December 2015 saw a paradigm shift as the U.S. Federal Reserve finally delivered its first rate hike in more than nine years. Saxo’s outlook for Q1 therefore focuses on ‘minding the gap’ – examining the net change of how various asset classes react during rate hike cycles.

Steen Jakobsen, Saxo Bank’s Chief Economist, said: “Q1 will be a tough start to the year dominated by confusion, increased volatility and a lot of Fed second guessing. The bigger picture however is that we are transitioning towards a model of marginal cost of capital and that is good news.

“Fed hikes are a sign of healing not sickness and 2016 is set to offer great opportunities for investors who are looking to capture growth in their portfolios as the market resets itself.”

Against this backdrop, Saxo’s outlook for major asset classes in Q1 2016 is as follows:

Commodities

Q1 could be the worst in the cycle for beleaguered oil. The lifting of sanctions against Iran could boost exports, initially from oil held in floating storage and later by 500,000 barrels/day into an already oversupplied market. In the U.S., inventories tend to rise during the first four months and this could increase pressure on Cushing, the delivery hub for WTI crude oil futures.

The first quarter will also continue to pose a challenging environment for precious metals with investors’ most likely viewing higher rates in the U.S. and continued quantitative easing in Europe and China as a dollar-buying opportunity.

FX

More than ever, now that the Fed is actively adjusting interest-rate policy again, the outlook for global markets and all currencies, major and minor, hinges upon the Fed hikes to come and adjustments in the market’s anticipation of the pace of those hikes. A straightforward call is for the USD to rise as the Fed is now leading the pack in unwinding the exceptionally easy policy of the years since the global financial crisis.

Bonds

As we enter a new year, one topic will dominate the agenda and preoccupy investors the world over – the credit factor. And with interest rates lifting off from zero, the cost of credit will inform the performance environment both on a national as well as corporate level. In the event of any economic upside surprise during Q1, it makes sense to add a short bund position in a portfolio context.

Equities

If equity markets are shielded from energy and mining credit crunch spillover – which is our scenario – then 2016 will likely be a good year as investors face a flattening curve in USD yields, negative rates across European government bonds as far out as five-year maturities and in short-term Japanese government bonds.

Macro

The global economy will hold up in the face of the first U.S. rate-hike cycle in a decade, but the outlook is skewed towards the advanced economies and away from emerging markets. For now, however, the ramifications of the rising cost of capital will not be exclusively negative and global growth will inch higher.

Europe

Poland has enjoyed the reputation of a solid, recession-resistant and well-developed economy for some time now. Unfortunately, it remains highly vulnerable to higher capital costs – particularly insofar as the energy sector is concerned. Our view is that Polish growth will likely take a hit in 2016.

Asia-Pacific

Q1 marks the Chinese New Year of the Red Fire Monkey – a year that could be characterised by extra market mischief, ambition and yet more volatility. Dislocations and fragmentations will be even more strenuous in 2016, with geopolitical risk high on the agenda and the potential for a global economic slowdown in what is already a challenging environment.

Access the full list of trade ideas produced by Saxo Bank analysts which accompany the Essential Trades for Q1.

The post ‘Minding the gap’ – Saxo’s Essential Trades for Q1 appeared first on AdviserVoice.

Outlook for Europe

Saxo Bank, the online multi-asset trading and investment specialist and parent company of Saxo Capital Markets, has published its second quarterly insight for 2014, focusing on the outlook for Europe.

European outlook: A United States of Europe?

Following an abundance of false starts, the European economy is likely to encounter further challenges in Q2, Saxo Bank writes in its second quarterly insight for 2014. By the end of the second quarter, the European Central Bank is likely to grow increasingly concerned about deflation and the lack of growth and signal new quantitative easing and yet another set of unconventional measures.

As well, Europe faces its biggest electoral challenge since the 1970s, as the reality gap between Europe’s voters and their EU-friendly politicians is wider than ever. At the May EU parliamentary elections, look for EU sceptic parties to form one of the largest overall blocs in the new European Parliament. If Brussels listens to voters, it could mark a decisive turning point for the failing EU experiment, even if for now, the political status quo is more likely to maintain the upper hand.

