Lions and bulls and hawks – oh my!
Or fewer doves, anyway... speaking live from Saxo Bank's trading floor in the lion city, Christoffer Moltke-Leth tells us that Singapore's MAS released its monetary policy statement shortly after yesterday's GDP release (1.1% quarter-over-quarter) and surprised markets by maintaining its ban on policy changes.
The SGD surged on the news, with SGDUSD hitting 1.3597 before retracing slightly to 1.3621. The pair was trading at 1.3732 before the news.
Asian equity markets traded mostly flat today, said Moltke-Leth, with some profit taking seen in Hong Kong. The Hong Kong markets, of course, have been the subject of much discussion lately as an influx of mainland money has prompted a massive rally.
According to Saxo Bank Asia-Pacific strategist Kay Van-Petersen, there are several ways that investors might play the Hang Seng, depending on one's expectations. If one believes that the Hang Seng is ready to see some profit taking, one could consider selling covered calls, while those believing that the rally is overheated in a broader sense could play that via puts.
If one suspects that vols are over-extended, conversely, Van-Petersen recommends looking at short straddles.
A yen for yen
Saxo Bank head of forex strategy John Hardy tells From the Floor that the JPY is picking up the pace after a key adviser to Japanese prime minister Shinzo Abe said that USDJPY at 1.20 was too weak, and that 1.05 would be a better level for the country's currency.
According to Hardy, the comment may have been a reaction to last week's US Treasury report that criticised Japan for its "over-reliance" on monetary policy.
On the data calendar, US Retail Sales is the elephant in today's room as traders look for signs of strength on the back of three consecutive weak prints. Also on tap are Sweden's CPI data, which appear primed to send EURSEK lower if it beats expectations.
Over at the FX Options desk, trader Gustave Rieunier says USDJPY remains "in the middle of nowhere" as traders look for a decisive move either way. According to Rieunier, vols on the pair saw some bid action yesterday before the JPY ticked upwards, but this disappeared as USDJPY headed lower.
In terms of EURUSD, Rieunier says that vols are "not massively big" given tomorrow's European Central Bank meeting, but notes that there are "huge amounts" of triggers set at lower levels such as 1.0250 and especially 1.00.
Season's beatings?
Over at the equities desk, Saxo Bank's Peter Garny says that the focus is on the US earnings season with Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC) and Wells Fargo (NYSE:WFC) set to report today.
Garnry also told From the Floor that he expects Wells Fargo to beat expectations on strong commercial banking activity. At present, the consensus EPS forecast for Wells Fargo sits at $0.98.
In Europe, DAX futures are looking strong ahead of market open with premarket buyers flocking to Alcatel-Lucent (PARIS:ALUA) on news of its acquisition by Nokia. Calling the move "positive for both companies", Garnry notes that Alcatel-Lucent shares are already up 6% in premarket trading.
Finally, Saxo Bank's equities head points to an interesting US alpha pick in the form of Premier, a healthcare concern that currently offers the most comprehensive database in the sector and what Garnry calls an "unreasonably low" valuation.
Noting ROIC at 43% and EV/EBITDA at 3.1x, Garnry emphasises that the Saxo equities desk will be watching Premier closely today As US Markets open
"Workin' in an oil trade, goin' down, down, down..."
If From the Floor interprets Lee Dorsey's lyrics correctly, he was short coal back in 1966. Today, Saxo Bank commodities head Ole Hansen feels that it is WTI oil that is primed to go down, down down, even if it is presently rangebound.
According to Hansen, there are a number of conflicting factors holding WTI crude in its present $50-54/barrel range, from instability in Yemen to the prospect of an Iranian deal to inventories. Yesterday, he notes, an EIA report indicating falling shale production boosted oil but Wednesday's inventory report is expected to show a storage increase of 3.5 million barrels, which will weigh on WTI prices.
In precious metals, Hansen tells us that both silver and gold are testing key support areas at $16,10/oz. and $1,190/oz. respectively.
Russian roulette
Speaking live from Saxo Bank's fixed income desk, trader Michael Boye tells us that there are two interesting stories in bond markets at the moment: Greece and Russia.
According to a recent Financial Times report, says Boye, a Greek debt default remains a very real possibility and the country's three-year yields reflect this, sitting north of 20%.
In Russia, however, a quiet but significant rally has seen the country recover from its end-2014 crisis, with the Russian credit default swap having fallen from a high of 600 basis points down to 346 bps at present.