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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 / 21 December 2016 at 12:20 GMT

Mid-session Europe: Spanish banks slump as EU ruling rolls in

Saxo Markets
Denmark

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Foreign exchange

Forex
 
Banking stocks have led European exchanges mildly lower on low volumes this morning despite the record highs set during Wall Street's Tuesday session. In terms of central bank news, Sweden's Riksbank has left its key rate unchanged at minus 0.5% while expanding the scope of its quantitative easing programme by SEK30 billion for another six months.

Despite the dovish outing, however, the SEK rallied against a weak euro.

Spanish banks headed lower today on news of a European Union court ruling in favour of mortgage borrowers that could see billions of euros worth of payouts from lenders; meanwhile, Rome received parliamentary approval for a €20bn debt-boosting plan for that country's troubled financial sector.

Watchlist

  • US MBA Mortgage Applications (1200 GMT) 
  • US November Existing Home Sales (5.5M expected, 1500 GMT) 
  • Eurozone December Adv. Consumer Confidence (minus 6.0 expected, 1500 GMT) 
  • US Weekly DOE Crude Oil Inventories (1530 GMT) 
    
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Forex developments

As we enter the holidays FX pairs are more or less rangebound with little major releases from the US. The main move has been in in JPY where USDJPY consolidation continues with yields on US 10-year Treasuries also consolidating. 

We continue to look at the 10-day moving average as a reference of tech support, which is at 116.50 today. As mentioned yesterday, the rally in USDJPY since November 8 is the steepest rally on monthly charts compared to any other period of same length since at least the start of the millennium, which also indicates that any correction could be deep. 

USDJPY has its 100-week moving average around the 114.68 area; 120 was a decent tech level throughout the first half of 2015.

FX Options volatilities
 
Vols

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Fixed income

Rates
 
Commodities

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Equities

Equities
 
Banking stocks lead European indices mildly lower this morning in thin trading despite US markets closing at record highs yesterday.

The Spanish IBEX was the biggest loser as the EU’s top court ruled against Spanish lenders over mortgage interest repayments.

Banco Popular, Caixabank, Banco Sabadell, and Santander were all hit as the banks may have to repay billions of euros to mortgage customers.

Banca Monte dei Paschi di Siena fell as much as 17% this morning following reports that the Italian lender would fail in its fund raising efforts and that it would exhaust €11bn of liquidity quicker than previously forecast.

European banks remain in the news as the Swiss Competition Commission announced that it had levied fines of around CHF100 million to those lenders involved in rate rigging. Deutsche Bank, SocGen, RBS, and Barclays were reported to have reached an “amicable settlement” with the regulator.

US equity index futures point towards a slightly softer opening for Wall Street today.

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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.




Madrid
Spanish banks sunk today as a new ruling could lead to massive payouts to mortgage holders. Photo: iStock

— Edited by Michael McKenna

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

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