Video /
12 July 2017 at 7:45 GMT
From the Floor: Snap plunges 9% to all-time lows — #SaxoStrats
#SaxoStrats • Snap shares plunge as product developing slower than expected
Crude oil prices rallied sharply Tuesday on the back of news that US production is on the wane with the Energy Information Administration shifting its 2018 production forecasts below 10 million barrels/day.
• 'The whole US tech sector remains overvalued': Garnry
• Chinese banks head higher as regulator says risk under control
• German 10-year yield spikes north of 60 bps as Merkel calls for ECB tightening
• Crude oil rallies sharply on US inventories, production data
• Fed chair Yellen's testimony to be released at 1230 CET
By Michael McKenna
Shares of Snap Inc. closed just south of the $16/share mark, a new all-time low, as the firm was downgraded by its own underwriter Morgan Stanley on fears that its products are not developing as fast as was expected in light of competition from the likes of Facebook-owned Instagram.
Nonetheless, says Saxo Bank head of equity strategy Peter Garnry, Snap Inc. still retains the largest share of the youth social media market. Ultimately, however, Garnry feels that "the whole sector remains overvalued".
Elsewhere in equities, Chinese bank shares are headed higher after a regulator came out saying that sectoral risk is under control. According to Garnry, Chinese financials have been underperforming since early 2016 and Saxo's quant model ranks the highly at this juncture.
The big news today has to be Federal Reserve chair Janet Yellen's testimony before the US Congress. Her testimony begins at 1400 GMT but will be released 90 minutes prior at 1230 GMT. Yellen's speech comes as a media scandal surrounding Donald Trump, Jr.'s pre-election meeting with a Russian lawyer who apparently promised to produce incriminating "dirt" on Democratic candidate Hillary Clinton.
While the developing scandal has spurred many a headline from the US media, whose largest outlets near-unilaterally supported Clinton's presidential bid, Saxo Bank head of forex strategy John J Hardy says that there appears to be "very little meat on the bone" in terms of actual, criminal materials, with Garnry adding that the main risk here is that such scandals may further inhibit the Trump administration's ability tio push through growth-friendly policy shifts.
Also up today is the Bank of Canada at 1400 GMT, where an interest rate hike is broadly expected and, according to Hardy, very much priced in to the current USDCAD rate of 1.2908.
Create your own charts with SaxoTraderGO click here to learn more
Source: Saxo Bank
Singapore-based Saxo trader Tareck Horchani reports that the USD selloff continued in Asia, with equity inflows in Taiwan and Thailand, as well, potentially, as the political turmoil in D.C., contributing to the decline.
In Hardy's view, as well as that of Saxo Bank fixed income trader Michael Boye, however, markets remain "fairly complacent" about the impact of future Fed policy shifts to the hawkish side.
Crude oil prices rallied sharply Tuesday on the back of news that US production is on the wane with the Energy Information Administration shifting its 2018 production forecasts below 10 million barrels/day.
The American petroleum Institute was also out Tuesday with news of an 8.1m barrel inventories decline. While Saudi production is set to exceed the Opec/'Nopec' cap in July, Saxo Bank head of commodity strategy Ole Hansen says that the impact will likely be fairly contained as the rise comes mainly due to increased domestic consumption.
Beyond oil, precious metals are tracking risk sentiment broadly with Hansen reporting that a gold break above $1,230/oz or a silver rally past $16.20/oz could send the signal that the selloff has failed.
All in all, however, prices and the investors who animate their movements are largely waiting for Yellen.
Finally, Boye reports that German chancellor Merkel was out putting pressure on the European Central bank to tighten policy in what he terms an exceedingly rare move from the German leader. Ten-year bund yields, he adds, spiked past 60+ basis points for the first time since 2015 as the market priced a new 10-year issue.
And now to Washington... Photo: Shutterstock
Michael McKenna is an editor at Saxo Bank