While the economic outlook appears to be improving for Spain, Portugal and Greece, this is really part of an internal transfer of problems from these ‘Club Med’ countries to France and soon Germany, which is likely to flirt with recession by the end of the year. France and Germany are also likely to suffer from reduced exports, particularly in the luxury goods sector, as Asian growth cools.

Steen Jakobsen, Chief Economist and CIO for Saxo Bank, commented: “The EU member countries have surprised with their political solidarity over the last few years of the EU crisis, but the electorate is growing restless and EU-sceptic parties are making huge inroads that the establishment must recognise. Beside this we have the eternal problem that the EU entirely lacks an economic foundation that is sound and long term. Here in early 2014, EU complacency has never been higher, just as real political and popular entropy is about to make its presence felt.”

Global outlook: a ‘state of flux’

The ‘Fragile Five” (South Africa, Brazil, India, Indonesia, Turkey), which with the recent additions of Argentina, Russia and Chile have become the “Fragile Eight”, are now in the process of rebalancing, as the Fed tapering has forced their currencies weaker and required policy tightening that will crimp growth and right the structural imbalances that have grown in recent years. This “state of flux” is a positive development overall, but too many countries and economies are trying to do the same thing simultaneously – devalue and increase exports – so growth is likely to weaken structurally and cyclically due to prior credit excesses.

As Jakobsen points outs, “We have been so focused on saving the world, the banks and the political system that we have underinvested in people, education, infrastructure, innovation and technology.

“It will not be the European Parliamentary elections that make or break the EU, but how the policymakers and their trusted mandarins respond to the slowdown and subsequent rebalancing of the world.”

Key points on investments for 2014:

Fixed income: core government bonds will be the only asset that is up Q1 2014 versus Q1 2015 (rebalancing and lack of productivity).

Foreign exchange: EURUSD will peak at about 1.4000/1.4050and then turn down to 1.2500 (the ECB should get active on deflation over the summer). USDJPY could see 95.00 on a VAT hike and initial signs of Abenomics failing. The “Fragile Eight” will drop another 5 percent.

Commodities: will do well through Q2 as real rates will drop, but could fall again heading into H1 2015.Will take profit in Q3 2014.

Equity: The S&P 500 will peak at about 1,900-1,950, then a 30 percent correction. Equities are the only asset not yet hurt by the changing economic cycle.

The post Saxo Bank publishes its investment outlook for Q2 2014 appeared first on AdviserVoice.

The new portal enables traders around the world to share their trades with peers and transforms trading into a social experience.

“We want to set free the peer-to-peer power of traders around the globe by enabling them to connect online with experienced and like-minded investors who are tired of input from salespeople from traditional banks,” Saxo Bank co-founders and co-CEOs Kim Fournais and Lars Seier Christensen said in a joint statement.

On the new site, live now at beta.tradingfloor.com, investors can share their trades in a community where all performance data is verified so traders can be sure of the performance of the people they choose to follow or copy.

Kim Fournais and Lars Seier Christensen believe it may be a game changer: “Having once revolutionised online trading as a first mover in 1998, we now want to democratise the access to trading and fund management by opening up an otherwise closed world of trading. We now enable investors to share their trades openly, interact with each other, post comments and strategies, discuss, follow and copy each other. We believe that this may change radically how investors will go about trading FX, CFDs, options, futures, bonds and equities in the future, making trading a social experience,” they said.

Kim Fournais and Lars Seier Christensen added: “At the new TradingFloor.com, you can see what the best participating traders are doing with their own money in any asset class of your choice. We are deliberately only featuring real traders with real accounts trading their own money to ensure a social trading community of serious investors.”

The new TradingFloor.com also features a range of valuable content for traders, such as market news and views, data, insights and trade ideas from Saxo’s research teams and VIP authors. A real-time trade stream will reveal the current market sentiment. British award-winning ITV News correspondent Angus Walker has joined Saxo and will, along with former Bloomberg and BBC World anchor Owen Thomas, front the portal’s on-demand TV channel by reporting from Saxo’s own trading floor.

The post Saxo Capital Markets launches new portal combining social features with trading platform
 appeared first on AdviserVoice.

Saxo Bank’s outlook for 2014.

