USDCHF - Bullish above 0.7486

Our bearish call for USDCHF sentiment for last week was confirmed with aggressive selling that took it more than 5 big figures lower – to new all-time lows. But these lows were not maintained. In fact, all initial losses were powerfully reversed and although this rally was inspired by non-technical factors, the formation of a Bullish Hammer on weekly candle charts indicates scope for gains to continue.

In view of this our call is Bullish above 0.7486, although exact risk levels in such volatile conditions are hard to gauge. The immediate objective is 0.7836, the open from August 2nd, with a move beyond that point targeting 0.7954, the 2-week peak, then 0.8119, the open from 3 weeks ago.

The risk to this call is that the improvement was more temporary and limited than currently assessed and this would be signalled by a move below 0.7486, 38% pullback of Thursday’s net rise. Prices and sentiment should then fall to 0.7265, that day’s open, or even 0.7181, Wednesday’s base.

EURUSD - Bearish below 1.4555

Our cautiously bullish call on EURUSD for yesterday proved correct but gains were limited in both time and price. The subsequent sharp reversal took it to a 2nd consecutive negative daily performance and a move to the lowest levels of the week. Although the lows were not maintained, an overnight rally proved temporary and limited.
In view of this, and negative momentum, our call is Bearish below 1.4555. The immediate objective is 1.4478, yesterday's low, with a move below that point targeting 1.4451, the 3rd June low, then 1.4405, half of the net gains from June 2nd.
The risk to this call is that oversold extremes begin to correct earlier and higher than currently assessed. This would be signalled by a move above 1.4555, the overnight high, with subsequent upside targeting 1.4596, yesterday's European afternoon open, or even Thursday’s high at 1.4652.

Today's Call: EURUSD - Cautiously Bullish above 1.4555

Contrary to this week's bullish call for EURUSD sentiment, 2 days of gains stalled yesterday as investors took some profits. Net losses were not extensive though – less than half of Friday’s net gains reversed – and demand for EURUSD has re-emerged in Asian trading.

Immediate signals are not strong but are positive and in view of this our call is Cautiously Bullish above 1.4555. The immediate objective is 1.4630 with a move beyond that point targeting 1.4659, yesterday's top, then 1.4682.

Selling through 1.4555, yesterday's low, is the risk to this call as it signals that selling pressure is greater than currently assessed. The market should then decline to 1.4517 then 1.4451, Friday’s bottom.

Today's Call: USDJPY- Cautiously Bearish below 82.30

Signals for USDJPY sentiment were again bearish last week and a loss of more than 100 pips from Monday's open confirmed the strategy. This was the 3rd week of losses in row in USDJPY which has also now confirmed the Bearish Engulfing signal formed at April's top – a pattern of trading consistent with exhausted bull market momentum and start of a new bearish bias.

Going into this week the market has almost corrected 50% of the rally since March’s low (76.25 – 85.54), bounces are failing and attracting selling interest. Nnegative momentum levels have, however, failed to increase in line with the losses, which is a warning that selling interest is weakening. Against this background the forecast is bearish below 82.30 for losses through 80.87, the 50% pullback to 79.75, a deeper 62% correction or potentially 78.83, the low traded on the 18th March.

Risk to this forecast is that bearish momentum continues to slow and USDJPY is bought through 82.30, Thursday's top. This should be a bullish signal that sentiment is improving again to 82.81, Wednesday's top then the high on 20 April at 83.12.

Today's Call: GBPJPY – Bearish below 137.23

The buy recommendation for Q2 is underpinned by clear bullish signals that long term sentiment is improving and so far this is being confirmed. From the 7am open on Monday April 4 the cross rallied 400 pips in the first week, recording the strongest performance in one and a half  years. However on a daily basis the indications have been for stalling investor  enthusiasm at overstretched extremes and all through last week this was supported by increasingly bearish momentum signals warning that selling interest is strengthening. Going into this week, prices have now pulled back 50% of the rally since the end of March ( 130.12 – 140.03 ) and the forecast is bearish below 137.23 to 133.89, a broader 62% correction, then April’s 133.23 bottom or potentially 132.00.

