•China’s minsky moment
•Brexit talks causing massive troubles for the Sterling
•Modest gains after volatile week (stocks)
•Bullish outlook for oil
•MACD indicates a strong investor sentiment (OMXS30)
•GBP/USD = Bearish trending but extremely oversold
•China’s minsky moment
•Brexit talks causing massive troubles for the Sterling
•Modest gains after volatile week (stocks)
•Bullish outlook for oil
•MACD indicates a strong investor sentiment (OMXS30)
•GBP/USD = Bearish trending but extremely oversold
•China’s minsky moment
•Brexit talks causing massive troubles for the Sterling
•Modest gains after volatile week (stocks)
•Bullish outlook for oil
•MACD indicates a strong investor sentiment (OMXS30)
•GBP/USD = Bearish trending but extremely oversold
•China’s minsky moment
•Brexit talks causing massive troubles for the Sterling
•Modest gains after volatile week (stocks)
•Bullish outlook for oil
•MACD indicates a strong investor sentiment (OMXS30)
•GBP/USD = Bearish trending but extremely oversold
Brexit talks causing massive troubles for the Sterling Modest gains after volatile week (stocks) Bullish outlook for oil MACD indicates a strong investor sentiment (OMXS30) GBP/USD = Bearish trending but extremely oversold
WEEK 9
Chinas minsky moment
China is slowing down, which has led to a collapse in commodity
prices and instability in the stock market. China recently reported the lowest growth numbers in many years and it is becoming apparent that the slowdown has just begun. How did China end up in this situation? The last 20 years Chinas GDP has grown impressively and millions of people have been lifted out of poverty. However, somewhere along the line the Chinese miracle turned away from sustainable economic growth and turned to debt driven growth. During the great financial crisis Chinese policymakers feared that social unrest would grip the country. To prevent social unrest and resume economic growth policymakers ordered state-owned banks to fund infrastructure and housing projects. Today China is facing the consequences of this credit binge and the malinvestments that came with it. In China the amount of malinvestments has reached mindboggling levels with approximately 40-60 million vacant homes, enormous industrial overcapacity and bankrupt local governments. As a result of this credit boom the banking sector has become increasingly unstable. According to Bloomberg, Chinese analysts are estimating that 45% of all new loans in China are used to pay interest on old debt. Analysts also estimate that approximately 50% of Chinas commodity companies cannot pay the interest on their debt and it is clear that the Chinese banking sector is keeping the economy afloat by extending credit to already bankrupt companies. Currently China displays the classic characteristics of what economist Hyman Minsky called Ponzi finance. During the start of a credit boom banks make sensible loans to companies that can repay. However, as the credit cycle progresses banks make riskier
and riskier loans. Eventually banks start to make loans to companies
that cannot repay, and this is when the economy enters the Ponzi finance stage. Ponzi finance is unsustainable and will inevitable result in a bust, also called a Minsky moment, this is Chinas likely destination.
Bonds and Forex
Brexit talks causing massive troubles for the Sterling
The sterling tumbled to a seven-year low level against the dollar last week as British conservative members of parliament rocked the boat. Boris Johnson, the popular conservative MP and mayor of
London, declared that he is going to campaign for a Brexit. In
addition roughly half the force of conservative MPs expressed harsh criticism against David Cameron and left the message that they as well intend to back a leave in the referendum planned for the 23rd of June. The divergences of opinions that appeared within the party have made the Brexit a greater issue at stake and the likelihood of its occurrence is now around 45 %. David Cameron is of the view that an exit would threaten Britains growth perspective and have an adverse effect on the economy in the long run. Most economists seem to agree. Cost will most likely outweigh the benefits and the rating agencies have warned of a downgrading if an exit occurs. Direct effects waiting around the corner are an immediate disruption in several sectors as well as a sudden stop of capital inflows. The latter may in the worst-case end up in a balance payment crisis due to difficulties in financing the already quite high trade account deficit. However, a Brexit will also affect global markets, not least the currency market. At the moment the US dollar seems to be the absolute winner against it peers, but depending on both the outcome of the referendum and the Federal Reserves decision regarding a rate hike in June the game could take an unpredictable turn. The tumbling sterling indicates that markets already have priced in at least some of the risks associated with a potential Brexit. At the same time markets expect it to go lower until the referendum takes place. In case the Brexit comes about the sterling would probably fall even further due to the risk of an economic slowdown and expected policy changes reacting on such a turn of events. On the other hand if the opposite occurs the sterling would probably rebound. The path ahead seems volatile, with polls as they are and the EU under further pressure and
scrutiny. British politicians are stoking the fires of their EU critical
populace. Whos to say where we're heading?
