View: Sit with trends buying stocks into weakness, bearish UST’s and short EUR/USD
Election-day and markets are typically sedate, more out of habit than anything else. We find it difficult to become overly excited at the outcome whoever wins seeing rather limited room for policy manoeuvre going forward. While much has been written about the positive prospects for the US economy should Romney receive a mandate we’re not convinced it would herald any marked shift in trajectory, certainly a sustainable one. We have no concerns Romney would be a Tea Party-ite, more the moderate he has spent most of his career and the more radical campaign promises should be whittled back accordingly, including many of his tax reform ideas which look incomplete to put it modestly. But he would face similar obstacles to Obama in dealing with the fiscal cliff, particularly if the Democrats remain in control of the Senate and the debt ceiling might even be more of a contentious issue with a Republican at the helm as expectations shift accordingly. There has been much chatter about the impact Romney would have on the dollar, which seems to centre on the hostility towards Bernanke and his QE programmes. While this might mean Bernanke takes the easy way out by standing down when his term expires in January 2014 we doubt it will have any immediate impact on easing with any President likely to be seduced by the prospect of the easy stimulus/scapegoat package.
Full report below…
View: Buy S&P 500 dips with new highs in mind, leaning on 1,361 support
There is something of a mismatch between our short-term bullish expectations and more cautious mid-term equity views, built around how the longer-term charts have been developing, which makes the current corrective price action rather tricky to interpret. This degree of ambiguity is also reflected in the more immediate fundamental drivers, specifically what has so far been a disappointing earnings season not to mention the closely fought US election contest which has added to concerns surrounding the fiscal cliff. One could perhaps tack on the immediate failure of the market to rally on all that liquidity goodness delivered by Bernanke, QEinfinity as some have dubbed the open ended programme, as a further sign that the rally has exhausted.
Full report below…
Our weekly publication insight into which data and events has the potential to move markets in the week ahead, an update on the more interesting chart developments and concludes with a summary of our core strategy views.
- Market more confident on ECB’s OMT backstop despite Spanish procrastination
- EZ equity dip should tempt buyers but EUR’s corrective bounce at its limit
- UK data still looking constructive, political risks worth closer scrutiny
- Pound looks rich, Cable support at 1.5977 vulnerable, switch to neutral EUR/GBP
- US data improving, election noise should distract from fiscal cliff worries near-term
- S&P500 remains bullish, pre-crisis highs at 1,576 in play while market holds 1,419/22
This note covers US, UK and European markets for the week commencing October 22nd.
Full report below…
View: Periphery debt tempting, short Bunds great risk reward at current levels
Gloom continues to dominate Eurozone investor’s thinking with the market reluctant to buy into the idea that there are now adequate backstops (ESM, OMT) available to finally stabilise the debt crisis, continuing to focus on the always distracting political noise. This seemingly forgets as to just how the Eurozone crisis has developed over the past three years or so, specifically just how long it takes for the numerous political factions forging those numerous ‘breakthrough’ agreements to find a consensus on the critical final details. Furthermore one can see from previous bailouts that the longer one generally stalls the easier conditions imposed eventually are, making foot dragging an essential component. Of course the Greek problem remains but even there there seems to be a realisation among the core that it is better to keep the patient’s heart beating than force the country out; at least immediately – which means this side of next year’s German federal elections. In fact senior politicians from both sides have been clear about this over the past couple of weeks.
Full report below…
Our weekly publication insight into which data and events has the potential to move markets in the week ahead, an update on the more interesting chart developments and concludes with a summary of our core strategy views.
- ECB’s OMT ‘plan’ to remain just that as PM Rajoy stalls amid ranging periphery yields
- EZ equity run could extend but EUR’s corrective bounce reaching its limit
- UK data still looking constructive, market buying into improvement
- Pound looks rich, still waiting for signal to short Cable, like long EUR/GBP
- US data improving, election noise should distract from fiscal cliff worries near-term
- S&P500 remains bullish, pre-crisis highs at 1,576 in play while market holds 1,419/22
This note covers US, UK and European markets for the week commencing October 15th.
Full report below…
View: JPY response to ‘Risk on’ phase should worry BoJ, SNB style Peg worth debating
Despite solid gains in US and European markets over the past few months that Asia heavyweight Japan has enjoyed rather limited luck with even the BoJ’s efforts to continue on the central bank easing bandwagon given short shrift by the market. The performance of the JPY specifically must be worrying for Japanese officials, particularly its unresponsiveness to the ‘risk on’ mood which in the past has provided exporters with some much needed breathing space. Indeed, USD/JPY has been stuck sub 80.00 throughout Q3, in stark contrast to price action in Q1 where a similar ‘risk on’ phase was enough to push the pair up around eight big figures back towards 84.00. The implications if the mood shifts don’t look particularly encouraging with this in mind, particularly given the ineffectiveness of the BoJ’s preferred tools of verbal then physical intervention to contain unwarranted/undesirable JPY appreciation.
Full report below…
Our weekly publication insight into which data and events has the potential to move markets in the week ahead, an update on the more interesting chart developments and concludes with a summary of our core strategy views.
- ECB’s OMT ‘plan’ to remain just that while periphery yields look tolerable
- EZ equity run could extend but EUR’s corrective bounce reaching its limit
- UK data remains constructive for now, market buying into improvement
- Pound vulnerable to political risk, prefer USD, still waiting for signal to short Cable
- US data improving, election noise should distract from fiscal cliff worries near-term
- S&P500 remains bullish, pre-crisis highs at 1,576 in play while market holds 1,422
This note covers US, UK and European markets for the week commencing October 8th.
Full report below…
View: Spain ‘worries’ totally predictable, PM Rajoy’s delaying tactics all part of the game
Watching the Eurozone crisis unfold is a bit like sitting down to watch a few Road Runner cartoons, we all know Wylie Coyote is going to run over a cliff at some point we just don’t know what sort of pain and suffering he’ll go through first and the particular shape he’ll form when he hits the bottom. In these terms one could well compare the market to a four year old, deriving endless surprise, dare we say enjoyment, from what is a tried and tested formula. And so we find ourselves with panicked headlines from Spain once again with the usual media tarts rolled out with a new damning indictment on why the project is doomed, a scenario as predictable as any of those classic cartoons.
Full report below…
View: Brent remains a m/t bear play despite the seemingly hot geopolitical backdrop
It has been difficult to flick through any weekend media without stumbling across detailed editorials on the prospects for a pre-emptive Israeli strike against Iran’s nuclear programme in October, ahead of the US Presidential election. The logic of this timeframe centres on what PM Netanyahu’s camp allegedly feel is the final opportunity to mount a unilateral strike against increasingly hardened Iranian targets, feeling that a second term Obama would be far more likely to resist military intervention that by then only the US would have the firepower to execute. This tension has of course been on the markets mind for many months, even years, with a decent proportion of the rise in oil prices post Arab-spring linked to geopolitical risks in the region which Iran is the very centre of.
Full report below….
