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#SaxoStrats
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Morning Call: Chinese shares fall further
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11 September 2018 at 8:36 GMT
11:34
Morning Call: USD, SEK in focus
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10 September 2018 at 7:49 GMT
2:47
The week ahead in macro
Kay Van-Petersen
10 September 2018 at 7:37 GMT
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Morning Call: Is Japan next?
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07 September 2018 at 7:35 GMT
Video / 20 March 2018 at 8:42 GMT

From the Floor: GBP rallies limply, tech stocks crumble – #SaxoStrats

#SaxoStrats
  • USD edges back lower ahead of tomorrow’s FOMC
  • GBP: Rally attempt on Brexit transition deal agreement 
  • Key days ahead for GBP as EU summit looms
  • Expect weak CHF and strong sterling if GBP survives next few days
  • Tech stocks fell 2.2%, led by scandal-hit Facebook
  • We're still quite defensive and cautious on equities
  • The hashtag #deletefacebook is spreading rapidly
  • Crude oil breaking higher but upside potential limited
  • Gold awaits FOMC outcome with a dovish hike looming
  • Grains and soybeans remain troubled following buying spree 
strats
 
By Clare MacCarthy

News that the EU and the UK had agreed a 21-month Brexit transition deal propelled sterling higher yesterday but some gains were subsequently lost as doubts crept in. Sterling faces a difficult week between today's CPI, tomorrow's Bank of England meeting and the EU summit in Brussels on Thursday and Friday. "Expect a weak Swiss franc and a strong sterling if the pound survives the next few days," says John Hardy, Saxo's head of FX strategy. 

Meanwhile, the US dollar has edged back lower ahead of tomorrow's Federal Open Market Committee meeting, with markets almost 100% certain that a rate hike will be announced. "I'm not sure what the driver is here, of course we don't know what Powell is going to say, but my general stance is that he's not going to want to be very specific on guidance. So while the market is discussing whether we'll see two, three or four hikes [this year] I think Powell won't want to be tied down to too explicit a forward guidance. The takeaway will be on intangibles – his demeanour, his stance and his answers in the Q&A," Hardy says.

chart
 Source: Saxo Bank

In equities, meanwhile, the story of the week (and probably longer) is the technology shakedown which saw the Nasdaq 100 fall 2.2% yesterday, driven by Facebook, which is under scrutiny because of the Cambridge Analytics data misuse allegations. "Facebook shares fell 7% and the hashtag #deletefacbook is spreading rapidly on the internet. This has the potential to have a severe impact on engagement numbers," warns Peter Garnry, Saxo's head of equity strategy.

In commodities, "we're seeing a bit of a two-way market with crude oil trying to break to the upside and industrial metals looking heavy to the downside," says Ole Hansen, Saxo's head of commodity strategy. Crude’s breakout attempt is supported by high Opec compliance on tumbling Venezuelan production and Middle East security concerns (Saudi Arabia vs Iran and US sanctions return). Against it is the rising risk of a demand growth-killing trade war, weaker stocks and rising US stocks, Hansen says.

Finally today, in precious metals, the tech rout has paused the gold and silver selling we've seen the past few days in the run-up to the Fed meeting. But there's no end yet to the problems of grains and soybeans which remain troubled after their recent protracted buying spree.

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