Risk to this forecast would be buying through Wednesday’s 137.23 top. This should be a bullish signal that sentiment is improving again and further gains are likely to retest last Tuesday's top at 138.60 then the April high at 140.03.

Wakeup Call: EURGBP – Bullish above 0.8824

The setback from this week's highs on EURGBP, beyond 0.8900, extended yesterday with initial downside of almost ¾-point. And although a second negative daily performance in succession resulted, the market found fresh investor buying interest near 0.8800, similar levels to Monday, and most of the early losses were recaptured by the close.
Trading in Asian lacked clear signals but it is considered likely that yesterday's sharp reversal of the downside will be the dominant factor. In view of this our call is bullish above 0.8824. The immediate objective is 0.8883, yesterday's top, with a move beyond that point targeting 0.8906 and 0.8926, Wednesday’s open and high.
Selling through 0.8824 is the risk to this call as it signals that selling pressure is greater than currently assessed. The market should then decline to 0.8808, yesterday's low, then this week's base at 0.8792.

Today's Call: USDJPY – Bullish above 80.40

After two strong days of gains from the month's bottom, last week’s buy strategy relied on the bullish Hammer signal at the low as a pattern consistent with exhausted bear market momentum and the start of a new positive bias. On the week, trading was consolidative with a small improvement in prices but going into this week the forecast remains bullish. Positive momentum signals are still increasing, indicating buying interest is strengthening and as long as prices remain above 80.40 the targets are for buying through 82.00, the high on the 18th March, to 82.46, the 2-week top, then the high for March at 83.31 and potentially February's 83.99 high trade.

Risk to this forecast would be selling back through 80.40, a correction of 50% of the strong rally on 18th. This should be a bearish signal that the improvement is stalling and sentiment is deteriorating further to 80.00 then 79.00.

Weekly Call: EURJPY - Cautiously bullish above 112.45

The pattern of trading for the past 10 months has been for selling interest to cap any improvements above 115.00 and this signal dominated last week’s sell strategy. This was successful with an initial loss of almost 800 pips to reach a new low for the year. However, recovery on Thursday and the strongest gain in 10 months on Friday has once again brought prices back to test the 115.00 level. As a result signals for sentiment this week are cautious but on balance. The forecast is for continued buying while above 112.45. Targets are for gains to retest March’s high at 116.00, then 117.00 and 118.24, a 38% recovery to the 2009 -2010 bear market ( 138.74-105.43).
Exact risk to this forecast is not clear but most likely selling back through 112.45 should be a bearish signal that the improvement is stalling and sentiment is deteriorating again back to 110.52, Friday’s low, then potentially back to last week’s 106.60 bottom.

Weekly Call: USDJPY – Bearish below 83.09

This quarter's forecast for USDJPY has been for a slowdown in the 3 year bear trend and some consolidation and indecision. This has been confirmed. Prices are little-changed from January's opening level and prices have tested toward both extremes of the signalled range. For this week, however, the outlook is more bearish.

 The pattern of trading on a daily basis is for bounces to fail. Fridays failure was the largest one day loss since May 2010. With increasingly negative momentum levels, the forecast for the week is for continued losses while below 83.09. Targets are for weakness through 81.34, breaking the developing trend of rising weekly lows to signal that investors are no longer buying pullbacks and further losses are likely to retest 80.23, the low trade last November then potential 79.92, the low reached in 1995.

Risk to this forecast would be buying through 83.09, the high traded on the 4th March. This should be a bullish signal that sentiment is improving again to retest the high from February at 83.99 then the high last November at 84.42.

Today's Call: EURUSD is cautiously bullish above 1.3820

For the fourth consecutive day, direction for investor sentiment changed yet again Wednesday. This time Tuesday’s decline was entirely overturned and EURUSD was bought at the most positive levels for 16-weeks.  Although the highs were not maintained and some consolidation has been seen in Asia, we look for dips/profit taking to be limited and temporary. In view of this, our call is bullish above 1.3820. The immediate objective is 1.3893, yesterday's top, with a move beyond that point targeting 1.3923 or even 1.3967.