Stocks
Modest gains after volatile week
Global stock indices were up about 1.5 percent on average after a volatile week, thereby extending the previous weeks large gains. As noted by our technical analysis team the Swedish large cap index is now looking at resistance around 1400 points. Yesterday we got the Swedish growth figures showing that the Swedish economy grew 4.1 percent last year, beating the Riksbanks projection of 3.6. This was however not enough to make the Swedish index test resistance, as weakness stemming from a larger sell-off in China overshadowed the strong number. Playing an even larger role on fundamentals, at least from a global perspective, was the ECBs inflation rate which came in just a few hours later. The number surely disappointed the ECB as it was a lot lower than expected, increasing the pressure on the central bank to deliver a large stimulus in March. Key indicators to keep an extra eye on this week are the labour market figures, especially the American ones coming out on Friday. In January, average hourly earnings increased by 0.5 percent, beating the expectations by 0.2. Another good hourly earnings report this month combined with the recent high (CORE) CPI number of 2.2% (year over year) would suggest the FED is very close to reaching its stated inflation target both regarding consumer prices and hourly wages. As the FED has been increasingly focused on labour market conditions, so has the stock market. Expect volatility to ramp up as we get closer to Friday.
Commodities
Bullish outlook for oil
To summarize last week: on Mondays trade, the gold price fell as much as 2 percent, as the dollar strengthened and investor appetite for risk increased. However gold managed to remain above $1,200 an ounce, once again indicating that a new bottom might have been set. Investors sentimentality remained largely bullish and this was apparent in the fund flows. On Friday last week, the world's top gold exchange traded fund, SPDR Gold Trust, had its largest singleday inflow since August 2011. Sam Laughlin, MKS Group trader, explained that "increases in ETF holdings will continue to support gold higher. On Fridays trade however, gold fell more than 1 percent, as the dollar and global indexes rose. "The GDP data came out better than expected, so it gives strength to the rate debate. If rates go higher, gold goes lower," said senior market strategist at RJO Futures in Chicago, Bob Haberkorn. However, not all investors share the same pessimistic view on the future, as Capital Economics noted in a research; strong buying from both consumers and central banks in emerging economies, coupled with supply cuts, should offer solid support," even if the fed decides to increase the rates. On Mondays trade, crude oil prices surged as much as 6 percent, closing at 33.34 dollars a barrel. Speculation about falling U.S. shale output and a rally in equities fed the idea that crude prices may be bottoming after a 20 month old oil collapse. On Fridays trade, oil reached an intraday peak of 34.44 dollars a barrel, before falling back to close at 32.86. Senior energy economist in Amsterdam for ABN Amro, Hans Van Cleef, said that Brent's oil break above the technical resistance at 36.25 dollars an barrels is indicating that "there will be more short covering in the upcoming days.
Small Cap
A summary of Analyst Groups latest analyses
Briox AB is an independent company that has licensed the rights to adapt and sell Fortnox AB's leading cloud based Enterprise resource planning software. The product is directed primarily towards small and medium enterprises, in particular accounting and auditing firms. The software, which include accounting, administration, sales support and time tracking, is a full-scale cloud solution and accessed from any internet- based computer or device. Briox has gone through major changes during 2016. The company has renegotiated its licensing agreement with Fortknox and will now be able to sell the software globally instead of being limited to Finland, Germany, Poland and the UK. Additionally, the company has developed its own software which is now entering the marketing phase. Briox has got a new CEO, Johan Rutgersson. Mr. Rutgersson was last CEO at Prognosia where he contributed to a revenue increase from 8.9 MSEK to 285 MSEK between 2008 and 2014. Briox enjoys great economies of scale because there are no additional costs when selling additional subscriptions to a customer. The estimated growth in revenue combined with a limited cost increase as a result of growth makes Briox for an interesting turn-around case. Doxa AB Doxa is a company that manufactures bio-ceramic dental products used for putting dental crowns and bridges in place. It operates on a market with an annual growth of 4-5%, a number which could increase in the future due to an ageing population and thereby higher demand for dental implants. Q4-15 was an all-time-high for
Doxa as regards to quarterly revenue, and over the last eight