Saxo Bank, parent company of Saxo Capital Markets, the online multi-asset trading and investment specialist, has published its first quarterly insight for 2014 looking across both the macroeconomic environment and individual asset classes.

Global overview

Having maintained world growth at acceptable levels throughout the current crisis, emerging Asia will become the world’s primary weak spot in 2014. Investment in that region has reached a staggering 43% of GDP while growth has fallen to barely 6%; the easy part of the growth cycle is long gone, and some emerging market governments are now proactively trying to slow their economies down. This is not necessarily a bad thing for Asia, which needs to cool off and reconsider its economic model; Europe, however, will be hit by the fallout of the troubles facing its best growth market for exports.

Beyond emerging Asia, Saxo Bank expects the global economy to accelerate from 2% growth in 2013 to 2.8% in 2014. This uptick will be led by the US where private consumption and private investment will prove key drivers, pushing growth close to 3%. Tapering will continue as the economy strengthens, which would imply an exit from QE in the second half of 2014.

The Eurozone is on the mend and likely to see growth move into positive territory of 0.8% in 2014, but the outlook for Germany and particularly France remains bleak, the latter having failed to spur growth outside increases in public spending. The two year decline in inflation across the Eurozone is unlikely to reverse meaningfully this year and the argument for additional ECB easing is valid, most likely through a new LTRO.

Steen Jakobsen, Chief Economist at Saxo Bank, comments: “It’s been a long time since the stars of macro indicators have aligned so perfectly. The good news? This is the beginning of the end of this crisis. The 2014-2015 period will see a transition away from quantitative easing and easy money towards better quality growth and, hopefully, a mandate for real change. The world has become so out of balance that things can only improve from here.”

Equities

Peter Garnry, Head of Equity Strategy, underlines the continuing importance of holding equities to see any meaningful capital growth. The relative repricing between equities and bonds will continue in 2014 as total return in equities relative to bonds remains below the equity risk premium line since 1995. He comments: “Don’t pay any heed to those who say equities are in a bubble. If you really want to make the most of your portfolio in 2014, the biggest risk is not being long enough on risky assets. ”

Saxo Bank forecasts a 10 percent overall rise in global equities over 2014. Its top equity picks for 2014 include General Electric, Microsoft and BNP Paribas.

FX

The market is assuming that the Fed will adopt a slow and steady approach to decreasing purchases, and as such the anticipated path is towards a higher USD. However, if markets lose their nerve the USD strength could shift more prominently against the less liquid G10 and emerging-market currencies rather than the JPY and other majors.

John J. Hardy, Head of FX Strategy, adds: “Q1 will see a concerted effort to wean the FX market off QE. The Eurozone could prove a flashpoint, with the peripheral economies ready to rebel if the ECB doesn’t take stronger steps to expand its balance sheet.”

Saxo Bank’s top FX trading themes for Q1 2014 include long USDCAD, long USDJPY and long GBPNZD.

Commodities

Another tough year lies ahead for commodities, with the risk of even lower prices still a possibility. Demand growth has stabilised as economic growth rates in emerging economies, not least China, have declined.

The energy market will have to deal with the possibility of global crude oil supply exceeding demand for the first time in recent memory, thanks in part to the rise in non-OPEC production, and the average price of Brent crude is likely to move lower towards USD 105/barrel. After 2013 saw gold’s first annual loss in 13 years, Saxo Bank is cautiously optimistic for its prospects later in 2014 after averaging 1,225 USD/oz during the first quarter.

Ole S. Hansen, Head of Commodity Strategy, adds: “Raised growth expectations at the beginning of the year carry the risk that investors will once again become too optimistic about the prospects for higher prices, especially in crude oil and industrial metals. Strong January performances over the past three years could therefore be repeated only to be retracted later in the quarter.”

The post Saxo Bank publishes its investment outlook for Q1 2014 appeared first on AdviserVoice.

Outlook is positive for Q4: Saxo Bank

With or without the support of further quantitative easing from the major central banks, global growth is headed for a slowdown, say analysts at Saxo Bank, the parent company of Saxo Capital Markets, in the Bank’s financial outlook for Q4.

