Article / 15 July 2016 at 8:40 GMT

From the Floor: Markets steady after France attack

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  • Very, very minor effect of terrorism on govt bonds – Boye
  • An unsustainable explosion of new credit in China – Hardy
  • US heatwave drives cotton 12.6% higher – Hansen
  • Industrial metals boosted by Chinese data– Hansen
  • S&P500 is trading at 17 times expected earnings – Garnry
By Clare MacCarthy

France has extended a national state of emergency and is mourning her dead after last night's terrorist atrocity in Nice while elsewhere in Europe life continues as normal. Saxo Bank's strategists, speaking on their regular morning conference call, report that markets are largely unaffected by the attack. "We've seen a very, very minor reaction at the opening in government bonds," says Michael Boye of the fixed income trading team. Equities in Europe are narrowly mixed following strong performances in Wall Street and across Asia and airline stocks are predictably lower in response to the terrorist strike.

John J Hardy, Saxo's head of FX strategy, notes that while the economic data that was reported overnight in China revealed a buoyant 6.7% year-on-year economic growth that they also show that this advance is due to "an unsustainable explosion of new credit that puts further pressure on the currrency". The New Zealand dollar crumbled further overnight after the Reserve Bank of New Zealand announced it would release an economic assessment on July 21 just a few days after the Q2 CPI release. "I think we're seeing some trend changes in Kiwi dollar and Aussie dollar," Hardy says, adding that the focus from here is on risk appetite.

US stocks continue their dizzy ascent:
The S&P 500 continued climbing into virgin territory overnight but this dizzying ascent will likely soon grind to a halt. "We're leaning towards a negative view on this index given that it's trading at 17 times expected earnings," says Peter Garnry, head of equity strategy. As illustrated by the chart above, expectations for earnings 12 months ahead are on the rise but in the absence of supportive macro data the upcoming earnings season is likely to disappoint, Garnry forecasts.

In commodities, meanwhile, Ole Hansen, head of commodity strategy, reports that it's been a particularly good week for softs and that cotton was driven 12.6% higher by a heatwave in the USA that threaten's this year's crop. "Coffee continues to be supported by a truckers' strike in Colombia and some of the industrial metals have been boosted by improvements to the Chinese economy," he adds.

Oil, on the other hand, remains exposed to further weakness with a renewed focus on the supply glut in crude. WTI is bouncing off support at $44.50 and in the short term risk is skewed to the downside. Gold is continuing to find support at $1,328 but the risk remains of an extension to key support between $1,313 and $1,298, Hansen says.

Finally, the hottest stock on the block overnight was the messaging app Line which made its debut in Tokyo after a book building process that saw heavy demand. The stock closed 37% higher in Tokyo having been as high as 52% above the opening price in a stunning display of strength and optimism. Go message that!
 Shares of messaging app Line soared 50% after their Tokyo debut. Photo: iStock


Clare MacCarthy is deputy editor at

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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