tradingfloor.com 2013 q2 insights

7/28/2019 TradingFloor.com 2013 Q2 Insights

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Equity Isights

Anothpoitiv ya

Q2 Isights

Th nof th

f iFX Isights

T till ontgow to th ky

Maco Isights

Mot ptickin gowth

Commodity Isights

Tail-n ik laving littloom to th pi

Quatey Outook Q2 2013


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So, its the ed of the fee ide as we kow it. O at east it shoud e. I ecoomics, the

tem fee ide is used to descie a eso who eefits fom a vaiety of esouces

o sevices without ayig fo them.

As we move ito the secod quate of 2013, the cocet ca e see eveywhee,

fom cometitive devauatios to ack of efom i the US ad Euoe, ot to metiothe faiue of the Euoea Couci to agee o a aiout ogamme ad uic secto

esistace to much-eeded efoms.

But where to from here?

Wod gowth is eig oweed ad fisca deficit oectios ae o the ise. Sue, the

stock maket might e ueat, ut that is aothe exame of the fee-ide cocet

ad, it has to e said, it has ecome a efuge i itsef. Thee is o dout that the

ecoomic cisis is i a taisi ad oiticias ae stadig idy y.

Ad with a eyes o Gemay ad its Seteme eectio, it has to e asked: wi Gemay

wite a ig cheque ad save the sige-cuecy oc? The facts state othewise, whie

this hoe is ased yet agai o a fee ide that thee wi e a Gema wiigess to

he. Aways.

Thow i the Cyus ai-i, which ceated o wies, ad the cocusio is that

Euoea decisio-makig has ee eft eedig ad without hoe of ecovey. The

ack of coheet oicies aises seious coces ove who wi ay fo futue ai-is.Ovea, this adds weight to ou geea theme of a stoge USD ad ou eief that

much of the ivestmet etu fo the est of the yea wi come fom foeig-exchage

exosue.

That said, we ae seekig a madate fo chage, which woud e est accomished y

a oactive ecogitio of the eed to efom.

Ad theei ies ou otimism: thigs cat get ay wose.

Home


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Home

STEEN JAKOBSENChie Economist

PETEr GArNryHea oEquit Stateg

JOHN J. HArdyHea oFX Stateg

MAdS KOEFOEdHea oMaco Stateg

pETErSblOG

jOHnSblOG

MADSblOG

E-MAIl E-MAIl E-MAIl

TWITTEr TWITTEr TWITTEr

WEb WEb WEb

OlE S. HANSENHea oCommoit Stateg

OlESblOG

E-MAIl

TWITTEr

WEb

STEEnSblOG

E-MAIl

TWITTEr

WEb


4/40

Th month into th ya an w gowth bing low an fical ficit

pojction inca by all of th Clb Mconti, pl Fanc an now alo Gmany.

Th Intnational Montay Fn ha lowwol gowth an w a looking at a 2013 that i,fom th oti, a mio imag of 2011 an 2012.

b STEEN JAKOBSEN, Chie Economist

Th n of th

f i

Q2 IsightsHome


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A fee ide i ecoomics efes

to someoe who eefits fom

esouces, goods, eefits, o sevices

without ayig fo the cost of said

eefit.

This tem ca est descie how the wod

i the fist quate moved fom a fee-idig

cocet to atat uic disageemet o how to

kee the aty goig. The stock maket is hittig ew

highs ut emoymet ad gowth, the two factos

that eay matte i the og tem, ae hittig ew ows

moth y moth.

Attemts to fee ide ca e see evey day i cometitive

devauatios, ack of efom i Euoe ad the US, the iaiity of

the Euoea Couci to agee o a aiout (o ai-i) ogamme,

the stock maket ise, ad how iteest gous (ead uic secto)

efuse to efom desite the ovious eed ad geate good of doig

so.

The ecoomic cisis has evoved ito a fu-ow oitica cisis. Whe

govemet det ecomes too age ad the fisca deficit exodes, it is much

moe difficut to iduce a iteest gous to co-oeate. The ate the fiacia

ecostuctio is iitiated, the igge the deficit ad it is moe ikey to e usuccessfu

ecause of the aties ack of iteest. This is the case i the US ad Euoe ight

ow: they have ought so much time that the oem has moved fom eig a issue

that coud e deat with to somethig that must e deat with.

Thee moths ito the yea ad we see gowth eig oweed ad fisca deficit oectios

iceased y a of the Cu Med couties, us Face ad ow aso Gemay. The Iteatioa

Moetay Fud (IMF) has oweed wod gowth ad we ae ookig at 2013 that is, fom the

Q2 IsightsHome


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Caita cotos: oe euo i Cyus is ot the same as oe

euo i bei o pais ay moe. You caot move you

moey off the isad.

bai-i of seio odhodes: I Geece, it was oy uio

odhodes.

bai-i of deositos with moe tha EUr 100,000 i thei

accouts.

The moe seious vioatio is the caita coto. A ecoomic

ad moetay uio o oge exists acoss the Euozoe.

The ack of coheet oicy soutios aises the questio: who

is to ay fo futue ai-is? Is it oe seaso o uisued

deositos fo oicymakes? It woud aea that this souce

of eveue is fa moe efficiet, o imemetae, tha aisig

othe tyes of taxes i couties such as Itay, Sai, Geece

ad potuga.

Oe ca secuate that the utimate goa coud e to itoduce

a Swedish-tye akig mode fiaced y a evy o assets

fom deositos ad shaehodes. To uid a fud ig eough

to ecaitaise a of the aks i the Euozoe, the i woud

e EUr 3 tiio, o 30 ecet of the ocs GDp, accodig

to Citigous chief ecoomist Wiem buite. I eeat EUr 3

tiio.

A deosit tax is aeady i ace i Itay ad Sai. Itay has

had a 0.015 ecet tax o assets ude maagemet sice

Deceme 2011 ad oy a few weeks ago, the Saish couts

aowed the govemet to imose a 0.2 ecet to 0.3 ecet

deosit tax.

outside, a mio image of 2011 ad 2012. but thee is oe

diffeece: the Gema eectio o Seteme 22 the mai

evet of the yea.

The Gema eectio cat come soo eough. We eed to

eak this egative cyce that is siaig out of coto, iwhich oiticias ae stadig idy y. The et that Gemay

wi, utimatey, wite a ig cheque ad accet fisca uio

is evaet i the maket, ut ehas histoy is ette

guide.

The sige iggest cheque eve witte was the Masha

pa offeed y the US to Euoe ost-Wod Wa II. Its size?

A imessive USD 13 iio i a USD 258 iio ecoomy o,

i othe wods, 5 ecet of US GDp. lets assume Gemay is

wiig to ai-i the est of Euoe with a ume equivaet

to the US Masha pa: Gemays GDp is USD 3.6 tiio ad

5 ecet of this is USD 180 iio, o EUr 140 iio hady

eough cosideig it is estimated that etwee EUr 2 tiio

ad EUr 3 tiio is what is eeded to sto the EU det cisis

oce ad fo a. We ae agai seeig that hoe is ased o

a fee ide that thee wi e a Gema wiigess to he,

ut the facts state othewise.

The Cyus ai-i o aiout ceated o wies oy oses.

no did it give ay cediiity to the EU ocess. It has eft

Euoea decisio-makig eedig ad without hoe of

ecovey as the EU Commissio ad the IMF exchaged hash

wods i the ame of a owe game, eve fo the sake of

futue Euoeas. We saw i Cyus how icies go out the

doo whe the Euozoe eeds to fid a soutio that fits the

oitica sectum. Cyus was a fist i thee ways:

Q2 IsightsHome


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We are looking at a mandate

for change. This would best

be achieved via a proactive

recognition of the need to

reform, but change, most likely,

will be triggered by another

failure, such not keeping Cyprus

or Greece in the Eurozone.

