Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 11 July 2016 at 11:18 GMT

Mid-session Europe: A bailout for Italian banks?

Saxo Markets


Foreign exchange

European stocks followed their Asian peers into the green today, with Wall Street futures pointing to more green ink stateside. Among the factors boosting markets are last week's strong nonfarm payrolls print, stimulus forecasts for Japanese prime minister Shinzo Abe's new government, and media reports that a bailout is in the offing for troubled Italian banking giant Monte dei Paschi di Siena.

On the flip side, however, bond yields continue to sink lower reflecting the difficulties of a zero or even negative rate environment. In commodities, gold is consolidating following a strong APAC session while crude oil remains under pressure.


  • Canada: Housing starts (1215 GMT)

Forex developments

USDJPY has been the standout pair this morning rallying over 150 pips to above 102.00 on the weekend news that Japanese prime minister Shinzo Abe had won a single-party majority and would begin preparing a stimulus package immediately. USD continued stronger against other pairs as well as US equities approached all-time highs.

FX Options volatilities

The market is pretty tame in most majors, and front end vols are becoming softer. In GBP, the focus is on the Bank of England on Thursday, and options for that day are better bid than on a normal BoE day as the market expect a cut after the Brexit vote. 

In other majors, vols are becoming softer in the front end as well as vega.

Fixed income

Government yields, reflected in both German bunds and US Treasuries, maintain higher levels in price terms despite the stronger jobs report on Friday and the slight increase in the chance of US rate hikes over the coming year. 

The shorter end of the curve is particularly bid and the two-year German yield this morning reached a staggering minus 0.70% – a new all-time low. Credit, which enjoyed a strong session on Friday, is giving up earlier gains on the day to trade unchanged for the session. 




European indices continue to trade higher after a positive APAC session and risk-on sentiment following Friday’s better-than-expected US jobs release.

Steelmakers are rallying today as Thyssenkrupp reported that it was in talks with Tata Steel to consolidate European steel mills that have been hit by weak demand and cheap imports. Thyssenkrupp and ArcelorMital both rallied by between 4.5% and 5%.

Italian financial stocks are also trading higher today as newspapers reported that Atlante, the bank rescue fund, would help Monte dei Paschi with its bad loans.

French aerospace firm Airbus trades up 2.5% on reports of agreeing to a $12.6 billion order with Airasia.

In the UK, shares in housebuilders advanced after falling 30% or more after the Brexit vote; Dixons Carphone fell 2.3% on a broker downgrade by Barclay’s.

Miners received an uplift today as copper prices rallied after recent price weakness. Glencore, Anglo American and Fresnillo rose by 4-5%.

US equity index futures continue today’s positive note with the Street expected to be 0.4% higher at the open.

The replay of our Morning Call can be found here.

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.

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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

Milan A new dawn? Media reports of assistance for bad loan-bedecked Italian bank Monte dei Paschi are seeing the embattled firm's shares on the rise. Photo: iStock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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