Selling through 1.3820, half of yesterday's net gains, is the risk to this call as it signals a stalling, and reversal, of demand. The market should then decline to 1.3778, yesterday's open, or even the day’s low at 1.3743.

Wake-up Call - Macro Kickoff: US consumers are back

Macro Kickoff: US consumers are back

The US economy is shifting into a higher gear as we go into an eventful week. The Middle East will likely draw headlines, but we also have ISM Manufacturing, Nonfarm Payrolls, and an ECB rate meeting.

Canadian economy expanded in November?
We kick the week off with gross domestic product from Canada and personal income and spending from the US all three of which are expected to increase on the month. We look for economic activity in Canada to grow 0.2 percent month-on-month on top of the 0.2 percent in October. Should our forecast be met it would take the annualised growth rate to 2.4 percent so far in the fourth quarter, a clear improvement on the disappointing 1 percent recorded in the third quarter even though it would mean that the economy slowed to 2.8 percent on a year-on-year basis in November from 3.3 percent in October. Consensus is a tad more optimistic regarding today’s report and look for a growth rate of 0.3 percent month-on-month. The numbers have generally been strong in November in Canada with employment up another 15K, housing starts up to 187K from 172K, and industrial product price up 0.5 percent month-on-month (note this is not seasonally adjusted).

The US consumer finally gets her act together
When it comes to spending the US consumer is back to what she does best, consume, with the GDP report indicating a 4.4 percent annualised quarterly growth rate (slightly above our own bullish 4.2 percent and consensus’ 4 percent ). While there may yet be several changes to fourth quarter GDP, we can for now say that the consumer seems to be doing exactly what is needed, taking over and continuing the previously inventory-led GDP growth.

This is likely to be reflected in today’s income-and-spending combo where we look for a 0.5 percent monthly surge in each, meaning that the savings rate would be more or less unaltered; which suggests that while the consumer may be increasing consumption again some dollars remain unspent as private deleveraging is still very much a part of everyday life in the US.

Other releases today
An hour and 15 minutes after the income and spending report from the US we get to take a look at manufacturing sector in Chicago, which is generally a reasonable indicator of tomorrow’s ISM Manufacturing report. However, the Chicago PMI has been overly bullish of late, likely a reflection of the improvements in the auto industry. [Note that Chicago PMI is released three minutes earlier to subscribers at 14:42 GMT].

As an aside, we note that the annual revisions to the seasonal factors of the ISM surveys saw December’s ISM Manufacturing index be revised higher to 58.5 from 57 earlier while the Non-manufacturing index was unchanged at 57.1 in December while non-manufacturing employment was revised up to 52.6 from 50.5.

 Before the US and Canadian economic data the Eurozone presents its initial take on January’s inflation, which is expected to show yet another increase to 2.3 percent year-on-year from 2.2 percent in December. This is particularly interesting given the recent more hawkish (or so the market interpreted them) remarks from the ECB and even more so given that the ECB will take centre stage on Thursday and announce (unchanged, we expect) rates. At the brink of 2011 the market was looking for a hike of 50bps in 2011, but in light of the recent speeches the market is now expecting the ECB to raise rates by 75bps by year-end. We remain happy to take the under on this one for now, but anything is possible as the July 2008 hike to 4.25 percent can attest to.

US GDP in review
While GDP disappointed the market by clocking a 3.2 percent annualised quarterly growth rate below the consensus estimate of 3.5 percent (and below our more optimistic 3.7 percent), the report was a mixed bag with both uplifting and disturbing pieces. First of all, as we mentioned above, consumption grew a massive 4.4 percent; by far the strongest growth rate in this recovery/expansion and a full 2 percentage points above the previous best of 2.4 percent in 3Q10. In particular durable goods led the way with a 21.6 percent surge. Net exports also contributed solidly, mainly due to a 13.6 percent decline in imports, which was caused by a large uptick in the relevant price deflator. Inventories was the main drawback to GDP by subtracting 3.7 percent (real final sales in other words rose a remarkable 7.1 percent).