So Cyus was a fist i may ways, ut aso a extesio of

actices aeady i ace. let me wa agai: the fact that

deosit taxes ae cuety ow shoud ot make you see

easiy. VAT was itoduced i Demak i 1967 at 9 ecet,

ut it has sice ise to 25 ecet. The oit is that deosit

taxes ae easy to coect, come fom the ivate secto adwi e deemed fai y may o-ceditos agai ack to

the fee idig. If you have o moey i the ak, a deosit

tax seems fai ad with the eset oicy of o-efom, this

gou is gettig igge ad igge y the day.

This was est see i Itay, whee bee Gio ad his Five

Sta Movemet oed 25 ecet with o ogamme excet

eig ati-estaishmet. This is a waig fo a oiticias

i Euoe. Votes ae ot goig to sit this oe out, desitehavig ee fee ides fo a og time. The utimate chaege

of fidig os ad gettig ack to oma is ow moe

imotat tha ookig fo the system to ai them out.

Sice Cyus, this move shoud get stoge as savigs if i

excess of EUr100,000 wi e tageted y the Euozoe Toika.

The EU ad its oiticias ae uig out of time. by this time

ext yea, without chage ad efoms, thee wi ot oy e

ecoomic cosequeces to ay, ut aso oitica ot oy

fo domestic oiticias, ut aso fo thei EU couteats as

eectoates wi have o atiece with thei as to have a

a fo a a i 2018.

Meawhie, the shot-tem soutio is fo eveyoe to egage

i cometitive cuecy devauatio. Officiay, they ae a

coductig domestic-dive moetay easig, ut the fow of

caita chasig yied fom jaa ad the US is ow divig

ocas i Sigaoe out of thei ow couty. likewise fo

Q2 IsightsHome


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the ma o the steet i Zuich,

it is gettig extemey difficut to

maitai a stadad of ivig whie

o-domicied foeiges id u the cost

of houses, food, eegy ad eveythig

ese. Aothe socia tagedy.

The mai eeficiay emais the stock maket,

which has ecome a efuge i itsef. May eoe

evet to the Maxist agumet that oety ights

ae oy tuy otected i equity ad oety, with

the US eig the mai eeficiay.

This ays we to ou geea theme of a stoge USD ad

we eieve that the uk of ivestmet etu fo the emaideof 2013 wi come fom foeig-exchage exosue. We do ot see

a equity maket coase, ut the eset eve of the S&p idex

ad goa stocks amost y atue dictate a ause as we aoach

exesive eves fo stocks, aticuay i the cotext of owe goa

gowth ad weake eaigs. Fo stocks to cotiue isig, we woud eed

to see a ig imovemet i ecoomic gowth ad a mao ew souce of

moetay easig eyod the exected ate cut fom the Euoea Ceta bak.

I Q1, the wod moey itig machie ecame jaa, so ow the ace is ofo ecoomic coditios to imove efoe the moetay exeimets i the UK,

US ad jaa fai. The UK wi oay ty to exad futhe to ecome the ew

imuse i Q3 ut oay ot fuy efoe the chage of bak of Egad goveo i

juy. This eaves Q2 vueae to moe oitica issues fo wat of ew QE imuses. Most

imotaty of a, Q2 comes ight efoe the Gema geea eectio. This meas Chaceo

Agea Meke wi eed to exed geat eegy i exaiig he coutys oe i Euoe to

votes. I do ot evy he this task, eseciay as the cisis ada has aeady zeoed i o Soveia

as a otetia ew aiout cadidate i the secod quate.

Q2 IsightsHome

i h


9/40

We ae ookig at a madate fo chage. This woud est e achieved via a oactive ecogitio of the

eed to efom, ut chage, most ikey, wi e tiggeed y aothe faiue, such ot keeig Cyuso Geece i the Euozoe. Howeve, we aso eed to ea that faiig is a at of ife ad sigas

ew egiigs. The Kigdom of Sai has ee akut 14 times i histoy ad if we ook at

ou ow ives, it tes us that we ae at ou most atioae ad ogica whe we have ou acks

u agaist the wa.

Ad theei ies my otimism. As I ike to say at the stat of my seeches: Im the most

otimistic I have ee i 25 yeas, oy ecause thigs caot get ay wose.

The fee-idig see fo oiticias is ove. They ow eed to do somethig theyhave eve exceed at: face facts ad devise ea soutios. As they ae uikey to

ise to the task, the mico ecoomy wi do it fo them istead.

Q2 IsightsHome

download saxo banks mobile app here

You can follow the effects of these macro events on

the financial markets by creating a personalized view

on Saxo Banks mobile app. go to steensblog here

E i I i hH


10/40

Anoth poitiv ya

Equity IsightsHome

Th US main o top pick among all

th vlop qity makt implybca it ha bn by fa th bt in

navigating th financial cii.

b PETEr GArNry, Hea o Equit Stateg

Phot

o:SongquanDeng/Shutterstock.com

E it I i htH


11/40

factos, goa equities woud have to ise a additioa 12

ecet efoe eachig thei aveage vauatio. Give that

udeyig eaigs ad cash fows gow i omia figues

i a exadig goa ecoomy, the equity etu otetia

is atuay much highe tha 12 ecet whe you take the

ogess of time ito accout. If the goa ecoomy acceeatesto 3.8 ecet ea gowth i 2014 as ou maco foecast

cuety suggests the vauatio coud oveshoot, takig

vauatios aove thei aveage some time duig 2014.

The imotat ice-to-cash-fow atio is cuety eadig 8.8

comaed with 16.6 at the height of 2007. Whie equity ices

have moe tha doued sice the ottom i Mach 2009,

this idicates that cash fows have aooed duig the ast

five yeas ad highights the cooate sectos magificetexecise i shoig u oeatios. Aso addig suot fom

a vauatio oit of view is the cuet divided yied eadig

of 2.6 ecet comaed with 10-yea govemet od yieds

agig fom 0.5 ecet i jaa to 2.2 ecet i begium

amog the safe-haou couties.

With the cuet data o had, we ae cofidet that goa

equities wi e highe ove the ext 12 moths. Whie the

Itaia eectio ad the escue of Cyus eceived massiveheadie attetio, the makets eactio has ot sigificaty

ateed ou cofidece i goa equities ad we foecast that

they wi cotiue to ise. Howeve, the secod quate might

e ess osy eative to the fist quate as equity ivestos wi

have to see whethe the discouted imovemet i ecoomic

data mateiaises. but it is woth otig that goa equities

have see ositive etus i 66 ecet of the quates sice

1970; it ca e costy to et agaist the dift i equities.

Equities oeed the yea y sugig 10.6 ecet (measued

i EUr), shuggig off the mass hysteia ove the fisca ciff

ad Itaia eectios, which wee highighted as the two

mai evets that coud deai stock makets. Whie the

secod quate might ot e as good as the fist, we exect

2013 to e a good yea fo goa equities ad i aticua,US equities.

i qu

Goa equities ae sti mea-evetig i tems of vauatio

ad desite the imessive ay, they ae sti vaued mius

a haf stadad deviatio eow thei aveage vauatio

i the eiod 1996 to 2013. based o ou modes iut

Equity IsightsHome

E it I i htH


12/40

With the current data on hand,

we are confident that global

equities will be higher over

the next 12 months. While the

Italian election and the rescue of

Cyprus received massive headline

attention, the markets reaction

has not significantly altered our

confidence in global equities

and we forecast that they will

continue to rise.

