Wake Up Call - Equities to head higher

Despite the GDP numbers from US last Friday Asian markets were off to a positive start driven by better than expected earnings. We expect this trend to continue into the European session.

What's going on ?
Theme Comment

US GDP Friday was on the surface better than expected, but far worse if you do some digging into the numbers. The expectation was -1.5% QoQ and the realized was -1.0%. However the prior number was revised lower from -5.5% to -6.4%; and furthermore personal consumption (which amounts to 70% of GDP) dropped to -1.2% from 0.6%. This is not a recovery.

·US banks that have been bailed out are returning the favor by stepping up purchases of Treasuries, helping to temper a rise in borrowing costs (notice the drop in yields). However, this will only be a short term phenomenon as the amount of Treasuries issued in one week amounts to the total liquidity that those banks possess.

·Watch for US macro numbers today and earnings from Barclays and HSBC.

FX

FX	Daily stance	Comment
EURUSD	0/-	Major res at 1.4340, sell there, or break below 1.4220 for 1.4150.
EURJPY	0	Expect to see a 134.0-135.50. Still within recent ranges.
USDJPY	0/+	Buy dips down to 94.50 for a retracement to 95.70.
GBPUSD	0/-	Risk we have a cap at 1.6775 with slippage to 1.6680 possible.
AUDUSD	0/+	Prefer to buy dips to 0.8325 for a rebound to 0.84 again, stop below 0.8290.

Equities

Equities	Daily stance	Comment
DAX	0/+	Buy on dips towards 5320 and target 5395. Stop below 5300.
FTSE	0/+	Buy on dips towards 4605 and target 4658. Stop below 4600.
S&P500	0/+	Buy on dips towards 987 and target 996. Stop below 985.
Nasdaq	0/+	Buy on dips towards 1605 and target 1622. Stop below 1602.
Dow Jones	0/+

FX Options

FX-Options	Comment
EURUSD	Front end vols are down close to year lows and market still undecided on the next move.
	Back end slightly bid but indicates vols could explode if 1.37/1.43 range is broken.
USDJPY	Quiet session with vols holding steady across the curve. Few bids for 9500 strikes under
	1w and front end likely to be well supported after Friday’s move.
AUDUSD	Gamma turns bid this morning with spot attempting to test 8400 level. Mid curve also
	traded higher so it seems vols are showing signs of bottoming out.

Futures

Commodities	Daily Stance	Comment
Gold	0/-	Sell at the break of 950 and target 944. Stop above 953.
Silver	-	Sell around 14.10 and target 13.90. Stop above 14.22.
Oil	0/+	Buy on dips towards 69.60 and target 71. Stop below 68.70.