Given the steep increase in the import price deflator (and the rising inflation evidenced in all other reports on the subject) one wonders why the overall GDP price index is estimated to have slowed to 0.3 percent in the fourth quarter from 2.1 percent a quarter earlier. It will certainly be interesting to see if the price index remains this low in the coming months’ revisions.

Calendar

 

Equity Kickoff: Tensions in Egypt point to lower open

European cash indices will open lower Monday after tensions in Egypt escalated over the weekend. Earnings will, for a moment be set aside as the main driver for equity markets, but earnings season isn't quite over.

The tensions in Egypt accelerated during the weekend and the general fear in markets will be as to whether this will spread into other Middle Eastern countries where uncertainty would result in concerns over oil supply. Markets will generally shift into risk aversion mode, selling off commodities and equities until the tensions have eased.

Ryanair, the European airline sector's enfant terrible, posts earnings today. EPS is expected to expected to be negative, EUR -0.015 per share vs. a prior reading of EUR 0.211 and sales is expected to have dropped from EUR 1,284 mio to EUR 725.000. But we expect Ryanair to have handled the higher oil prices better than Easyjet last week given their its cost structure.

Exxon Mobil is expected to show and EPS improvement from USD 1.44 per share to USD 1.63 and likewise with sales from USD 95,290 mio to USD 100,124 mio. This is mainly driven by higher oil prices, but the company’s profit is also likely to have been helped by the higher volume in the chemical segment which picked up in 2010. DuPont, Exxons main competitor, posted earnings earlier in the season and it surprised rather significantly to the upside, pointing toward this from Exxon too.  On another note, Exxon has recently stated it expects demand for natural gas and oil to be 35% higher in 2030 compared to 2005.

Wake-up Call - Macro Kickoff: will Portugal be mentioned by the ECB today?

Wake-up Call - Macro Kickoff: will Portugal be mentioned by the ECB today?

Focus will be on the Bank of England and the ECB today and the markets will look for any hints from the latter about the situation concerning Portugal.

Focus will be on the Bank of England and the ECB today and the markets will look for any hints from the latter about the situation concerning Portugal. The calendar features U.K. industrial production and U.S. producer prices, both of which are expected to increase. Trade data for the U.S. is also released and should show a slight widening of the deficit.

BoE, ECB rate announcements
Portugal’s successful auction yesterday saw risk rally and while we maintain our stance that Portugal will sooner or later apply for a bailout package perhaps we can concentrate on other events today than the constantly reappearing European sovereign debt concerns.
Both the ECB and the Bank of England will announcement rates today, but neither is expected to provide much action, we believe. The central banks will keep rates at 1% and 0.5%, respectively, and in the case of the latter the asset purchase target amount will remain at £200 billion.
The BoE should not change its monetary policy stance until a clearer picture of the economy is available given all the changes this year including a VAT increase to 20%. The ECB’s Trichet is also not expected to say much we don’t already know which includes potential questions about a Portuguese auction where the President of the ECB will maintain that any prospective bailout applicants have to make the first move.

U.K. manufacturing sector to improve
The PMI Manufacturing survey last week confirmed similar surveys from the U.S. and Eurozone, namely that the manufacturing sector of these economies continues to perform well. The overall index in the survey rose to 58.3, the highest in a decade, and has provided the markets with the ammunition needed to forecast that today’s report on industrial production while show that production rose 0.5% month-on-month in December.

 U.S. producer prices expected to rise, trade deficit to widen
Turning to the U.S. producer prices are set to rise yet again helped by the surge in energy in December, a month which saw Crude rise 8%. Following November’s 0.8% month-on-month change in prices, we expect prices are the producer level to show another gain of 0.7% (consensus: 0.8%) while core prices should also improve by 0.2%.

 The disappointing wholesale inventories report earlier this week suggests that the contribution from inventories in the fourth quarter may be smaller than previously expected (tomorrow’s business inventories report should help clarify that), but on the other hand trade data has been kind to the U.S. in recent months and even though we look for a slightly increase in the deficit to $40 billion, net exports looks on track to boost GDP in the fourth quarter.