Equity IsightsHome

Us qu u y

The US emais ou to ick amog a the deveoed equity

makets. The easos ae quite sime. The US ecoomy hasee y fa the est i avigatig the fiacia cisis, with

good ivate secto gowth i emoymet ad ofits

whie deeveagig househods aace sheets. Additioay,

the uic secto has cut dow o sedig ad wokes,

which, comied with omia GDp gowth, has sigificaty

heaed the fisca udget ove the ast 12 moths. recety,

moe ecoomic idicatos ae sigaig that the ecoomy is

iceasig its hoseowe. based o cuet ecoomic data,

maagemets eaigs guidace, oig eaised voatiityad vauatios, we see a high oaiity that US equities wi

cotiue to ise.

O Mach 28, the S&p 500 hit a ew a-time high, ecisig

the evious ecod set o Octoe 9, 2007, whe the idex

cosed at 1,565.15. This is, of couse, oy the ice idex.

Measued y tota etu, that is, eivestig the divideds,

the idex eached a a-time high i the thid quate ast

yea. The ast coue of yeas have ee a oecoaste adthe 12-moth fowad p/E atio, a good gauge of vauatio

ad cofidece, has ouced ack fom its ows of aout 11

times fowad eaigs duig the high oit of the Euozoe

cisis i 2011 to aout 14 times as of ate Mach 2013. I ate

Feuay, we udated ou yea ed mid-oit foecast fo the

S&p 500 to 1,640 ased o cuet 12-moth fowad eaigs

of 111.65, 5 ecet gowth i fowad eaigs i 2013 ad

fowad p/E exasio to 14 times.

E it I i htH


13/40

eu qu cu uu

Whie uemoymet is sti cimig, sigaig ecessioay

ecoomies thoughout most of the Euozoe, Euoea equitieshave suged y aout 25 ecet sice ate May ast yea.

Equities ae fowad-ookig ad, as such, aggig idicatos

ike uemoymet ae ieevat. Oy the futue mattes ad

hee, Euoea equities ae votig fo a imovig ecoomy

i Euoe desite what the maisteam media wats us to

eieve. The ea-time GDp tacke -coi ose fo the seveth-

cosecutive moth to -0.12 i Mach, its highest eadig sice

May 2012 ad a siga of ovea imovig coditios desite

the wose tha exected pMI figues fo Mach. Desite aweak Euozoe ecoomy, Euoea equities coud sti have

a good yea with ositive etus as the mao idices moe

tha eve efect the goa ecoomy ad ot so much the

domestic ecoomy.

I ou evious quatey outook, we couageousy foecast

that eihea Euoea equities coud e this yeas wies

ased o ou mea-evesio theme. Ou case was uit o

a staiisig Euozoe that woud etu to ositive gowth

i ate 2013. Desite a oitica vacuum foowig the Itaia

eectio ad the escue of Cyus with its cotovesia evy

o deosits aove EUr 100,000, Euoea equities have hed

u ad the MSCI Euo idex, catuig 90 ecet of the tota

Euozoe maket caitaisatio, is u 1.7 ecet this yea.

Howeve, a asket ivested equay i Geek, Iish, potuguese,

Saish ad Itaia stocks woud have etued 5 ecet, with

Itaia stocks the iggest dag o efomace.

The cuet 12-week oig eaised voatiity sead etwee

high eta stocks ad ow voatiity stocks is at vey ow eves,

imyig cam wates. As such, we exect a modest dawdow

shoud equities eteat i the secod quate. If we get asetack i US equities, we exect it to e tiggeed y some

extea shock to cofidece fom the Euozoe cisis, which

sti ooms as the mai dowside isk.

Some aaysts have secuated ecety that US equities

have eteed a ue hase. based o cuet vauatios,

secificay the ice-to-cash-fow atio ad james Tois Q

ratio, which was uished y the Fed, ou est udgemet is

that US equities ae fa fom eig i a ue.

Equity IsightsHome

Equity IsightsHome


14/40

neithe Cyus o the Itaia eectio has made us chage ou

foecast that eihea Euoea equities have a good chace

of eig the est efomig makets this yea. pogess is

evidet i may of these couties with Iead comig ack

to the od maket, potuga ahead of its a fo fisca

cosoidatio, Sais aou costs deciig fast ad thusimovig the coutys cometitiveess, ad Itay eachig

ecod 12-moth oig exots i jauay. Such facts ae

testamet that these couties ae comig ack fom the ayss.

a J c v ?

Sice mid-noveme ast yea, whe it ecame evidet that

jaaese pime Miiste Shizo Ae woud wi the eectio o

a atfom to ed defatio, the jpY has weakeed. Its decie

gatheed moe steam whe the bak of jaa i jauay

auched its ew moetay famewok fo the futue icudig

a 2 ecet ifatio taget. Statig i mid-noveme, the

jpY is dow 18.7 ecet ad 19.8 ecet agaist the USD

ad EUr esectivey. As a esut, the nikkei stock maketidex has take off ike a ocket, gaiig 43 ecet sice mid-

noveme ad 19.3 ecet this yea. The six-moth gai is

the iggest o ecod sice the fouth quate of 1972.

What does the ay se fo the futue of jaaese equities?

Ae they fiay set fo a secua u maket? That might e

too ematue to exect. The oem fo jaa is that the

weakeed jpY might e good fo exotes, ut the couty

imots a ot of eegy, which wi ow icease i ice adhit oth cosumes ad domestic-oieted usiesses. Thee

is o easy cue i ecoomics ad the weak jpY wi ot e the

osy oe-way oad jaa thiks it might e.

The nikkei idex is futhemoe vaued way aove the MSCI

Wod o mutie metics icudig eaigs, cash fows ad

divideds. Se-side aaysts aso have vey uish estimates fo

eaigs, which they oect to gow 30 ecet auaised ove

the ext two yeas. These estimates seem a it ovestetchedgive that ou estimate fo jaas GDp gowth i 2013 is

1 ecet ad the goa ecoomy 3 ecet. With goa

ifatio exected to e aout 3 ecet i 2013, aaysts

must e foecastig ig cuecy gais o sigificat maket

shae gais fo foeig-focused jaaese comaies. This is

too otimistic i ou view ad we exect jaaese equities to

ete a moe modest hase, i which jaaese ivestos wi

aayse the weak jpYs ea imact o eaigs ad saes.

Equity IsightsHome

Equity IsightsHome


15/40

Equity IsightsHome

h u cc c Q1 ?

I ou fist quate outook, we took a moe tactica age

ovidig some stategies fo jauay. We agued that

histoicay thee has ee a mea-evesio effect i the fist

moth of the yea, with the iggest ose i the evious yea

eig the wies i the fist moth ad vice vesa.

A asket of the five-wost efomes i Euoe ad the US

esectivey woud have etued 11.6 ecet measued i

EUr comaed with 2.1 ecet fo the MSCI Tr Wod Euo

idex i jauay. The oosite asket, seig the evious

yeas wies, woud have gaied 2.2 ecet, so hee the

stategy did ot wok i ou favou.

go to petersblog here


16/40

Tadig i fiacia istumets caies isk ad may ot e suitae fo you. Aways esue you udestad athese isks efoe tadig. pease ead Saxo baks Fu Discaime avaiae at www.saxoak.com/discaime.

