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Asian Focus: A bumpy road to reform for China's new leader
In thisAsian Focus video Yvette Roper, Editor of TradingFloor.com, interviews ...
In thisAsian Focus video Yvette Roper, Editor of TradingFloor.com, interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, about expectations for the all-important communist party congress. The key question is how free will China’s new leaders be to drive growth and reform? He also looks at key Chinese macro data and the status of growth. With the week-long National Congress of the Communist Party of China underway focus is on the leadership set-up and what announcements will be made to frame the new leader in the best light and indicate control over the world’s second-largest economy. What kind of reforms will be made in the next 10 years of rule and to what degree will the leader’s hands will be tied by conservatives and hardliners ruling the party and making reform difficult is key. Also of focus is how leadership for the next 10 years will maintain the constant steady growth that China has experienced up to now. “The speed of reforms we have seen over the last 10 years has certainly slowed over the past two to three years as the leaders have got bogged down in a slowing economy and a global mess. Now is the time to get back on track,” says Andrew Robinson.
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Ole S. Hansen: What the US election and Fiscal Cliff mean for Oil Prices
Ole Hansen, ahead of CommodityStrategy at Saxo Bank in Copenhagen, ...
Ole Hansen, ahead of CommodityStrategy at Saxo Bank in Copenhagen, discusses how anticipation of a Barack Obama win caused the dollar to drop the day before yesterday's US election, which boosted US equity prices and energy markets. He notes that Hurricane Sandy has reduced the availability of gasoline, which has caused some upside for crude prices, but that the U.S. fiscal cliff will limit upside in the short term. With spending cuts and tax hikes that could limit demand, the Fiscal Cliff is a medium-term negative for oil prices, Ole Hansen says.Seemore of Ole Hansen's commentary on TradingFloor.com
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Asian Focus: If China is turning a corner will the RBA stand pat?
In this video, Yvette Roper ofTradingFloor.com interviews Andrew Robinson, Market ...
In this video, Yvette Roper ofTradingFloor.com interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, about whether there are actually real signs of a recovery underway in China as reflected by recent data. He also shares his thoughts on the likelihood of the Reserve Bank of Australia easing interest rates at its November meeting.The official China PMI for October is expected to show that there is some degree of recovery underway in the Chinese manufacturing sector.Domestically the data for this month was slightly better, with industrial production and retail sales both firmer than expected. I think it is indicating that maybe China is turning the corner, says Andrew Robinson.As the health of the Australian economy is highly dependent on the buoyancy of China, any signs of Chinese recovery would be welcome news for the land Down Under.Based on the market's somewhat brighter outlook on China there is an increased likelihood that the Reserve Bank of Australia will not lower its key interest rate at it last meeting for the year on November 6. "At the moment we are looking at just over a 50 percent chance of a 25 basis point rate cut at the beginning of November," says Andrew. "At the start of October we were looking at a 100 percent chance." Nevertheless Andrew still sees the RBA cutting its key interest rate.With the data in both China and Australia perhaps bottoming at the moment the argument for a rate cut might be diminishing, but I do think they will produce one at this time. "I can’t see any issue with giving the local economy a bit of a tickle before Christmas," says Andrew.See more of Andrew's Asian market commentary on TradingFloor.com
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Asian Focus: Pressure increases on BoJ to provide more easing
In this video Yvette Roper of TradingFloor.com interviews Andrew Robinson, ...
In this video Yvette Roper of TradingFloor.com interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, about the outlook for Japan and the growing expectation that its central bank will provide more stimulus to ensure it reaches its growth and especially inflation targets this year.he Bank of Japan (BoJ) meets a on October 30 and in the lead up to this policy meeting there’s little doubt the markets are looking for additional stimulus with the USDJPY 80.00 handle having beenbroken. In addition to market pressure, politicians have also been pushing for action. Both a new finance minister and economics minister have recently been quite vocal in their attempts to get the BoJ to introduce more stimulus to achieve the 1 percent inflation target,” says Andrew . “The biggest risk is that if the BoJ does nothing then the market is totally disappointed,” says Andrew.In terms of what stimulus the BoJ may provide, more purchases of Japanese government bonds are touted as the most likely, says Andrew.Focus is also on the BoJ’s inflation and growth forecasts which it will release at its meeting. Growth wise no surprises are expected, given the domestic and external economic situations. Of most interest is the outlook for inflation though. “If they start to lower their inflation forecasts going into 2013 and 2014 then that will look pretty bad,” says Andrew who anticipates that the bank will affirm it is moving closer to its 1 percent target.According to Andrew, reaching the 1 percent target however is not at all realistic. “The one percent target is a medium term target and they can delay reaching the target for one or maybe two years but any further than that then it does really look like a bit of a pipe dream,” he says.QE head start The Bank of Japan has had a head start compared to other central banks in terms of quantitative easing (supposedly up to its ninth round) and like many is seemingly stuck on this QE to infinity path. “It is their only option - what else can they do to try to stimulate the economy?” says Andrew, adding that the bank like others is still hopeful such measures will work in the future despite them failing so far.In terms of where dollar-yen will trade ahead of the BoJ meeting, Andrew’s immediate support levels are 79.45 (the 200-day moving average). If we break below there then there’s a bit more support around the 78.50 level. Further out the markets are talking about extending the rally to 82 and some participants say possibly already by the end of the year.“Personally I think there is more of a chance of getting there in Q1 rather than in Q4,” says Andrew, adding that dollar-yen has a habit of never quite getting to the targets immediately.See more of Andrew's Asian market commentary on TradingFloor.com
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Asian Focus: Is the worst over for China's economy?
