By Michael McKenna
Reporting from Saxo Bank's Singapore trading floor on today's Global Morning Call
, trader Edmund Liu says that Monday's Asian session was "mixed" as slumping crude oil prices and gaming industry fears sent energy and casino-related stocks lower.
"Australia's S&P ASX200 index was the biggest loser on the day, tumbling 0.83% on energy sector weakness and a slump in gaming shares that occurred in the wake of Australian casino operator Crown Resorts' shares losing 13.90% of their value."
Eighteen Crown Resorts staffers were detained in China for reasons that have not yet been made clear, although the market's interpretation is clearly that Beijing is cracking down on overseas gambling.
"Meanwhile," continued Liu, "oil continued to retrace its recent gains following Friday's Baker Hughes rig count release showed a gain to 539 from 524 rigs in operation".
In Thailand, Liu says that today's session saw only a "muted" reaction in the Thai baht after the currency rallied Friday in the wake of King Bhumibol Adulyadej's death.
In forex markets, Liu tells us that the USD continues to hold firm with Federal Reserve speakers broadly talking up the December rate hike narrative, with chair Janet Yellen's Friday remarks about the dangers of continued policy accomodation providing support.
The dollar's strength saw it rise against the Japanese yen, where Saxo Bank head of equity strategy Peter Garnry says an upside breakout could be primed to occur if and when the pair clears key resistance just south of the 105.00 handle.
The rise and breakout potential seen in USDJPY is matched by a similar trend on the Nikkei 225 index, reports Garnry, where prices appear to be basing ahead of a surge past 17,000 and beyond. Stating that he remains largely bullish on Japanese stocks, Garnry adds that exporters are a sector where he sees particular value.
Breakout in view?
Create your own charts with SaxoTraderGO click here to learn more
Source: Saxo Bank
Beyond Japan, Garnry notes that we have a big week ahead of in terms of US earnings with Bank of America and IBM up today (the former at 1245 GMT, the latter after the New York closing bell).
"For BoA, forecasters are calling for a drop in earnings-per-share of around 3%," says Garnry; "but I think this is overly pessimistic."
According to Garnry, "I suspect we will see a surprise in terms of positive growth driven by the fixed segment – as we saw with JPMorgan – and improvements in commercial banking."
Garnry also says that he sees the firming prospects of at least one 2016 Fed rate hike as boosting financials as we head into 2017. Ultimately, however, he reiterates that "we are only slightly bullish on equities" citing "vulnerability to shocks."
In Europe, core yields are climbing ahead of Thursday's European Central Bank meeting where Saxo fixed income trader Michael Boye says he expects no policy changes but foresees a "great deal of questioning regarding [the potential for an asset-purchase programme] taper".
As has become the norm, then, markets remain dependent on forecasts of policy changes from the world's major central banks, with divergence and differentials powering equities and currencies alike.
With the odds of a Fed hike growing, and the US economy apparently seen as able to absorb such a move, we may soon return to a global macro landscape that features at least a few small fledgling hawks among the glut of policy doves.
"Widespread monetary easing cannot go on forever!" Photo: iStock
Editor’s note: From the Floor takes advantage of TradingFloor.com'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.