Equity Kickoff: Higher on Intel expectations

European cash indices will open higher Thursday lead by a general strong expectation for the upcoming earnings season and today’s release from Intel is expected to boost that sentiment.

In terms of planned data events look for BoE and ECB interest rate announcements at respectively and especially Trichet’s wording in the follow up conference. Trichet is widely expected to comment on the Portuguese situation.

Equity markets will focus on Intel earnings and the conference call afterwards. There is no release time, but earnings are expected to show an increase from 0.440 USD per share in Q3 to 0.530 USD per share in Q4. This is to a large extent driven by sales growth as sales growth is expected to increase from 10.72 bln. USD to 11.36 bln. USD. Intel’s own guidance for Q4 sales is 11.40 bln. USD. The really interesting issue with Intels sales growth is where it is located; in Q3 sales growth was all coming from emerging markets, but this time around we do expect to see some of it origin from the U.S. If this is the case this will strengthen our belief that the U.S. is in for a strong recovery this year where we expect a GDP growth of 2.7%.

Lately there has been talk of a bailout of Portugal from EU/IMF. In our view there is a great likelihood that this will be the outcome of the current situation for Portugal. Trichet is not expected to move interest rates in either direction for a long time, neither is the BoE for that matter. But llisten carefully to the ECB press conference where we expect Trichet to indirectly comment on the situation in Portugal, pointing toward whether it will receive a bailout. If that should be the case, then expect markets to start testing Spain. As we have said several times now, Spain is a whole different story; it is a BIG economy. So big that if the bond investors really put pressure on the Spanish government bonds you should expect EURUSD to drop and equity markets, at least in Europe, to drop too – whether we are in an earnings season or not.

In today’s trading we are bullish on tech companies as we expect solid earnings from Intel – so look for STMicroelectronics. JPMorgan is out with earnings tomorrow and here we expect a surprise to the upside, so we are still positive on JPMorgan, Goldman Sachs and UBS. It is widely expected that due to QEII the fixed income trading divisions will drive earnings higher like they did the last time around when QEI was hitting the street. Commodity producers continue to rise in Asia, so look for Rio Tinto and BHP Billiton.

Wake-up Call - Durable goods orders last pointer before US 3Q GDP

Durable goods orders last pointer before US 3Q GDP

The earnings season still produces interesting earnings releases from major companies, but today's Durable Goods orders from the US will be the last pointer before US GDP on Friday.

What's going on?

European equity markets will most likely open down. The close of the US was pretty much in line with the close of the European session in terms of levels, but Deutsche Bank disappointed the markets this morning, which is driving futures down. Look for an opening roughly 0.25% down. Ford released record earnings in its 107 year old history – presenting an EPS of 48c vs. 38c expected. Furthermore the debt reduction in Ford is going at record pace and this has made Ford predict that it will equal its cash balance with its debt by year end. Another string of earnings will be released today and those who have the largest market mover potential are: Volkswagen and Novo Nordisk in Europe and in the US the names to look for are P&G and ConocoPhillips.

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Calendar

GMT	Event	Saxo Bank	Consensus	Previous
08:00	Eurozone M3 YoY (SEP		1.3%	1.1%
12:00	NO Deposit Rates		2.00%	2.00%
12:30	US Durable Goods Orders MoM (SEP)	1.4%	2.0%	-1.3%
12:30	US Durable Goods Orders ex. Transportation MoM (SEP)	0.5%	0.5%	2.0%
14:00	US New Home Sales MoM (SEP)	0.0%	4.2%	0.0%
20:00	NZ RBNZ Official Cash Rate		3.00%	3.00%

Economic data highlights	Saxo Bank	Consensus	Actual	Previous	Revised
SW PPI MoM (SEP)		0.0%	0.4%	-0.5%
SW Interest Rate		1.00%	1.00%	0.75%
UK GDP QoQ (3Q)	0.5%	0.4%	0.8%	1.2%
US S&P/CaseShiller 20-City HPI MoM (AUG)	-0.10%	-0.20%	-0.28%	-0.13%	-0.21%
US Consumer Confidence (OCT)		49.9	50.2	48.5	48.6
US House Price Index MoM (AUG)		-0.2%	0.4%	-0.5%	-0.7%
US Richmond Fed Manufacturing Index (OCT)		1	5	-2

