Daily Kickstart (Swedish Edition)

Daily Kickstart (Swedish Edition)

It makes total sense to take some money off the table. We’ve priced in no policy mistakes. We’ve priced in no market accidents, and we’ve ignored all sorts of political issues.

That’s from Mohamed El-Erian and the former PIMCO chief could scarcely be any clearer. This week the market has taken apathy to a whole new level as US equities shrugged off the assassination of Russia’s ambassador to Turkey and a terrorist attack-by-lorry on a Christmas market in Berlin on the way to (nearly) hitting Dow 20,000, a level once thought to exist only in the minds of the world’s Jeremy Siegels.

On Wednesday, oil traded higher on falling US stockpiles while Spanish banks and Italy’s struggling Banca Monte dei Paschi di Siena fell on concerns tied to mortgage refunds and liquidity concerns, respectively.


Aside from that, it’s larger a snoozer out there. Here’s a brief rundown from Bloomberg:


  • The Stoxx Europe 600 Index fell 0.2 percent at 11 a.m. in London.
  • A gauge of European banks was among the worst performers, falling 0.6 percent, while financial services companies dropped 0.8 percent.
  • Futures on the S&P 500 Index were little changed The gauge rose 0.2 percent to 2,266.5 on Tuesday, a point below its all-time high. The Dow Jones Industrial Average closed at an unprecedented 19,974.62


  • The yen gained 0.3 percent to 117.46, after falling 0.7 percent on Tuesday. The euro added 0.2 percent to $1.0408, after touching an almost 14-year low of $1.0352 yesterday.
  • The Bloomberg Dollar Spot Index was little changed after climbing for two straight days. The measure’s gain for the quarter is 7.6 percent, heading for the biggest three-month advance since the third quarter of 2008.


  • Yields on 10-year Treasury notes fell one basis point to 2.55 percent, after gaining two basis points Tuesday.
  • Germany’s 10-year bund yields dropped two basis points to 0.24 percent.

Top US News

  • Coca-Cola buys AB InBev out of Africa bottling unit for $3.2 billion and also agrees to buy AB InBev’s interest in bottling operations in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras for an undisclosed sum
  • FedEx profit disappoints as ground-delivery spending rises; CFO Alan Graf says investment will help in long term
  • Stanley to sell Door- Locks Unit to Dormakaba for $725 million, possibly to raise money for acquisitions of its own
  • Trump Needs to Thwart Recession-Prone History of GOP Presidents; risk of a U.S. economic contraction occurring during his time in office can’t be cavalierly dismissed
  • Fed blurs intentions as dots drift away from economic forecasts; median estimate for growth next year edged up by just one-tenth of a percentage point
  • JPMorgan, Barclays Fined in Swiss Rate-Rigging Probes

Meanwhile, Sweden’s Riksbank extended QE through the first six months of the new year. There’s a greater probability that rates will be cut than raised near term, the bank said. Still, analysts interpreted the move as carrying a hawkish bias. The central bank is “at the end of the road as two board members entered reservations against QE and another board member advocating bond purchases of only SEK15b,” SEB’s Erica Blomgren said. Both Nordea and Swedbank said Sweden is likely “done” with easing. Given the current SEK forecast, “there’s a clear risk that the Riksbank will be challenged again early next year [and] we deem that it is more likely that we will see a rate cut than a rate hike in 2017,” Nordea’s Andreas Wallstrom said, in a note out Wednesday. “If we look at the risk picture, the likelihood of a rate cut is larger than for a hike,” he added. How’s that for mixed signals?

Ultimately, it’s all relative and between the split decision and the fact that the Riksbank’s program pales in comparison to the scope of ECB QE, today’s move comes across as hawkish and that’s showing up both in analyst banter…

  • Chris Turner, strategist at ING
    • The central bank is still trying to prevent SEK from appreciating too quickly by threatening a rate cut in early 2017, but the market does not buy into that as the accompanying policy statement is relatively upbeat
      • Expects EUR/SEK bear trend to continue
      • The scale of the Riksbank QE activity in no way matches the ECB’s vast scheme and leaves the SEK vulnerable to appreciation pressure
    • EUR/SEK can depreciate into year-end. 6m and 12m EUR/SEK forecasts at 9.50 and 9.20 respectively
      • Shorting EUR/SEK as one of top 2017 trades at ING
  • FX strategists at HSBC
    • SEK reacted to the lack of unanimity on the extension of QE; this will be seen as a hawkish development
      • Going into 2017 the big question for SEK will be just how much the local data supports a less dovish policy
    • Economic data has been disappointing relative to expectations, and while inflation is seen picking up, this may be short-lived, especially if SEK strength continues
  • Manuel Oliveri, strategist at Credit Agricole
    • SEK driven by growth and price developments of late and there is limited scope of cutting interest rates further
      • SEK should continue to gradually appreciate as central bank has reached the lower bound in rates
    • Any QE extension is regarded as preserving the stance, as a transition toward the end of the rate cut cycle
    • EUR/SEK should remain a sell
  • Aurelija Augulyte, analyst at Nordea
    • No big surprises from Riskbank, slightly hawkish twist from the QE side as half of the board were against the QE extension
    • We retain bias for a stronger SEK here, as data improves we should see EUR/SEK below 9.60 soon

… and in the EURSEK…


Finally, Asian shares were largely mixed on Wednesday with Shanghai,  Hong Kong, and Sydney bourses up while Tokyo and Seoul were weaker on the session.

Happy trading.

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