- Asian session sees huge selloff in emerging market bonds, assets
- USDIDR, USDMYR rally by between 4% and 5% — Horchani
- US rates, strounger USD 'toxic for emerging markets' — Hardy
- 'We remain bullish Nikkei on USDJPY above 105.50' — Garnry
- Mexican equities continue to bleed after Trump win
- Real estate plunges to lowest levels since crisis
By Michael McKenna
As Saxo Bank head of equity strategy Peter Garnry put it on today’s Global Morning Call, we are now in ”T minus two” – the second day of an America set to be run by none other than Donald John Trump.
The sky, it must be said, has not fallen, and nor has the system. But there have been shocks, skews, and all manner of things that go bump in the night. Regarding the latter, Saxo trader Tareck Horchani reports from Saxo's Singapore trading floor that emerging market assets saw an extraordinary selloff over the Asian session on the back of increasing post-Trump US yields and expectations of stimulus from the president-elect.
“Looking at USDIDR and USDMYR,” says Horchani, “we saw both pairs rally by 4% to 5% with the Indonesian authorities stepping in to sell dollars in the late-morning session in an effort to calm the move.
“A stronger USD and higher US rates are toxic for emerging markets,” emphasises Saxo Bank head of forex strategy John H Hardy, adding that the greenback is only getting greener as markets prepare for the Trump effect to kick in – whatever that may be!
“The only currency that we see coming close to the dollar’s robustness is sterling,” notes Hardy; “this is an interesting flashpoint as the EURGBP rate reflects fears of Europe becoming the next site of a populist backlash.”
The populists cometh? (EURGBP):
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Source: Saxo Bank
Such an eventuality, of course, could easily be prompted by the Italian referendum on December 4, not to mention next year’s French presidential election.
In equities, Garnry reports that financials are on a tear, which Hardy says likely comes down to the deregulation-oriented policy plans of Trump, who while a populist, remains a Republican both in name and on some core issues.
While some measure of the ongoing uncertainty surrounding Trump’s unprecedented victory continues to support gold, the yellow metal is ultimately coming under pressure as real yields rise, says Saxo Bank head of commodities strategy Ole Hansen. Meanwhile, copper has proven the big winner in the commodities space on Chinese speculative demand, but in Hansen’s view it is now “very overbought”.
Aside from the vicissitudes of the dollar and the weight they carry, Hansen reports that crude oil has reverted to Opec as its key driver, as well as production levels outside the cartel.
“Oil is weaker on rising US production and inventories,” says Hansen, and non-Opec production is projected to rise of 500,000 barrels in 2017.
Whether your particular concern this morning is EM currencies, financial stocks, or XAUUSD, the times they are a changing.
It only takes one look at either Facebook, the Guardian or similar to hear all about how it is changing for the worse and towards the destruction of all that is well and good… but here we speak of markets, where change is just change and all manner of transformations have two sides, two aspects, and two possible means of positioning.
The new area has begun.
"It'll be great. We have the best eras. I love eras." Photo: iStock
Editor’s note: From the Floor takes advantage of TradingFloor.com'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