Wakeup Call: EUR Weaker On Trichet Comments

USDJPY near trendline resistance at 107.30. Asian stocks down more than 3%.

Overnight News Bullets

• JN Eco Watchers Survey: Current (May) out at 32.1 vs. 34 expected.
• JN Eco Watchers Survey: Outlook (May) out at 35.1 vs. 36.1 prior.
• SW Budget Balance (May) out at 13.5B vs. 23.3B prior.
• UK PPI Input MoM /YoY (May) out at 3.8%/27.9% vs. 2.6%/23.8% expected.
• UK PPI Output MoM/YoY (May) out at 1.6%/8.9% vs. 0.8%/7.9% expected.
• UK PPI Output Core MoM/YoY (May) out at 1.2%/5.9% vs. 0.4%/4.8% expected.
• NZ New Zealand Manpower Survey (3Q) out at 12% vs. 24% prior.
• CA Housing Starts (May) out at 221.3K vs. 220K expected.
• US Pending Home Sales MoM (Apr) out at 6.3% vs. -0.4% expected.
• AU Australia Manpower Survey (3Q) out at 20% vs. 31% prior.
• JN Japan Manpower Survey (3Q) out at 20% vs. 22% prior.
• UK RICS House Price Balance (May) out at -92.9% vs. -97.0% expected.
• JN Machine Orders MoM/YoY (Apr) out at 5.5%/0.5% vs. 3.0%/-1.7% expected.
• AU Home loans (Apr) out at -3.0% vs. -2.0% expected.
• AU Investment Lending (Apr) out at 1.4% vs. -7.2% prior.
• AU ANZ Job Advertisements MoM (May) out at -1.7% vs. 3.1% prior.
• AU Value of Loans MoM (Apr) out at -4.9% vs. -4.4% prior.
• AU NAB Business Confidence (May) out at -4 vs. -8 prior.
• AU NAB Business Conditions (May) out at 7 vs. 7 prior.
• JN Machine Tool Orders YoY (May) out at vs. 0.4% prior.
• GE Wholesale price index MoM/YoY (May) out at / vs. 0.7%/7.1% expected.

Markets

• FX: EUR weaker on Trichet comments. JPY also selling off. USD gaining.
• Fixed Income: Weakness across the board… inflation fears are rampant.
• Equities: Mostly tight and uninspiring sessions.
• Commodities: Precious metals and energies all slightly lower on USD strength.

O/N Data Heat map:

Calendar

Today's Highlights:

This and Next Week's Highlights:

What's going on?

• Asian stocks have plunged in overnight trading, with the regional benchmark index driven to a 2-month low. Higher lending reserves in China and wider credit problems are seen as main contributors to the latest slide.
• Speaking in Boston yesterday, Fed Chairman Bernanke has pledged to 'strongly resist' any waning of public confidence in price stability. His comments that a 'substantial downturn' in the American economy had diminished are taken to signal potential rate hikes.
• Following Bernanke's comments, Fed Funds Futures are now implying a 6% chance of a 25bp hike at the end of June, while this was given a nil probability only yesterday.
  

FX

EURUSD to be bought on dips...

FX Trading Strategies

Equities

Additional Downside To Be Seen, We Sell DAX

• Equities: We expect the European markets to open -0.7% lower Tuesday. US indices lost 0.5% after Europe's close and the S&P future is also trading 0.5% lower. The drop was again led by financials due to speculation that the Federal Reserve will raise interest rates, a higher than expected Lehman capital increase and raised expectations about increased bank losses. We continue to short the banking sector, sticking to our short in Banco Bilbao Vizcaya and adding UBS and Credit Swiss as shorts for today.
• Trading Strategy: Trade Idea Equities - TrendSpotter - Sell DAX (DAX.i) We believe in a continued slide of the German index DAX, and acceleration to the downside should be seen with a break of y'days low. Thus we look to sell at 6740 with a stop at 6830 targeting 6580.

Equity Index Levels

Analysis Disclosure & Disclaimer

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained.

Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment.

If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations.

The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time.

In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis.

Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.