Tim fo a cool-ha bank.Saxo bak is headquateed i Demak with offices i 25 couties.Ou ciets eoy oe of the wods est oie tadig atfomswith 30,000+ istumets to tade ad deosit i 22 cuecies. Weae eady to seve you i ou offices i Coehage, Sigaoe,Zich, lodo, pais ad 20 othe cities aoud the wod.

o cc ccu y cscv-y . V u s.c

globalnpictability?100%

FX IsightsHome


17/40

Th ik apptit ntimnt will likly falt in Q2.An thi phap i to th aon:

aonality, woi ov th US Fal Rv

lowing th liqiity gavy tain an ongoingEopan Union wo. In tm of aonality,th pat th Q2 in a ow hav bn qat of

tanition to iway makt o wo afttong Q1 alli in iky at.

b JOHN J. HArdy, Hea o FX Stateg

FX IsightsHome

T till ont gow to

FX IsightsHome


18/40

I ou Q1 outook, I highighted that muti-yea ows i FX

imied voatiity ad oied that this simy coud ot

cotiue give the maco ackdo. Ideed, we did see a

modeate comeack i voatiity i Q1, ut ot the oad-

ased comeack I evisioed. rathe, it was oe that was

mosty imited to deveomets fo the EUr, Gbp ad jpY. Ithe secod quate, ook fo the aow ise i voatiity to

egi to oade with additioa USD stegth, a wid ide

fo the jpY ad commodity doa weakess eig the mai

themes.

t Q1

The EUr toed out i jauay, as the Euoea Ceta baks

(ECb) aace sheet was educed y the eay eaymet ofsome of the vast thee-yea log-Tem refiacig Oeatios

(lTrO). The cuecy the quicky tasitioed to oouced

weakess fo the aace of Q1 o the aticiatio ad the

eaity of the Itaia eectio. Ad the thee was Cyus, ut

moe o that ate. The othe ig dowes wee the jpY ad

Gbp. Aeomics i jaa, ugy UK umes ad Caey-

aticiatio saw two tuo-chaged jpY ad Gbp cay tades

i jauay ad Feuay. Comacecy i asset makets was

aothe key dive fo these tades.

now fo the stog cuecies of Q1: the a-imotat US doa

maaged to ay desite the Fed havig fied oth aes

of its moetay shotgu i ate 2012, whie the imoved

US ecoomic eviomet aso suoted the geeack.

Esewhee, we saw stadout stegth i AUD, nZD ad SEK

eve to ew outight og-tem highs fo AUD ad nZD.

Thei extemes of stegth wee a ceeatio of goa easy

As we enter Q2 amid widespread

complacency, the old risk appetite

meme hasnt only been playing

second fiddle, its been entirely

kicked out of the orchestra.

The market appears dangerously

convinced that central banks

will simply not allow any risk

to materialise for asset

markets, so why even

bother to worry?

FX IsightsHome

FX IsightsHome


19/40

JPy vs isk appetite: The JPY hasnt just been about

Abenomics, but also the markets embrace of a new carry

trade opportunity: its been easy to sell the currency when

the central bank (BoJ) is promising the most aggressive money

printing.

JPy vs. inteest ate speas: Japanese longer yields have

collapsed as investors anticipate that the Bank of Japan (BoJ)

will purchase debt at the long end of the curve, weakening

the JPY from an interest rate spread perspective. From here,

Japanese yields can hardly go lower and complacency can

hardly get more extreme, so well either need to see heavy

lifting from the BoJ and/or higher government bond yieldsoutside Japan to provide the fundamental drivers for more

JPY weakening in the short to medium term.

FX IsightsHome

FX IsightsHome


20/40

iquidity ad cotiued comacecy. I additio, the cuecy

wa/cometitive devauatio aggavated thei stegth as the

ceta aks i these couties oved hawkish, which

these days meas simy decaig euta oicy outooks,

athe tha ay discussio of actua ate hikes.

Q2: a qu y uv?

So as we ete Q2 amid widesead comacecy, the od isk

aetite meme hast oy ee ayig secod fidde, its

ee etiey kicked out of the ochesta. The maket aeas

dageousy coviced that ceta aks wi simy ot aow

ay isk to mateiaise fo asset makets, so why eve othe

to woy?

That setimet wi ikey fate i Q2. Ad this ehas is due

to thee easos: seasoaity, woies ove the Fed sowig the

iquidity gavy tai ad ogoig Euoea Uio woes. I

tems of seasoaity, the ast thee Q2s i a ow have ee

quates of tasitio to sideways makets o wose afte stog

Q1 aies i isky assets. This yeas Q1 u-u has ee the

agest of them a ad coud aso u ito mao headwids

due to the secod of ou dives: a tasitio i Fed oicytowads a ess accommodative stace. Moe o that i the

US doa sectio eow. Meawhie, EU woies ae othig

ew ad they wi emai o the tae though the Gema

eectio i Seteme.

Ovea i Q2, the G10 smas that efomed so we i Q1 wi

ikey egi to age tade i the est of cicumstaces ad

se-off utay i the wost. The US doa shoud cotiue

to do we the outook fom hee is wi-wi. The jpY is set

to e the G10s loki fo some time as we may see a vey

ocky ath fo jpY cosses as Aeomics moves fom the

aticiatio hase to the ue-meets-the-oad hase. The

outook fo the EUr is ehas the east cetai, ut a good

dea of essimism is aeady iced i fo the sige cuecy.

I the ackgoud, the systemic atue of isk o/isk off

seems to have ee aished, ut coud e eady to emege

agai ow that comacecy has eached such emakae

extemes. The oge the isk ue ifates, the highe the

otetia magitude of voatiity whe it does etu.

Usd: ry

The maco eviomet offes a wi-wi set-u fo the USD

fom hee. I the otimistic sceaio, the USD ises ecause the

US ecovey cotiues to take hod i comig moths, futhe

ecouagig aticiatio that the Fed wi egi to uwid

some of its accommodatio as eay as ate this yea, ossiy

y educig the ate of its motgage-acked secuities ad US

teasuy uyig, estaished at USD 85 iio e moth ast

Deceme. Fed chief be beake himsef has seed out this

sceaio. Thus, the Fed woud e the fist sue-mao cetaak to egi to uwid accommodatio. Othe suots fo

the USD o this fot ae the icedie comeack i eegy

oductio, the ogoig eductio of the cuet accout

deficit fom this ad fom the eshoig of some oductio.

A otetia dak hose suot fo the USD woud e the etu

of US foeig cooate weath if the govemet auches a

ew Homead Ivestmet Act ofit eatiatio scheme.

FX IsightsHome

FX IsightsHome


21/40

The moe essimistic sceaio fo the ea tem aso suots

the USD. I this sceaio, ecoomic ecovey hoes dot a

out, ehas due to the accumuative effects of the tax cut

exiies ad fisca austeity i the wake of the sequestatio

ocess ad futhe udget austeity i the ieie. So eve

with o chage i Fed oicy, this coud hit asset maketsathe had, which woud ted to suot the USD fom a

safe-have age. Ateativey, eve if the ecoomy meey

stumes aog ad sowy imoves, if asset makets dot

take a eathe, the Fed may fee foced to fiay ack off

some of its oe-eded QE ogamme i ecogitio that its

oicy has oveheated cedit makets ad geeated dageous

each fo yied. Ay actua o aticiated ea eductio i

Fed easig wi ay essue o goa isk aetite via the

eductio i iquidity.

eUr: t u

The EUr was o a wid ide i Q1. It ose shay as the ECbs

aace sheet shak due to lTrO eay eaymets, ut the

fe o the ucetaity geeated y Itays eectio esuts

ad the Cyus soutio, which saw the Toika goig afte

ak deositos to he fud the aiout due to the atios

status as a tax have with a ove-sized akig secto. Fomhee, the EU wi have a had time estoig cofidece i the

cuecy as we have the itemiae wait uti the Gema

eectios i Seteme ad the ukow ath fo Itay to

oot. As we, Faces ecoomic taectoy is a gowig woy,

whie tiy Soveia wi ikey eed a aiout. Ad dot foget

Sai, whee ew ak scadas coud hit at ay momet

ad the socia faic is eig soey tested with evey assig

moth. The most iteestig thig goig ito Q2 is the advet

of the Cyus aiout/ai i. Wi diect weath cofiscatio

deveo as a meme fom hee as a way to fud the estuctuig

of ou ove-ideted ecoomies goig fowad, athe tha

o a tide of ited moey?

Thee is the ossiiity that Euoe coud im aog utithe Gema eectio i Seteme. If a ew fu-fedged EU

cisis hast oke out efoe that citica evet, we woud

exect a aid move towads whateve soutio fo Euoe

awaits i the moths that foow eithe with a Agea

Meke madate o moe chaoticay due to the otetia fo

siteig Gema oitics.