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Markets at a glance

US Durable Goods Orders is an interesting report today both in terms of future production and third quarter GDP released on Friday. Nondefense capital goods shipments is a reliable indicator of businesses investments in durable equipment in the GDP report. We are looking for bounce back from August’s 1.3% decline to 1.4% MoM (consensus: 2%). The less volatile ‘ex transportation’ series is expected to some improvement in September, but the trend is clearly slowing from earlier this year.

The New Home Sales report for September is released today and consensus is looking for a 4.2% gain month-on-month.  Housing starts rose by 0.3% in September to 610,000 (annualised) as sales in the housing sector are stabilising after the disruptive homebuyer tax credit.

US consumer confidence – as measured by the Conference Board – rose slightly in October to 50.2 from 48.6 earlier. We still need to see a sustained increase over several months, however, because the man on the street clearly still believes the US is in a recession. Since 1967 the average confidence in recession was 68.9 so we still have some way to go for this to be merely an average recession. In expansions, the average is an almost unimaginable 99.6. This was also confirmed by the weekly ABC Consumer Confidence report out late yesterday, which showed a decline to -47 from -46. The ABC series has been hovering in the -40 to -50 range for two years.

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Equities

Ford posted very strong earnings yesterday – actually record earnings in its 107 year old history. Among the major car producers in the US Ford clearly came out of the crisis better than both GM and Chrysler and announced yesterday that they will equal their debt with cash by year end. This is very good news for Ford shareholders as Ford will now be able to, even more aggressively than before, to invest in new products without hurting the deleveraging process that has been going on since 2008.

Wake-up Call

Alcoa beats expectations, stock market: “so what”

It’s nonfarm day, so let’s get ready to rumble…? Well not quite, in fact we expect an entirely average report.

Analysis by : Christian Tegllund Blaabjerg Market Strategist Alcoa beats expectations, stock market: “so what” It’s nonfarm day, so let’s get ready to rumble…? Well not quite, in fact we expect an entirely average report. Calendar GMT Event Saxo Bank Consensus Previous 07:30 SW Industrial Production MoM (AUG) 1.0% 2.9% 08:30 UK PPI Output MoM (SEP) 0.0% 0.1% 0.0% 10:00 CA Net Change in Employment (SEP) 11.0K 10.0K 35.8K 11:00 CA Unemployment Rate (SEP) 8.1% 8.1% 8.1% 12:15 CA Housing Starts (SEP) 179.0K 183.3K 12:30 US Change in Nonfarm Payrolls (SEP) -25K -5K -54K 11:45 US Change in Private Payrolls (SEP) 65K 75K 67K 12:30 US Unemployment Rate (SEP) 9.7% 9.7% 9.7% 12:30 US Average Hourly Earnings MoM (SEP) 0.2% 0.2% 0.3% 12:30 US Average Weekly Hours (SEP) 34.2 34.2 34.2 20:10 US Wholesale Inventories MoM (AUG) 0.5% 1.3% What's going on? We clearly broke the 1150-threshold and closed well above the 1150-level yesterday. Seems from the latest price action that investors just want risk (equities). Disappointment in the QE-launch or in the upcoming earnings season could lead to a sharp market correction. European equity markets are expected to open 0.5% higher after a solid comeback in yesterday’s US session. Alcoa reported better than expected earnings ($0.09 vs. $0.05 exp.) though the earnings report was quite a non-event in the stock market. Likely due to quite weak sales growth and a QoQ decline in earnings per share. It’s nonfarm day, so let’s get ready to rumble…? Well not quite, in fact we expect an entirely average report. The positives are expected to be private sector job growth of 65,000 and an increase in hourly wages while the negative. will be that job creation is not even strong enough to follow the population growth. For the QE-bulls, this will likely be a welcome report since it will not be strong enough for the FOMC to consider a postponement of QE2, which we expect will arrive in a months’ time. Market at a glance US and Canadian employment reports are the ones to watch today. While the former economy is expected to show an overall decline in payrolls – mostly due to the 2010 Census – the latter’s labour market is expected to show improvement again today. Last month’s 35,800 increase in payrolls in Canada translates into a 2.1% MoM increase. For the US to be able to show off in a similar fashion, the net change in payrolls would have to be in the neighbourhood of 275,000. We expect the US employment report will be quite average. If the slight increase in the unemployment rate to 9.7% materialise, it will likely get most of the attention unless payrolls deviate significantly from consensus (Saxo: -25K). German trade numbers for August were released a few minutes ago and they show a MoM decrease in exports of 0.4% (exp.: -0.3%) while imports rose 0.9% (exp.: 0.4%). Exports were also revised slightly down for July, so the figures generally are not too great from a 3Q GDP perspective. Net exports and inventory adjustments were the main drivers behind the second quarter’s outlandish 9.1% QoQ growth (annualised), and while recent numbers were a tad on the negative we still expect a solid growth in 3Q in Germany, but nobody should expect anything remotely close to the 9.1%, of course. Equities Alcoa kicked off the earnings season after markets had closed yesterday, but somewhat uncharacteristically the company actually managed to beat expectations. Alcoa reported operating earnings per share of $0.09 against expectations for $0.05, but futures did not really care about the news. While EPS did beat expectations, earnings are down compared to the second quarter ($0.09 vs. $0.13) as expenses rose. Aluminum prices are up roughly 15% in the third quarter so you would expect Alcoa to grow revenues, and Alcoa did, but only by 1.9% sequentially. The company raised its outlook for global consumption in 2010 by a single percentage point to 12% on stronger demand from emerging economies.

