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Video / 19 October 2017 at 7:28 GMT

From the Floor: Equities strong, Dax bias 'still to the upside'

   • GBP facing headline risks out of European Union summit
   • NZD sharply lower as NZ First backs Labour party
   • Unilever, Nestle Q3s show low organic growth in retail
   • 'The 13,036.50 level is key for the Dax': Garnry
   • Kurdish conflict cuts Northern Iraq oil supplies by more than 50%

By Michael McKenna

Brexit may not be the biggest talking point at the European Union summit today in Brussels, but it could be the largest mover of FX markets as sterling remains sensitive with EURGBP trading at the 0.8950 area after the European bell.

Overnight, the largest mover in FX markets was the New Zealand dollar on news that NZ First leader Winston Peters has announced he will form a government with Labour. According to Saxo Bank head of forex strategy John J Hardy, the coalition could see NZ First extracting some anti-immigration (and growth-negative) concessions from Labour while the latter seeks to impose a Federal Reserve-style "dual mandate" on the Reserve Bank of New Zealand.

The Japanese yen and the Swiss franc are both showing degrees of tradeable weakness as well with hardy noting that the 113.00 level is most key for USDJPY, and 0.9825 for USDCHF.


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Source: Saxo Bank 

The German Dax index has opened marginally lower today but remains north of they key 13,000 area with Saxo Bank head of equity strategy Peter Garnry noting that "13,056.50" is the key level.

"I think the bias is till to the upside for the Dax," says Garnry.

In earnings, Garnry reports that Uniliver's third quarter disappointed while Nestle's results came out in line with expectations.

Both firms' results show expectations of 2.5% year-on-year growth, and both reflect low organic growth in retail, according to Garnry.

IBM shares rose by 9% after the electronics giant offered its first growth outlook in five years with the firm stating that Q4 revenue is projected at $22 billion to $22.1 bn, representing as much as a 1.5% gain over 2016.

In Garnry's view, however, IBM is still not especially promising from a business perspective with Saxo's equities head adding that the bank's in-house quant model remains negative on IBM shares.

Headlines out of Northern Iraq continue to sway oil markets as clashes between Iraqi federal forces and Kurdish troops have now cut supplies from the region to Turkey's Ceyhan port from 600,000 barrels/day to 240,000 b/d.

In Saxo Bank head of commodity strategy Ole Hansen's view, the cutback is a drop in the bucket from a global perspective but the headline risk may represent the return of a risk premium to oil markets.

For more on equities, oil inventories, gold, the Chinese yuan, and more, watch today's Morning Call in full above.

The ancient castle at Kirkuk: Clashes between Iraqi forces and Kurdish militias are boosting oil despite ultimately minimal supply cuts. Photo: serkan senturk /

Michael McKenna is senior editor at Saxo Bank


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