Daily Analysis – 30 sept 2016

Daily Analysis – 30 sept 2016


Some more worry signs appear on market. Yesterday Deutsche bank lost during Wall Street session another 7% increasing fears for the worst case scenario. Already some hedge funds have started to pull some of their business from Deutsche bank. The reality is that in an overleveraged company no one can knows with certainty what is going on. Deutsche bank since last year have lost more than half of its value. Lehman Brothers and the banking crisis in Europe failed to give lessons to the German bank. Greed and overleverage turned Deutche bank from an ordinary investment bank into a monster. Is not only the current 14 billion penalty that has to pay Deutche bank to US , there are plenty of other penalties for insider trading, rates manipulation, bond manipulation, forex manipulation, money laundering.

The recent macroeconomic data of Japan reveals some resilience however inflation numbers continue to disappoint markets and increase pressure for BOJ to add stimulus or at least to find other effective ways in order to fight low inflation. Traders who keep selling JPY probably will disappoint as the recent risk off environment does not justify much this trading idea.

The big picture recommend us to stay risk off today. As fears of Deutsche bank ability to survive and US elections uncertainty keep going, we expect that large players would like to take some risk off the table and of course to guarantee some gains from the extraordinary returns of the USA equity market . However we see that a political driven Fed that wants to see H Clinton as the next US president does not want to see a large sell off and uncertainty in markets before elections, a thing that can boost the popularity of D Trump .. so Fed will to whatever it takes in order to avoid a large sell off and has many tools to achieve it, Yellen just yesterday supported that ‘’ Fed is able to buy equities and corporate bonds and it could be helpful…’’

The European economy still struggling and shows tiny signs of improvements. Here is important to underline that the last two months we have some remarkable weakness for some major German macroeconomic indicators.

Key points:

• Commerzbank to cut almost 10,000 jobs, suspend dividend
• Fed’s Harker: We are slowly moving towards our 2% inflation target
• ECB’s Liikanen: QE To Continue Beyond March If Needed – RTRS
• Caixin China manufacturing shows marginal growth
• Japanese industrial production grows the most since 2014
• Japan’s household spending tumbles in August
• Japan CPI remains stuck in deflationary territory in August