JpY: t l g10

Maket syegies favoued a weake jpY to a ovewhemig

degee i the fist quate as isig comacecy ad the

aggessive jaaese govemet ad boj hetoic o jpY

weakeig was a match made i heave. The uta move

i the jpY ottomed out i eay Mach i ecogitio that

eveythig thus fa had ee aticiatio athe tha eaity.

just efoe we go to ess, the boj ueashed a massive

easig ogamme that is thee times age tha the Feds

cuet aace sheet exasio i domestic GDp tems, easiyoutstiig maket exectatios. At fist ush, the maket

is ceeatig the iquidity geeated y this move. but this

eactio atte may chage soo.

I Q2, the maket may sto ayig the jpY weakeig as a oo

to isk aetite ad stimuus fo a ew cay tade ad egi

to woy that the bak of jaas moves isk destaiizatio

whethe i jaaese od makets o tade eatios. At some

oit, if the isk aetite/jpY weakeig tade decoues, we

FX IsightsHome

FX IsightsHome


22/40

coud see sha wid two-way osciatios i the jpY withi the

cotext of ovea jpY weakeig as the maket stugges to

fid a ew aadigm, ad aticuay if othe Asia owes

gumigs ove the bojs ew oicy escaate to otectioist

theats.

gbp: d u u

The oud simy fe aat i eay Q1 as the maket uished

those cuecies whee ceta aks ooked the most ikey

to cotiue to it moey ad deve eve deee ito the

moetay oicy tooox. Its aticiated that the aiva of ew

bak of Egad (boE) goveo Mak Caey this summe coud

ig eve moe exteme moetay oicy accommodatio o

exeimetatio ossiy eve the utested nomia GDpeve tagetig.

Aso weighig o steig is the fact that the UKs huge cuet

accout deficit has somehow ot eve moved i the ight

diectio desite the temedous steig devauatio sice

the goa fiacia cisis. I thik much of the Gbp weakess

has aso ee a esut of stog isk aetite ad cay tadig

ehaviou. Goig fowad, Im ookig fo a age to deveo

agaist the EUr etwee ehas 0.8500 ad 0.9000, ad Ihave evised dow my GbpUSD foecasts due to the diffeeces

i otetia ceta ak oicy ad as the UKs twi deficits

aet imovig.

ChF: pv v

The Swiss fac aeaed to e o the cus of oiig the

jpY ad Gbp as a cay tade fudig cuecy eay i Q1 as

safe haves wee out of favou ad some Swiss aks ega

aoucig they woud chage egative iteest ates o

deosits. but eewed Euo zoe toues quicky scotched the

EUrCHF ay, as did the Swiss natioa baks (Snb) faiue to

ovide ay hit that a aisig of the foo was immiet. EUr

ucetaity fom hee wi ikey aso mea CHF ucetaity.

The Snb wi emai detemied to defed the 1.20 foo i

EUrCHF ad if it is ude essue, we ca exect a ew too

kit of otios fo discouagig caita accumuatio i Swiss

aks, whethe uitive egative deosit ates, o caita

cotos o the ike. I the oge tem, the fac emais

woefuy ovevaued, ut detemiig the timig of a otetia

weakeig is faught with ucetaity ehas we wot

get much movemet uti afte the Gema eectios.

Cy : aUd, Cad nZd

The Atiodeas, AUD ad nZD, have doe it agai this yea

osted ew og-tem highs vesus a asket of the est of

the G10 cuecies. but this stegth wi fade ad we wi see

these cuecies weakeig ack ito the age at est ad

faig steey at wost. That is ased o assumtios that the

Chia ecovey otetia is oveated, that the reseve bakof Austaias (rbA) sef-cogatuatoy stace o its success

i staiisig thigs with its ate accommodatio thus fa

is ematue, ad that isky assets ca hady e exected

to eeat thei stog Q1 efomace (AUD ad nZD ae

omay ositivey coeated with isk aetite).

I additio, the ig Austaia miig stocks ae o the

defesive agai ad a woyig dought has setted ove new

FX IsightsHome

FX IsightsHome


23/40

Zeaad which coud theate its mik exots. besides, oth

couties ceta aks wi ush ack vey had if maket

cicumstaces ush thei cuecies stoge fom hee.

CAD udeefomed as the bak of Caada (boC) was foced

to ecogise that Caadia fudametas have weakeedshay atey ad as it acked off eviousy moe hawkish

hetoic. The og out ea ad eow aity fo USDCAD has

hoowed out the Caadia ecoomy. Ad ecause the boC has

og ee foced to kee a iaoiatey accommodative

stace to avoid a eve stoge cuecy, a cedit ad housig

ue of scay ootios has ifated.

A og ad ugy ost-ue eviomet awaits Caada, a

ocess that may fiay e udeway. This wi see its cuecyweake.

sek nok: sek vcv

Fo SEK, the riksak is caught etwee the ock of a domestic

cedit ue ad the had ace of SEK stegth fom ess dovish

ostuig i Q1. The atte must give ad SEK wi e summaiy

kocked off its edesta sometime i the ext quate o

two. The SEK is nOT a safe have, ot whe the cuecy istaticuay iquid ad the couty faces a og hagove fom

a housig ad cedit ue that may fiay e cestig.

The nOK is the cuecy to efe of the two aso with a

domestic cedit ue, ut ehas ess deedet o extea

factos tha Swede. Oe imotat isk fo nOK, howeve,

is i eegy makets if they cotiue to coect owe shoud

goa demad ove ess oust fom hee.

AUD is at it again. The above chart shows AUD indexed versus

an evenly weighted basket of the rest of the G10 currencies.

Since 2010, the AUD has been making peak after peak, but the

rallies always seem to slip. Look for a repeat of this behaviour

this time around as well as the risk of a more significant sell-

off if the expectations of Fed perma-easing supporting globalliquidity suffer a paradigm shift.

FX IsightsHome

FX IsightsHome


24/40

t Q1 2013

The ideas eow ae ikey to do we if the geea sceaio

outied aove oves coect, ad ooy if ot save ehas

fo the og USDjpY idea.

Long USD versus a basket of AUD, CHF and SEK:The USD

wi emai o the med, the AUD wi age tade at est,

the riksak wi e foced ito the cometitive devauatio

game, ad CHF may eithe do othig o weake if goa

comacecy cotiues.

Long GBP, NOK and EUR against AUD and NZD:A cotaia

ca stickig ou ecks out hee ut the motivatio fo this

is quite simy that the status quo of Q1 wi ot cotiue.

Short CHFJPY: This is a shot-tem idea aimed at the 92.50-

95.00 zoe i CHFjpY o the ossiiity that the effects of

Aeomics ae ove-aticiated fo the ext quate o so.

Long USDJPY on dips: With a doue udeie ude

o dis. Wee ikey to see wid swigs i jpY cosses i the

comig moths, USDjpY wi ikey e a owe eta tade tha

othe cosses ad coud eset moe attactive eves to getivoved as the maket ties to sot though the imicatios

of what the boj has ueashed.

C c

disCoVer more aboUt Fx

FX IsightsHome

Cucy p 3 6 12

eUrUsd 1.23 1.18 1.12

UsdJpY 95 100 105

eUrJpY 117 118 118

gbpUsd 1.48 1.46 1.40

eUrgbp 0.83 0.81 0.80

eUrChF 1.22 1.25 1.30

UsdChF 1.00 1.06 1.16

aUdUsd 0.98 0.92 0.80

UsdCad 1.05 1.10 1.16

nZdUsd 0.77 0.72 0.64

eUrsek 8.60 8.80 9.00

eUrnok 7.40 7.50 7.60

Saxo Bank has been the leader in the FX markets for the last 25

years. The wide range of FX crosses allows you to execute a broad

range of strategies no matter where the markets move. go to Johnsblog here


25/40

Tadig i fiacia istumets caies isk ad may ot esuitae fo you. Aways esue you udestad a these isksefoe tadig.