In thisvideo Yvette Roper of TradingFloor.com interviews Andrew Robinson, Market ...
In thisvideo Yvette Roper of TradingFloor.com interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, about the challenges for China’s economy - growth and inflation wise -and the impact of the pending leadership handover. He also comments on the recent fall in the dollar-renminbi currency pair and the role of the People’s Bank of China in all of this. China’s economy grew an expected 7.4 percent in the third quarter. Though the rate is still below Chinese authorities’ official target of 7.5 percent growth for all of 2012, the year to date increase was 7.7 percent thereby indicating that perhaps there is little reason to be overly concerned about growth for the world’s second-largest economy. “The stimulus measures are slowly filtering through into the economy and perhaps authorities have done enough to allow a bottoming or even a turnaround in the economy,” says Andrew. Of greater concern for authorities is inflation and the National Statistics Bureau recently urged caution in this area. The main concern is that money being pumped into global economies could force global inflation issues. Expecting any intervention before the end of the year though is unlikely, due to the pending leadership change and expectation of inaction. This factor alone is possibly enough to indicate that China will reach its growth goals and that the economy at the end of the year will be in a better state than it is at the moment. “Mr. Wen will not want to be seen as passing a lame duck to his counterparts,” says Andrew. “Generally he is positive he has done enough to at least find a bottom for the Chinese economy.” Golden Week impact on retail salesRecent retail sales data further bolstered China’s growth outlook. Retails sales for September rose 14.2 percent year on year and were up 14.1 percent year to date. The data may however have been skewed by excessive spending in the run-up to the national holiday in the first week of October. The role of private consumption in driving growth though is still inadequate. “Compared to 10 years ago domestic consumption as a contributor to GDP is still lower than it was then, so there’s a bit more work to do on that front,” says Andrew. USDCNY situationThe dollar-renminbi cross is down 4½ big figures in the last week. The reasoning for this could possibly be the effect of the pending US election and related issues about labeling China as a currency manipulator. It is quite possible that this alone is preventing the People’s Bank of China from intervening. “Some say the tail risks for the Chinese economy are diminishing so we are seeing a lot of domestic on-shore US dollar selling and that is putting a lot of pressure on the currency and the PBOC is maybe willing to stand back and let it fall,” says Andrew. See more of Andrew's Asian market commentary on TradingFloor.com
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Asian Focus: China markets dry up making trade goal a pipe dream
In this video, Yvette Roper of TradingFloor.com interviews Andrew Robinson, ...
