oz, however, Hansen warns traders not to "chase" the precious metal higher.

Finally, WTI crude oil has held the $61/barrel line on a lower US rig count but Hansen notes that funds are selling into the rally. 

For more on metals, the euro, equity momentum, and more, watch today's Morning Call in its entirety via the video link above.

China Eastern Airlines
A China Eastern Airlines A330 waits at Frankfurt International: New latitude for fare-setting has boosted Chinese airline shares into this week. Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank

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