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.

Wake-up Call

Bearish News Flooding In Today's Markets

Spain’s central bank announced that it will release results from a stress test of banks while BP announced that it won’t pay a dividend and will also resort to asset sales to fund the Oil-spill fund.

What's going on?

Theme Comment

·         News overnight was mostly bearish. Spain’s central bank announced that it will release results from a stress test of banks while BP announced that it won’t pay a dividend and will also resort to asset sales to fund the Oil-spill fund demanded by President Obama. Of course, the large decline in US housing starts didn’t help matters much despite a solid display from the manufacturing sector with industrial production up 1.2% MoM.

·         Spain will test the market today with EUR 3.5bn in 10y and 30y bond auctions, and if recent Spanish auction are any indication then spreads will once again widen relative to the prior auction (in the spring).

·         It’s another busy day for economic releases led by US CPI, Jobless Claims, and Leading Indicators. The latter is expected is improving despite an 8% drop in S&P500 in May, which is one of the leading indicators.

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Calendar

Economic Data Releases
Country	Time (GMT)	Name	Saxo	Consensus	Prior
UK	08:30	Retail Sales MoM (MAY)	0.0%	0.1%	0.1%
US	12:30	CPI / Core CPI MoM (MAY)	0.0% / 0.1%	-0.2% / 0.1%	-0.1% / 0.0%
US	14:00	Leading Indicators MoM (MAY)		0.4%	-0.1%

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FX

FX	Daily stance	Comment
EURUSD	0/+	Buy break abv 1.2350, or dip to 1.22, for tgt 1.2420. Stop below 1.23, 1.2165 resp.
USDJPY	0/-	Resistance edging down to 91.40. 90.85 next suppt. Expect to trade a range
EURJPY	0/-	Break below 111.90 risks 111.50 before any suppt. Ranging 111.50-112.50 with slight –ve bias
GBPUSD	0	See n/term suppt at 1.4680. Below risks fall to 1.4615 else trade a 1.4680-1.4750 range
AUDUSD	0	0.8575 next suppt level. Below sees 0.8510 first or a 0.8575-0.8665 range
USDCAD	0	Seems to be building n/t base at 1.0225. Ranging 1.0225-1.03 again

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FX Options

FX-Options	Comment
EURUSD	Market still well bid for EUR puts. Market still very nervous despite  yesterday’s
	relatively narrow ranges in spot, with a vol curve remaining well bid throughout the sessions  still remains bid Banks aggressively paying up for EUR puts now and would not be surprised to see
	session. Definitely see potential for further downtrend in spot.