In this video, Yvette Roper of TradingFloor.com interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, abouttrade and inflation data in China which is expected to give further indication that the all-important Chinese economy remains vulnerable to the growth issues plaguing most parts of the world. China releases new trade data on October 13 and inflation data on October 15.Trade suprlus upheld by imports falling at faster pace than exportsSpecifically on trade he looks at how Chinese exports and imports are slowing. Exports are struggling but for the moment China's trade balance is being kept in surplus because imports are slowing more than exports. The decline in imports though is concerning because of the negative knock-on effect on the rest of the Asian economies. Achieving the Chinese authorities' goal of 10 percent growth in trade in 2012 is definitely a challenge, says Andrew. China’s total trade volumes in 2010 rose more than 20 percent a year and in 2011 the rate slowed to just above 12 percent a year. This year so far the rate it is down 1 percent on the year. Impact of easing and other measuresHe also comments on the limited impact of Chinese easing measures up to now and the need for great patience or a dramatic turnaround in the fourth quarter if Chinese authorities are to achieve their goal of 10 percent growth in trade this year, which he describes as a pipe dream. In terms of helpful easing measures there's little relief in sight in the short term. The most recent suspension of customs fees on incoming and outgoing goods to China will probably have the quickest effect while infrastructure projects, reserve requirement ratio changes and interest rate cuts have a substantial time lag. "In the meantime we have to be patient and probably have to survive some seriously bad data," says Andrew. Food inflation a big concernOn inflation he says the serious impact of rising food prices, particularly meat, is a major concern for Chinese authorities. Pork prices across 50 cities have been rising 0.8 percent every 10 days while beef is up 1.5 percent on average for the same period. On the inflation front there's no quick fix as easing measures have no effect. "You can’t fight food inflation with interest rate moves," says Andrew. Meanwhile, the rest of the inflation basket in China is behaving relatively okay and Andrew sees inflation hovering around the 2 percent level for some time. Yuan status - re-evalutaion takes back seatSince the quantitative easing measures by the Federal Reserve the dollar-yuan rate has stayed where it is at the bottom of its recent range. There has not been much mention about exchange rate issues from either Chinese or US authorities of late. "Even if you want to devalue your currency to make your exports more attractive if nobody is buying them then there is no point as there is still no market to export to," says Andrew. See more of Andrew's Asian market commentary on TradingFloor.com
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Q4 Commodity Outlook: Weak fundamentals create headwinds
Into the fourth quarter we think the impact of the ...
Into the fourth quarter we think the impact of the latest round of quantitative easing will fade and the dollar should find some support which in turn will create some headwinds for the commodity sector as a whole, says Ole Hansen, Head of Commodity Strategy, in Saxo Bank's Q4 Outlook.We continue to favour gold as raised inflation expectations and low official US rates until 2015 will keep the real rate of return on fixed income investment entrenched in negative territory. Energy prices, which had another attempt to the upside in Q3, once again found lack of support from sluggish economic fundamentals and lower to flat prices followed. This scenario of subdued price action is set to continue into Q4 barring any geo-political upheaval.For more of Ole Hansen's commodity commentary on TradingFloor.com see: http://www.tradingfloor.com/traders/ole-hansen
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Q4 Equity Outlook: Go small cap for large returns
The extreme intervention by global central banks distorts the price ...
The extreme intervention by global central banks distorts the price signalling effects of the marketplace and increases uncertainty in financial markets but also the real economy, says Peter Garnry, Equity Strategist in Saxo Bank's Q4 Outlook.On that basis equity risk premium and credit spreads are worth less value to investors. We foresee subdued economic growth going forward as the financial repression continues and in that environment small niche companies with comparative advantages will do well compared to larger companies.For more of Peter Garnry's commentary on TradingFloor.com see: http://www.tradingfloor.com/traders/peter-garnry
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Q4 Market Comment: Groundhog Day - Micro needs to replace macro
Q3, like most of 2012 so far, was about pretending ...
Q3, like most of 2012 so far, was about pretending to do something, while doing absolutely nothing and central banks putting everything on red in the ‘monetary casino’, says Chief Economist Steen Jakobsenin Saxo Bank's Q4 Outlook. We have essentially all become liquidity junkies, and this late in the year even the perma-bears have given up as there is no end in sight for quantitative easing to infinity and the Federal Reserve is now even promising to keep low rates into 2015. The main questions for the balance of 2012 have to be: how long can we keep the social unrest at bay and at what cost ? The Groundhog theme for this Q4 Outlook is illustrated in how we keep cycling back and forth between denial and protest with a real mandate for change neither given nor taken by anyone. We need a mandate for change in order to leave this low productivity, high taxation, no lending and no job growth environment behind, and in order to move towards the full potential of the micro-economy - the ultimate breadwinner in times of crises. Just like Bill Murray in Groundhog Day, we too may be able to improve the quality of the same repeating day, but ultimately and unfortunately we remain trapped until the current macro policies are abandoned. For more of Steen Jakobsen's commentary in TradingFloor.com see: http://www.tradingfloor.com/traders/steen-jakobsen
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Q4 FX Outlook: Market nerves will lead to volatility expansion
As we head into Q4, the global spirit of central ...
As we head into Q4, the global spirit of central bank interventionism has imposed tremendous losses on the macro “bears” particularly in the EU’s case, as a EUR bear squeeze ruined the best trend going in FX in September, says John Hardy, Head of FX Strategy in Saxo Bank's Q4 Outlook.In Q4, the QE effect may continue to fade. If not, we could get an unconvincing rally in risk currencies and sidewise action in the USD that merely delays the scenario until Q1, but that’s not the preferred scenario as the pressures of reality are mounting on central banks and policymakers to solve the issues at hand. See more of John Hardy's daily commentaryon TradingFloor.com: http://www.tradingfloor.com/traders/john-j-hardy