TEAM SAXO-TInKOFF.We ae oud to e sosoig the cycig TeamSaxo-Tikoff. besides eig oe of the mostoua sots i the wod, cycig shaes thesame vaues as the oes we stad fo as a goacomay: a wiig metaity, teamwok,eduace ad assio.Image TDWsot.com

Yo might ha a taingia bt not yo liqiity.If youe tadig o shaed iquidity, tadig duig eak houso momets of high voatiity ca esut i fequet odeeectios. Saxo bak udestads a the vaiaes i ay foa successfu tade, which is why we ovide a ou ciets 25mdedicated iquidity fo EUrUSD tades. put you isk i themaket ot i you ice.

o ccu y .c

icat liqiity fovy eurusd ta.25m

Maco IsightsHome


26/40

Th low-gowthnvionmnt contin

in vlop conomian i not xpct to b

mch tong thi ya aval conomi ngag in fical

conoliation, notably in piphalEo aa conomi, bt alo in th US.

b MAdS KOEFOEd, Hea o Maco Stateg

Goa ecoomic coditios cotiued to imove towads the ed of ast

yea ad ito the fist few moths of 2013. This was fueed y oust activity

i emegig makets ad the US, which has show emakae esiiece i the

face of the oomig sequestatio. but whie data cotiues to siga oust activity

goay, suggestig that sowe gowth is ot i the cads, the evidece fo a sigificat

stegtheig of goa demad aso ooks weak. We foecast a mid utick i gowth this

yea, isig to 3.4 ecet fom 3.2 ecet ast yea.

Mot ptickin gowth

g

Maco IsightsHome


27/40

dv c c c

The ow-gowth eviomet cotiues i deveoed

ecoomies, which ecoded gowth of ust 1.3 ecet ast

yea as the Euozoe fe ack ito ecessio. Gowth is ot

exected to e much stoge this yea as sevea ecoomies

egage i fisca cosoidatio, otay i eihea Euo aeaecoomies, ut aso i the US. I fact, a comaiso etwee

the mao Euozoe ecoomies, the UK ad the US eveas that

the atte aked thid ehid Sai ad Itay whe it came to

educig uic secto sedig ast yea. Meawhie, the UK,

Face ad Gemay a saw iceased uic cosumtio i

that ode.

puic sedig decied 1.8 ecet i the US i 2012 ad

futhe etechmet wi take ace this yea due to

sequestatio. nevetheess, we exect modeate gowth to

cotiue i 2013 to the tue of 2 ecet, fom 2.1 ecet ast

yea, efoe acceeatig to 3 ecet i 2014. Athough the

emova of the ayo tax cut eats ito ivate cosumtio,

cotiued imovemets i the aou maket, which saw a

aveage of 183,000 ayos added e moth ast yea, wiaid ivate cosumtio. The ositio of US househods is aso

heed y the imovig housig maket. risig ices ae

iftig homeowes out of egative equity (1.8 miio i 2012

aoe), heig to eai the atteed ivate secto aace

sheet. Add to this the activity i the housig secto, which o

its ow wi add to GDp though esidetia ivestmet. last

yeas cotiutio of 0.3 ecetage oits is exected to e

toed i 2013.

g

Maco IsightsHome


28/40

The US ecoomy may ot e exacty stea, ut at east

modeate gowth is o ta. The outook is decidedy moe

doweat acoss the Atatic, whee the Euozoe must esig

itsef to the fact that the ecessio is destied to cotiue. We

exect ecoomic activity to decie 0.3 ecet i 2013 afte ast

yeas do of 0.5 ecet, whie the uemoymet ate wiise thoughout the yea ad aveage moe tha 12 ecet.

The esutig sack i the ecoomy wi kee ifatio sudued.

The ecoomies of Itay ad Sai wi emai weak, ut it is the

Fech ecoomy that coces us most, aticuay ecause

of the Fech govemets faiue to imemet efoms. The

aou maket is too estictive ecause of the co-existece of

emaet ad time-esticted emoymet. This theates

Faces cometitiveess ad has set youth uemoymet

though the oof with moe tha a oe fouth ow oess.The ack of emedia actio isks etaig the Euo aeas

secod-agest ecoomy ito a ow-gowth eviomet fo

sevea yeas to come.

e c c u

Gowth i emegig makets has emaied oust due to

esosive oicies, oth fisca ad moetay, ad the oss of

ace ast yea was maiy due to owe demad fo oducefom deveoed ecoomies. I aticua, Euozoe imots

wee cutaied y fisca cosoidatio, dow 0.9 ecet,

whie US imot gowth sowed to 2.4 ecet. Athough

fisca cosoidatio cotiues to affect ivate cosumtio

ad imots, it is exected to esse, which wi aid gowth

i emegig makets. Howeve, we kee gowth exectatios

eow 2010-2011 eves as domestic gowth oicies this yea

ae exected to e ess suotive acoss the sectum of

deveoig ecoomies.

The imoved outook fo goa tade wi he Chias

ecoomy etu to gowth aove 8 ecet this yea. ledig

gowth emais aid at 15 ecet ad fiacig emaiseativey oose, esuig that domestic demad wi suot

the ecoomy ove the comig quates. I additio, the athe

udet fisca aace suggests that moe ca e doe i tems

of uic sedig to stimuate gowth if deemed ecessay y

the govemet. lookig futhe ahead, thigs ook ess osy,

howeve, ad the tasitio fom a exot- ad ivestmet-

ed ecoomy to oe dive y ivate cosumtio is oud

to e umy ad wi see aua gowth ates decie steadiy.

g

The US economy may not be

exactly stellar, but at least

moderate growth is on tap.

The outlook is decidedly moredownbeat across the Atlantic,

where the Eurozone must resign

itself to the fact that the recession

is destined to continue.

Maco IsightsHome


29/40

g

2012 2013 2014

w 2.9 3.0 3.8C c v uc c cc. s

c .

h y c. C c iy s.

dv c

5.1 5.3 6.0a u euz . dc .

Cv cucy vu cu u. r euz cu .pc y ccv.

U s 2.1 2.0 3.0hu cvy, j u. h u c

c .

l ucy u c cy v.squ cu uc

c .

eu -0.5 -0.3 0.7

s c iy v c . r c c s. sg v cu.

Fu uc ucy uuCyu iy u. w Fc vcu.

U k 0.3 0.5 1.0gv c c uv, cu u u.

Fu cu u .

C 7.8 8.2 7.5dc . l, y uy uv cy.

av u cu cu . ovy c.

J 2.0 1.0 1.0 w cucy .

w cucy cu u .

h () y c cu cu.

gdp U d

Notes: GdP (goss omestic pouct) is ea, infation-ajuste, ea-on-ea changes in pecent. 2012 is actua, whie 2013 an 2014 ae oecasts.

Maco IsightsHome


30/40

the eed aise. So, too, is the ste of oweig the deosit

ate eow zeo, ut that woud ad the ECb i eve moe

ucovetioa wates. Hece, ou ase sceaio is fo the ECb

to kee ates uchaged as the Euozoe muddes though

ecoomic gowth kicks i ate this yea. but shoud the efi

ate e oweed fom 75 asis oits (), we woud ook fo

a aowig of the ate coido (fom us/mius 75) athetha a oweig of the deosit ate ito egative teitoy.

accv c c y c

last yea was a usy yea fo ceta aks, with the US Fedea

reseve itoducig oud thee of its quatitative easig

ogamme, the Euoea Ceta bak (ECb) doig whateveit takes i aoucig the Outight Moetay Tasactios

(OMT) ogamme, whie jaa aid the goudwok fo

Aeomics. This yea wi see suotive oicies cotiue.

