Article / 16 September 2016 at 8:00 GMT

From the Floor: Markets celebrate US retail slump

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  • US retail sales negative for second month in a row
  • Markets celebrate with massive risk-on move — Hardy
  • Implications for FOMC meeting next week on rate hike 
  • Bank of Japan directional split strengthens yen — Hardy
  • Clinton's health poses "one-off risk" to markets — Hardy
  • Long Nikkei still in play despite last Friday's selloff — Garnry


By Martin O'Rourke

Like it's 1999

A sparsely populated Morning Call Friday perhaps says something about the current torpor gripping markets ahead of the pivotal central bank meetings in the US and Japan on September 21, but there was a return of some risk-on after a second consecutive monthly disappointment in US retail sales.

"The retail sales was a lot weaker than expected and down for the second month in-a-row," says John J Hardy, Saxo Bank's head of forex strategy. "Markets love bad news because they think this means there is less chance of a rate hike when the Federal Open Market Committee meets next week."

"The thing that markets most fear is unaccommodative central banks."

The 1999-style party move rather puts in context our somewhat scathing criticisms of the Shanghai Composite's Index propensity for reacting to bad news with a surge and vice versa as the same affliction seems to be engulfing more mature markets that really ought to know better.

The Bank of Japan meanwhile enters the final lap before its key meeting on Wednesday seemingly split over future direction, if the Wall Street Journal is to be believed.

"In policy terms, some are looking for a change of policy direction especially on bonds purchases as to whether they should continue as is, whether they should establish a range or whether they should establish a yield target," says Saxo's forex chief. "We're clearly at an inflection point on the BoJ and the yen is stronger on the suggestion that they are not going to do anything notably new on the easing or on the rate front next Wednesday."

USDJPY was at 101.92 at 0655 GMT.

Hardy is clearly not over-enamoured with the state of markets heading into next Wednesday but spots an interesting development in AUDUSD in the wake of this week's not so stellar Australian jobs report.

"This big tumble off the highs still leaves us in the ranges of the lines of consolidation but there is decent momentum here for a test of the downside lines which could set in motion a bearish market," says Hardy. "If we do see a break, it will probably be over the central bank meetings on Wednesday."

AUDUSD could be heading towards a bearish market

 Source: SaxoTraderGO

Clinton's health

It's not exactly in the mainstream, despite that dizzy turn that felled Democrat presidential nominee Hillary Clinton last Sunday, but if ill health continues to plague her, the consequences could be profound, says Hardy.

"I really wouldn't be surprised if there is another incident with Clinton's health and this would have serious implications with profound one-off consequences for risk appetite," he says. "She could be forced to step down if the Democratic Party has to struggle to find a new candidate."

Clinton resumed the campaign trail Friday but a diagnosis of pneumonia will no doubt focus the spotlight firmly on the Democrat candidate and any further health scares would dim her prospects of winning November's election significantly.

Equities rollercoaster

Saxo Bank's head of equities strategy Peter Garnry was able to deliver on his S&P 500 view Thursday that we covered here and he is once again trained on the Nikkei which, he says, has underperformed in 2016.

"We were long Nikkei before the selloff last Friday and with a Fed rate hike likely out of the picture next week, the BoJ may move," says Garnry. "We really like to be long Japanese equities with more limited downside against the upside potential if the BoJ sends the right signals to help a reversal in Japanese fortunes."

"We really like it but bear in mind the BoJ meeting next week."

And finally...

Garnry also likes Dutch insurance giant Aegon which carries a 7.7% dividend yield and generates €1.2 billion in net profit.

"This yield is not at risk of being cut so this is possibly the most attractive large cap dividend in the market," he say. "We should be aggressive here."

Garny is setting a stop loss at €2.90 and looking for a target of €5.

Hillary Clinton's stage for now, but another health calamity could cause chaos. Photo: iStock

Martin O’Rourke is managing 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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