They don’t expect a sustainable comeback for growth until policymakers stop supporting the parts of the economy that don’t need or deserve support and start supporting the most important engine of job and economic growth: small and medium-sized enterprises (SMEs).

With the intensifying need to reset interest rate expectations after the Fed’s non-tapering of its asset-buying programme, there is a perfect storm brewing on the economic horizon. This would be good news, Saxo Bank pointed out in the Quarterly Outlook published on 8 October. The only way to stop the unprecedented monetary experiment is for it to fail to show that it is generating what should always be the number one priority: more jobs and rising incomes.

Saxo Bank argues that a weak economy and in particular the struggling labour market will force the Fed’s hand, and instead of tapering it will have to increase its QE next year as the economy is too weak to weather a pullback in Fed support. As the markets adjust to the prospect of more QE rather than less, we may see another bout of hope that extend and pretend will continue to pump asset valuations ever higher. However, further ahead, likely sometime early in 2014, the QE cycle – or at least the markets response to it – will begin to falter as Fed policy will increasingly risk losing credibility. In the end, all major historic shifts in policy have only come as a result of massive stock market declines or unemployment rates becoming too high and painful to ignore. In other words, QE will only be threatened as a policy tool when the markets roundly reject it, rather than celebrating it.

Steen Jakobsen, Chief Economist, Saxo Bank, comments: “The global economy is running on empty. 2014 will see a bigger discussion on what is the real exit strategy from the current ‘extend and pretend’. Right now the market only sees two paths: Inflating the economy to reduce the burden of debt, or writing off the debt between treasuries and central banks. But I believe there is a third way: A repeat of the 1940s – the last time fed was this involved in so-called helping the market. Back then, the Fed got saved by disinflation and a recession brought on by the very same policy which today slows the path towards recovery too much easy money. History is about to repeat itself only because we fail to learn and to embrace the need for change”

Saxo Bank advises to prepare for a good start to Q4, but for headwinds in asset markets to build as we roll in to 2014. Steen Jakobsen added: “2014 will be the year to clean up and prepare for a world that is increasingly more balanced, less leveraged and more proactively helping the one part of the economy we have kept outside the loop throughout this cycle: the SME.”

The full report can be downloaded here: http://storage.saxosoft.net/au/q4-outlook.pdf

The post Saxo Bank’s Q4 2013 Outlook: Destined for global growth slow down appeared first on AdviserVoice.

Following the conclusion of that investigation, which focused on the risk management practices of Saxo Bank, ASIC has agreed with Saxo Bank that additional licence conditions will be included on the Australian financial services (AFS) licence under which it will continue to conduct its business in Australia.

The additional licence conditions agreed with Saxo Bank, which apply to Saxo Capital Markets (Australia) Pty Ltd (SCMA) require SCMA to:

• engage an expert to review and report on the adequacy of SCMA’s risk management systems to properly address credit risk, client risk and compliance risk
• implement any recommendations made by the expert over a six month period
• engage the expert for further reviews and reporting over an 18 month period following the initial expert report
• provide ASIC, on a bi-annual basis, independent verification of client monies being held by SCMA.

Since September 2004, Saxo Bank has held an AFSL authorising it to provide financial services on a wholesale basis. Under that wholesale licence, Saxo Bank contracted with a number of retail licensees in Australia, including Sonray, to facilitate the trading of various financial products on a trading platform, Saxo Trader.

Saxo Bank will now provide financial services in Australia to retail clients directly through the entity SCMA. This follows Saxo Bank, in late December 2011, acquiring control of Commodity Broking Services Pty Ltd by purchasing the shares of Logos Commodities Pty Ltd, the holding company of CBS. At the same time, CBS changed its name to Saxo Capital Markets (Australia) Pty Ltd.

ASIC Chairman, Greg Medcraft, said the additional licence conditions on Saxo Bank’s AFSL reflected ASIC’s priority to improve industry standards amongst financial services licensees. He added that the new licence conditions were an important part of restoring investor confidence in the broader broking area and providing reassurance that compliance procedures are in place to ensure risk management practices are of the standard required under the law.

The post ASIC finalises investigation into Saxo Bank following Sonray collapse appeared first on AdviserVoice.