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Video / 15 November 2017 at 8:55 GMT

From the Floor: Risk rising, EM bond yields spike — #SaxoStrats

   • Risk factors rise, equities and junk bonds lower
   • Euro up on strong German GDP release
   • Aussie dollar struggles on weak wage growth
   • Venezuela, South Africa, Zimbabwe sink EM bonds
   • Weak Swedish and Norwegian data impact currencies

By Michael McKenna

Equities sold off with commodities overnight while junk bonds are also feeling the pinch as risk assets retreat, reports Saxo Bank head of forex strategy John J Hardy.

The euro, meanwhile, is gaining ground on a strong German GDP beat Tuesday (0.8% quarterly growth versus 0.6% expected). In hardy's view, the pair to watch here is EURAUD as the Australian dollar is struggling on pallid wage growth.

"The downtrend in EURUSD also appears to be done," says Hardy, adding that the 113.00 level in USDJPY could be "the next shoe to drop" in the G3 space.


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Source: Saxo Bank 

Geopolitical risks are also on the rise, particularly in the emerging markets space where Saxo Bank global sales trading manager Althea Spinozzi points to the coup in Zimbabwe, continued (and related) unrest in South Africa, and the Venezuelan default as three major factors weighing down EM bonds.

"European core bonds, however, are higher amidst strong macro data," adds Spinozzi.

Finally, Hardy reports that the SEK and NOK are "imploding" after a disappointing CPI release out of Stockholm and poor GDP figures out of Oslo.

For more on the risk climate, EM bonds, and the developing situation in Saudi Arabia, listen to today's morning call in full via the link above.

Harare, Zimbabwe
   The Zimbabwean capital of Harare is now under direct military control. Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank
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