I site of modeate gowth i the US, the taget fo the

uemoymet ate of 6.5 ecet is ot ikey to e eached

fo sevea quates, whie coe ifatio wi emai sudued

due to excess caacity, meaig that QE3 wi cotiue this

yea ad we ito 2014, though the amout coud e educed

ate this yea o i 2014.

The aoucemet of the ECbs OMT ogamme has

succeeded i aeviatig the imaaces i the moetay

tasmissio mechaism as is idicated y yied seads to

Itay ad Sai. This has aowed the ECb to shik its aace

sheet ecause eaymets of oas fom the two lTrOs

(og-tem efiacig oeatios) ega eaie this yea.

Howeve, tumoi is ot fa away as the Cyiot escue missio

ad Itaia eectios ove. Cuts to oth the ECbs efiacig(efi) ate ad a ew oud of lTrO ae ossie toos shoud

go to madsblog here

Commodity IsightsHome


31/40

Tail-n iklaving littl oom

to thpi

Th xbanc of th Nw Ya mayhav abat, with gol ffing itfit back-to-back qat lo

inc 2001, bt commoiti ingnal col i lightly in thcon qat.

b OlE S. HANSEN, Hea o Commoit Stateg

Eevated goa gowth exectatios at the egiig of 2013

esuted i a stog stat to the yea i what was amost a eeatof what haeed the evious two yeas. Ivestos umed

ooad ad i jauay heed to cay fowad key gowth

deedet commodities such as oi ad idustia metas. Oe

key dive that has ee aset is the geooitica woies,

which, i evious yeas, dove oi ices to usustaiae

eves efoe tiggeig mao coectios duig the secod

quates of oth 2011 ad 2012.

As we ete the secod quate, some of the exueace hasevaoated, with modeate gowth i the Uited States ad

jaa ad, to a cetai extet, Chia eig eutaised y

aothe oud of Euoea det woies that kicked off with

the Itaia eectio i Feuay ad the ea coase of the

Cyus ecoomy i ate Mach. Goig fowad, the oitica isk

ad ucetaity eated to oth Sai ad Itay wi cotiue

to ceate headies ad, at times, ceate outs of isk advesity.

Desite these coces, oe of the iteestig featues of the



32/40

fist quate was seeig the decade-og ove affai etwee

ivestos ad ecious metas egi to eak dow. Imoved

US ecoomic data aised secuatio aout a eaie-tha-

exected cessatio of quatitative easig ad with eative

weak hysica demad, omia od yieds ecame ess

egative ad god suffeed, esutig i the fist ack-to-ackquate of osses sice Mach 2001.

We see a eative sma chace of highe commodity ices

goig ito the secod quate, with tai-ed isks, such as Euo

aea oems, a otetia se-off/coectio i stocks ad

the ea-tem outook fo goa gowth, ot eig stog

eough to ate the suy ad demad situatio. This wi

esut i eegy secto ookig aaced afte eig the oysecto showig ositive efomace i Q1 imaiy due to

a stog ise i natua gas. Idustia metas ae u agaist

ovesuy, fo exame coe, i which iceased oductio

i esose to highe ices i ecet yeas has see moe

suy ecomig avaiae.

Agicutue makets ae ookig fowad to a otetia

ume havest this summe acoss the nothe Hemishee.

Comied with iceased oductio i South Ameica, thisshoud he to euid deeted goa stocks of key cos

such as co, soyeas ad wheat. Ay eeat of ast yeas

dought ca, of couse, ot e ued out ad it coud tigge a

mao ay i ew co ices. This is eseciay so fo co ad

soyeas, whee ew co ices ae tadig at a cosideae

doue-digit discout to cuet od co ices.

Continued focus on US economic data probably holds the

near-term key and any softness as seen recently could provide

gold with the catalyst that has been missed for months.



33/40

beow, we have highighted some of the geea key dives

that commodity ivestos shoud e awae off goig fowad.

Futhe dow, we take a moe detaied ook at the eegy

ad meta makets.

o u

bet cude oi ega the yea coyig its efomace fom

the evious two yeas. The aised gowth exectatios

tiggeed a ay that asted uti mid-Feuay efoe woies

that the ice had u ahead of fudametas tiggeed a

etu to the owe ed of its estaished age etwee 105

USD/ae ad 118 USD/ae. The mid-ice of this age co-

icidetay coesods with the aveage ice see ove the

ast two yeas.

The sot maket tightess i bet cude oi ad the ovesuy

of WTI Cude oi has egu to ease, esutig i the sead

etwee these two imotat echmaks cotactig

towads 12 USD/ ae. Iceased noth Sea oductio ad

the high eve of efiey maiteace comied with the

Euo aea ecessio ad oitica cisis have see the seadetwee omt ad defeed futues ices cotact.

Meawhie i the US, iceased caaiity to tasot oi fom

the mid-west to Guf coast efieies has stated to aeviate

the otteeck issues that has see WTI Cude oi discoect

fom goa ices ove the ast coue of yeas. The cost of

tasotig oi away fom the oducig aeas y ieie,

ai ad ive comes at a ice, which, fo ow, shoud imit

futhe cotactio of the sead eow 10 USD/ae.

U d

g c v/ eu c c

s/u u

y uc lc c cy c

ecv quy Qe mj c cc

av y

C cu

w puc cu u ,

u vy u

r uc c ecv cuv

C



34/40

We eieve that goa oi makets ae cuety we suied,

ut oy ecause OpEC cotiues to oduce at a ate aove

its stated taget. US oductio cotiues to imess ad

gow, whie Veezuea, foowig the death of pesidet

Hugo Chavez, coud agai otetiay ecome a key suie

to the goa maket ovided it oes u fo foeig-diectivestmets, somethig that is cuety ot exected to

hae aytime soo. We exect bet cude to cotiue

eig mosty age oud duig the secod quate; with

the 105 USD/ae to 115 USD/ae age seeig most of

the activity. The geatest isk, howeve, wi e skewed to the

dowside ecause of the ogoig coces eated to Euoe.

pcu cy u qu

The side i god ices, which ega ast Octoe, cotiued

duig the fist quate efoe suot oce agai was

estaished ahead of cucia suot at 1,530 USD/oz. Sive

efomed eve wose with the cost of oe ouce of godisig to 57 ouces of sive, the highest sice ast August ad

takig it cose to its five-yea aveage at 57.75. The idustia

cedetias that goes with sive heed to attact additioa

uyig, eseciay though Exchage Taded poducts (ETps),

ut as idustia metas wet ito evese duig Mach, as

gowth osects fateed, so did sive.

U d

o uc c c

v

d v cu

cuv qu

gc sy

cy i uc u

uv

n-opeC uy cu u

n uc cqu uc

-

uc c

su Us uc

uc

opeC uc v,

v

F a

C, su k J

cu c

Qe u --c

gdp

eu cy

v n s u

h v y c

ey



35/40

God ivestos who use ETps to gai ueveaged exosue

to ecious metas have ee et sees a yea, esutig i

the weakest quate o ecod fo god ETp fows. Duig the

quate, some 181 toes wee ued comaed with ositive

fows of 87 ad 138 toes duig the evious two quates

(boomeg).

This eductio, as see eow, has evetheess oy ought

hodigs dow to eves see ast August. It aso shows some

cotiued esiiece amog these ivestos, may of whom

sti see god as a atua icusio i a aaced otfoio.

Its use as a hedge agaist goa tai-ed isks ceated y

excessive moey itig y ceta aks i ecet yeas,

adds to gods aea.

We see god taed withi a 270 doa age ad eieve

that suot fom the hysica maket ad ceta ak

uyig shoud e eough to aest ay attemts o key

suot at 1,530 USD/oz. If this eve is oke, it coud siga

a much deee coectio tha the oe aeady witessed.