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Equities

Equities	Daily stance	Comment
DAX	0/-	Sell on rallies towards 6190 targeting 6156. S/L above 6207.
FTSE	0/-	Sell on rallies towards 5240 targeting 5208. S/L above 5257.
S&P500	0/-	Sell on rallies towards 1118 targeting 1112. S/L above 1119.
NASDAQ100	0/-
DJIA	0/-

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Futures

Commodities	Daily Stance	Comment
Gold	0/	Buy on dips towards 1228 and target 1236. Stop below 1226.
Silver	0/+	Buy at the break of 18.68 and target 18.96. Stop below 18.50.
Oil (CLQ0)	0/+	Sell on rallies towards 79.80 and target 78. Stop above 80.50.

Watch Out For Claims From The US Today - Wakeup Call

Watch out for the weekly employment data from the US. Initial jobless claims could disappoint the market, which is expecting a 2K fall in claims, today

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What's going on?

Theme Comment

·         Much better than expected employment data from Australia (change in employment was 31.2K vs. 5K expected, resulting in a 0.1%-point drop in the unemployment rate) caused the AUD to rally overnight. Additionally, the S&P 500 staged a comeback in the US session, but we are nevertheless negative on risk today.

·         Watch out for the weekly employment data from the US. Initial jobless claims could disappoint the market, which is expecting a 2K fall in claims, today. Another good number will on the other hand point towards further improvement in Nonfarm Payrolls (and we could even see the NOV change in payrolls revised to a positive number come January).

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Calendar

Economic Data Releases
Country	Time (GMT)	Name	Saxo	Consensus	Prior
UK	12:00	BoE Interest Rate / Asset Purchase Amount		0.50% / 200B	0.50% / 200B
US	13:30	Initial / Continuing Jobless Claims		455K / 5450K	457K / 5465K
US	15:00	Geithner testifies on TARP program

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FX

FX	Daily stance	Comment
EURUSD	-	Prefer short side below 1.4760/80. Key support at 1.4670 area, then not much until <1.4500.
USDJPY	0/+	Beware large range. Interested in strategic long, but only at good price (low 87.00’s perhaps).
EURJPY	0/-	Short rallies for a try below 128.75 low. Strong bunds market is key for further JPY strength.
GBPUSD	-	Sell ahead of 1.6300, looking for eventual 1.60 test. 55-day MA is at 1.6375 area.
AUDUSD	0/-	Still prefer to be short here if risk aversion comes back on. 0.9180 area is first key resistance.

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FX Options

FX-Options	Comment
EURUSD	Front end looked well bid but the middle of the curve is softer. Event risk today and next
	week should keep gamma supported.
USDJPY	1Y year ATMs were sold so likely to see some easing in the curve especially given how
	much it has climbed this week. Spot under 8800 will ensure vols won’t come off too much.
AUDUSD	1w now gets the FOMC rate decision so remains bid and was paid at 14% first thing this
	morning. 2wk area looks very offered and liquidity looks to be drying up.

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Equities

Equities	Daily stance	Comment
DAX	0/-	Sell on rallies towards 5714 targeting 5668. S/L above 5736.
FTSE	0/-	Sell on rallies towards 5246 targeting 5217. S/L above 5259.
S&P500	0/-	Sell on rallies towards 1101 targeting 1095. S/L above 1105.
NASDAQ100	0/-
DJIA	0/-

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Futures

Commodities	Daily Stance	Comment
Gold	0/-	Sell on rallies towards 1135 targeting 1125. S/L above 1141.
Silver	0/-	Sell at the break of 17.30 targeting 17.12. S/L above 17.41
Oil (CLF0)	0/-	Sell at the break of 70.13  targeting 69.25. S/L above 70.50