Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 30 June 2016 at 8:06 GMT

From the Floor: How high can a dead cat bounce?

Your Next Trade
  • Asian stocks continue to rally: Van-Petersen
  • USDCHF 'trying to turn around': Hardy
  • FTSE 100 back to pre-Brexit levels
  • Gold retreats, gap to platinum widens
  • German 10-year bund yield remains negative
  • USDA acreage report out at 1800 CET

From the Floor
By Michael McKenna

Today's morning call began with a word from Singapore-based Saxo macro strategist Kay Van-Petersen, who had one question for the continued post-Brexit rally in regional equities and global assets in general:

"Is it window-dressing?"

According to Saxo Bank head of equity strategy Peter Garnry, while the FTSE 100 has regained the entirety of its post-referendum losses, the MSCI World index is only halfway to the same point. nevertheless, says Garnry, "it's probably time for a pause" in the dramatic recovery uptick.

Beyond Van-Petersen's most essential of questions, there remain several queries on traders' minds concerning month- and quarter-end flows, as well as ongoing concerns regarding macro data. Essentially, the receding of Britain's shock vote will eventually lead the market to a renewed focus on fundamentals, and Saxo's strategy team continues to wonder just how much support the upcoming suite of figures will provide.

Tomorrow, says Van-Petersen, will be a big one for macro mavens as a suite of PMI releases – perhaps most notably from China and the US – will provide direction in a market tiring of political slings and arrows.

In China, forecasters expect a reading of 50 versus 50.1 previously while in the US, the ISM figure is expected to come in at 51.3.

Overall, says Saxo Bank head of forex strategy John J Hardy, today's markets reflect a "very confusing set of circumstances." On the one hand, he says, investors appear to be limiting the Brexit fallot to sterling and the euro, signalling that this is very much a "case-specific issue".

On the other, he adds, you have the counter-signal of low sovereign bond yields.

On that front, Saxo fixed income trader Michael Boye points out that the 10-year german bund yields remains negative at minus 0.11%. According to Boye, a broad anticipation of central bank intervention is evident in bond markets and core yields across the EU and US remain low.

One trade Boye is watching, however, concerns RBS subordinated bonds; "the Brexit is not a solvency risk for UK banks," he adds.

(For more on that trade, keep an eye on today's SaxoStrats feed on

Given the varied and unpredictable landscape, traders are attemtping to focus their attentions on those trades that most accurately reflect both sentiment and the underlying fundamentals, as certain instruments – cable, for one – remain clouded by headlines and sudden changes in the current.

In forex, Hardy tells us that he will be keeping an eye on USDCHF, which he says is "approaching interesting resistance". 

"The Swiss franc's safe-haven status is beginning to erode," says Hardy, "and this pair appears to be trying to turn around."


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Source: Saxo Bank 

In stocks, Garnry tells us that he is looking at French industrial concern Lafarge on an expected improvement in EBITDA. "I think Lafarge's valuation looks solid after the recent selloff", he notes, adding that Saxo's equities desk has added Barclay's, Rightmove, Diageo, Auto Trader, and a speculative play in Betsson to its portfolio.

In the midst of this eerie procession of undead bouncing cats, Saxo Bank commodities head Ole Hansen informs us that gold is predictably on the back foot, but not only because of the apparent reversal of sentiment post-Brexit.

"Gold interest is quieting as the asset is challenged by the record speculative long position," says Hansen, adding that India may slash its gold imports to a seven-year low.

Outperforming XAU is platinum, he notes, pointing to a wide spread and the fact that the metal has only retraced 38.2% of its May selloff. 

"$1,022/oz and $1,292 are the key levels to watch here," concludes Hansen.

Finally, agricultural commodity traders are waiting the USDA acreage report at 1800 CET today, where the agricultural board is expected to allocate 83.9 million acres to soybeans (versus 82.2m previously) and 92.8m acres to corn (versus 93.6 previously).

For a trader seeking to exit the post-Brexit world of deafening headlines, journalistic hyperbole, political subterfuge, and outright partisan dishonesty, perhaps an evening spent in the world of US corn traders might be a suitable refuge.

That or a single malt whisky. Your call.

In our times
"Provisions of Article 50, you say? Let's have another." 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. 


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