Wake-up Call

FedEx earnings report the joker in today's markets

FedEx and Oracle will report earnings today and especially the former could be a joker for risk. Given the company’s global presence any comments about the outlook could move equities.

Calendar

GMT	Event	Saxo Bank	Consensus	Previous
07:30	SW Unemployment Rate (AUG)		7.8%	8.0%
08:30	UK Retail Sales ex Auto Fuel MoM (AUG)		0.2%	0.9%
09:00	EC Trade Balance (JUL)		-0.5B	-1.6B
12:00	SZ SNB 3-month Libor Target Rate		0.25%	0.25%
12:30	US PPI (AUG)		0.3%	0.2%
12:30	US Core PPI (AUG)		0.1%	0.3%
12:30	Initial Jobless Claims		459K	451K
12:30	Continuing Jobless Claims		4464K	4478K
14:00	Philadelphia Fed. (SEP)		0.5	-7.7

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What's going on?

European markets will most likely open around flat-to-negative this morning on the back of the intervention from Bank Of Japan yesterday that most likely is going to retrace a bit. We are very close to the 1130-level and for equities to travel much higher from here will take a string of positive news from the macroeconomic space. We do not see this coming but will and cannot rule out a few surprises to the upside, but this will only lead to a failed breakout of 1130.

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Market musings

UK retail sales, US initial jobless, US Philadelphia Fed. Index are the reports to keep an eye out for today together with the announcement from the Swiss central bank regarding its target rate. Initial jobless claims are expected to rise slightly following the good (relatively speaking) 451,000 print last week. However, as we said at the time that report may have been skewed since nine states estimated their claims due to Labor Day. The market is looking for the Philadelphia Fed index to head back into expansionary territory (0.5) from the miserable -7.7 print last month. However, consensus has been very optimistic in recent months overshooting the realised number by roughly 10 points no average in the last three months.

New Zealand’s central bank kept the rate unchanged at 3.00% as expected by the market. The most interesting to come out of the meeting was a slight change in language as the RBNZ adopted a more dovish stance. There were more headwinds to come for the NZD, however, as Governor Bollard said the strength of the currency was not due to fundamentals (a couple of hours earlier a NZ PMI report had shown that manufacturing fell into contrationary territory in August).

US industrial production and the Empire Manufacturing survey, which is a regional manufacturing survey for the state of New York, both delivered subpar reports yesterday though the internals of both were better than the overall numbers would suggest. New orders in New York rose in September after dipping into a negative print in August. The employees component was also solid at 14.93.

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Equities

The rally in equities is fading and it seems that the fuel sparked by the Bank Of Japan intervention is already fading out. It is a bit soon giving the very strong signal that Bank of Japan sent and with the expectation that FED will engage in a similar action before year end this warns us that risk is not going to be spurred that much by central bank intervention (unlike our initial assumption). However you should not engage in a battle with central banks because you for sure are going to lose. What you need to realize is that what central banks are securing is a flat yield curve with the long end of the curve trending down. In order to secure a decent return investors will need to add risk and this means keeping their exposure to equities and therefore this level of interest rates and expected development will keep a floor under equities. We still see equities range trade towards year end.