The cuet US ecoomic exasio is uig at a ace

that at this stage does ot waat ay eay exit fom assetuchases, somethig we eieve the maket has ot yet fuy

take ito accout. The ack of stog oitica maagemet

of the Euozoe det cisis aises the isk of cotagio, which

aso coud ovide eewed suot.

Howeve, cotiued focus o US ecoomic data oay

hods the ea-tem key ad ay softess, as see ecety,

coud ovide god with the catayst that has ee missig fo

U d

eu c c c n y c

v

Us c

Qe suu f u

s c uy r c

h Fu v

c -y v

uc

Cu qu

ec-t puc

gc va c cc

c- uc

pcu m



36/40

moths. Secuative ositioig hed y hedge fuds i oth

god ad sive ae ea the owest eves sice 2006 ad ay

sigs of eewed ife i the secto wi eave may ofessioa

ivestos udeexosed, which shoud he oth metas ad

sive i aticua to efom. We owe ou aveage ice

taget fo 2013 fom 1,740 USD/oz to 1,640 USD/oz o the ack

of the weak ice actio duig Q1. We see cotiued age-

oud tadig duig the comig quate at aout 1650. As

metioed efoe, we ae acutey awae of the otetia

dowside isk that god oses ecause it has ecome a

emotioa tade fo may ivestos. Futhe ice weakess

eow 1,500 USD/oz wi iceasigy make this a ai tade as

it eodes cofidece amog may weak ogs.

Copper Up against inCreased prodUCtionand rising inVentories

The idustia metas secto is oe of the wost efomig

sectos so fa this yea. The gowth stoy, which has heed to

dive goa stocks highe i ecet moths, has so fa faied

to ed ay suot to idustia metas, with the egative

efomace eig dive y ead, zic ad aumiium.

This disocatio etwee stocks ad idustia metas, howeve,

is ot a ew occuece, with oth meta ad miig comaies

ad udeyig commodities havig ee disocated fom

equity makets fo moe tha a yea ow.



37/40

recod-high ices efoe the fiacia cisis tiggeed mao

icetives fo miig comaies to icease oductio. The

esut of these ivestmets is ow egiig to tasate

ito igge suy at a time whe Chia, the wods iggest

cosume of idustia metas, has see gowth sow to the

owest eve i moe tha a decade. I ecet moths adgoig fowad, its focus has ee ad wi e divided

etwee the eed fo gowth, ut at the same time havig to

fight ifatio, which has ee ickig u. Sowig demad

fom Chia has ed to iceased ivetoies i lodo Meta

Exchage ad Shaghai Futues Exchage waehouses (see

coe exame eow) ad this suy ovehag is ikey to

kee a id o ices ove the comig quates.

Oe of the est coeatios out thee cosideig thedisocatio etwee stocks ad meta ices is cuety the

oe vesus Chiese pMI. It shows the cotiued deedecy

of demad gowth i Chia, somethig that has oved

difficut to come y i ecet moths ut which shoud

egi to imove give the ecet sigs of a ick-u i pMI.

Woies aout eevated ivetoies ad the imemetatio

of measues to cotai house ice ifatio coud, howeve,

cause a ea-tem dag. We see a otetia eeat of 2012

with some secod-quate weakess testig the ows fom astyea, ut that shoud oay e it efoe a ecovey egis

afte the summe ot east heed y sigs of a cotiued

imovemet i key ecoomic idicatos such as pMI.

Copper Deliverable Stocks(Metric tonnes)

LME Shanghai

0

150000

300000

450000

600000

750000

900000 2000

3500

5000

6500

8000

9500

11000

Apr

-09

Oct

-09

Apr

-08

Oct

-08

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Copper, Inverse, RHS

Source: Bloomberg and Saxo Bank

go to olesblog here


38/40

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0.8231

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39/40

Will the German election change the direction

of the Eurozone crisis in the third quarter?

Find out in TradingFloor.com Insights Q3 issue

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40/40

nOn-InDEpEnDEnT InVESTMEnT rESEArCHThis ivestmet eseach has ot ee eaed i accodace with ega equiemets desiged to omote the ideedeceof ivestmet eseach. Futhe it is ot suect to ay ohiitio o deaig ahead of the dissemiatio of ivestmeteseach. Saxo bak, its affiiates o staff, may efom sevices fo, soicit usiess fom, hod og o shot ositios i, oothewise e iteested i the ivestmets (icudig deivatives), of ay issue metioed heei.noe of the ifomatio cotaied heei costitutes a offe (o soicitatio of a offe) to uy o se ay cuecy, oducto fiacia istumet, to make ay ivestmet, o to aticiate i ay aticua tadig stategy. This mateia is oduced

fo maketig ad/o ifomatioa uoses oy ad Saxo bak A/S ad its owes, susidiaies ad affiiates whetheactig diecty o though ach offices (Saxo bak) make o eesetatio o waaty, ad assume o iaiity, fo theaccuacy o cometeess of the ifomatio ovided heei. I ovidig this mateia Saxo bak has ot take ito accoutay aticua eciiets ivestmet oectives, secia ivestmet goas, fiacia situatio, ad secific eeds ad demadsad othig heei is iteded as a ecommedatio fo ay eciiet to ivest o divest i a aticua mae ad Saxobak assumes o iaiity fo ay eciiet sustaiig a oss fom tadig i accodace with a eceived ecommedatio.A ivestmets etai a isk ad may esut i oth ofits ad osses. I aticua ivestmets i eveaged oducts, such asut ot imited to foeig exchage, deivates ad commodities ca e vey secuative ad ofits ad osses may fuctuateoth vioety ad aidy. Secuative tadig is ot suitae fo a ivestos ad a eciiets shoud caefuy coside theifiacia situatio ad cosut fiacia adviso(s) i ode to udestad the isks ivoved ad esue the suitaiity of theisituatio io to makig ay ivestmet, divestmet o eteig ito ay tasactio. Ay metioig heei, if ay, ofay isk may ot e, ad shoud ot e cosideed to e, eithe a comehesive discosue o isks o a comehesive

descitio such isks. Ay exessio of oiio may e esoa to the autho ad may ot efect the oiio of Saxo bakad a exessios of oiio ae suect to chage without otice (eithe io o susequet).This [wesite/commuicatio] efes to ast efomace. past efomace is ot a eiae idicato of futue efomace.Idicatios of ast efomace disayed o this [wesite/commuicatio] wi ot ecessaiy e eeated i the futue. noeesetatio is eig made that ay ivestmet wi o is ikey to achieve ofits o osses simia to those achieved i theast, o that sigificat osses wi e avoided.Statemets cotaied o this [wesite/commuicatio] that ae ot histoica facts ad which may e simuated astefomace o futue efomace data ae ased o cuet exectatios, estimates, oectios, oiios ad eiefs ofthe Saxo bak Gou. Such statemets ivove kow ad ukow isks, ucetaities ad othe factos, ad udue eiaceshoud ot e aced theeo. Additioay, this [wesite/commuicatio] may cotai fowad-ookig statemets. Actua

evets o esuts o actua efomace may diffe mateiay fom those efected o cotemated i such fowad-ookigstatemets.This mateia is cofidetia ad shoud ot e coied, distiuted, uished o eoduced i whoe o i at o discosedy eciiets to ay othe eso.Ay ifomatio o oiios i this mateia ae ot iteded fo distiutio to, o use y, ay eso i ay uisdictio ocouty whee such distiutio o use woud e uawfu. The ifomatio i this documet is ot diected at o itededfo US pesos withi the meaig of the Uited States Secuities Act of 1993, as ameded ad the Uited States SecuitiesExchage Act of 1934, as ameded.This discaime is suect to Saxo baks Fu Discaime avaiae at www.saxoak.com/discaime.

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