quarters the company has seen a CAGR of 13%. This is a trend expected to continue, with forecasted revenue for 2016 at around 26 mSEK, which can be compared to last years 15 mSEK. If Doxas current EV/S multiple is somewhat correct and this forecasted increase in revenue turns out right, the stock holds a potential upside of 175% for 2016. Currently 95% of sales are in the US, but an expansion to Europe is underway with contracts being signed in several countries. These contracts are expected to generate an income as early as Q1 this year. An unexpected drop in sales or rise in costs is deemed to be the biggest threats to the company, since Doxa has relatively little cash. MACRO EVENTS WEEK 9 Monday Sweden: GDP Growth Rate QoQ Q4 and GDP Growth Rate YoY Q4 Euro Area: Inflation Rate YoY Flash FEB United States: Pending Home Sales MoM JAN Japan: Unemployment Rate JAN and Household Spending YoY JAN Tuesday Sweden: Swedbank Manufacturing PMI FEB China: NBS Manufacturing PMI FEB, Non Manufacturing PMI FEB and Caixin Manufacturing PMI FEB Australia: RBA Interest Rate Decision Germany: Unemployment Change FEB and Unemployment Rate FEB Euro Area: Unemployment Rate JAN Italy: GDP Growth Rate 2015 201 Canada: GDP Growth Rate QoQ Q4, GDP Growth Rate Annualized Q4 and GDP MoM DEC
United States: ISM Manufacturing PMI FEB and Total Vehicle
Sales FEB Wednesday Sweden: Current Account Q4 Australia: GDP Growth Rate QoQ Q4 and GDP Growth Rate YoY Q4 Switzerland: GDP Growth Rate QoQ Q4 and GDP Growth Rate YoY Q4 United States: Adp Employment Change FEB Brazil: Interest Rate Decision Thursday Sweden: Services PMI FEB Australia: Balance of Trade JAN France: Unemployment Rate Q4 Euro Area: Retail Sales MoM JAN and Retail Sales YoY JAN Brazil: GDP Growth Rate QoQ Q4 and GDP Growth Rate YoY Q4 United States: Initial Jobless Claims 27/FEB, Unit Labour Costs QoQ Final Q4, Nonfarm Productivity QoQ Final Q4, Factory Orders MoM JAN and ISM Non-Manufacturing PMI FEB Friday Sweden: Industrial Production YoY JAN, Industrial Production MoM JAN and New Orders YoY JAN Italy: GDP Growth Rate QoQ Final Q4 Great Britain: Consumer Inflation Expectations Russia: Inflation Rate YoY FEB Canada: Balance of Trade JAN United States: Average Hourly Earnings MoM FEB, Balance of Trade JAN, Participation Rate FEB, Non-Farm Payrolls FEB, Nonfarm Payrolls Private FEB and Unemployment Rate FEB
OMX Stockholm 30 has for more than 1 year been traded in a negative primary trend. Within this trend a steeper decline has occurred in the secondary trend with increasing volume which has strengthened the negative trend further. The index broke through the ceiling of the secondary trend last month and is now in the middle of the primary trend channel. MACD is well above the signal line, indicating that the market has a positive outlook and that the index might try to reach its resistance level of 1400 points. However, it could also lead to a short-term rebound before further rise within the trend channel. The index has its support level at around 1290 points and a stop loss is set tentatively slightly below this level. The technical view of the OMX Stockholm 30 is positive in the short term while its negative in the long term.
GPB/USD SPOT
Swedish Orphan Biovitrium
GBP/USD = Bearish trending but extremely oversold
GBP/USD has been trading in a steep downtrend previously. It created a rectangle formation with a breakout on the downside which indicated initially a target zone of 1.45. However, the market believes the Pound will weaken and therefor it has collapsed out of the previous trend channel and an even steeper downtrend is indicated. Momentum is decreasing whilst the ADX-indicator shows that the trend in the short-term is downwards. However, GBP is massively oversold with a RSI value of 16. A stop loss could be placed beneath the support level of 1.38, a support level that has not been tested since 2009. The GBP is due for a retracement up to 1.42 but the trend is continuously very bearish. We are slightly technically positive in the short-term whilst we are very technically negative in the middlelong and long term.
Sobi = Very bearish setup
Sobi has previously been trading at levels above 140 SEK. The stock made a dramatic Head and Shoulders formation with a volumeenhanced breakout. The stock has since then collapsed into its former downtrend. The stock has worked itself upwards from the support level 92 SEK where buyers returned to the stock but has recently collapsed yet again. Momentum in the stock is declining and the MACD-line is positioned close to the zero-line as well as the signal-line on the upside which could trigger two strong sell-signals. The stock is also somewhat overbought according to RSI. A stop loss could be placed beneath the support level 95 SEK where the trend channels bottom could prove a strong support line. We are technically negative in the short, middlelong and long term.
Mindmancer
Support levels support positive long trend
Mindmancer has since the rectangle formation last year been traded in a positive trend. After the formation, the stock break through its previous resistance levels and the ceiling of the trend channel during high volume, and after the peak, the stock is now being traded at the middle of the trend channel with slightly lower volumes. MACD is above the signal line, indicating a "bullish" view from the market. However, it could also indicate that a short term rebound is expected. If so, the stock has its support level of around 8.5, which remained solid during recent attack couple of weeks ago. A stop loss tentatively set slightly below the level of 8.5 SEK. Resistance level of the stock can be found around 13.5 SEK. The technical view of Mindmancer is positive in the short- and longterm.
Kopparbers Bryggeri B
Kopparbergs - Disturbance in the uptrend
Kopparbergs Bryggeri is in a strong upwards trend and further upwards movement is indicated. The stock has created formations previously, for example one bearish pennant as well as a doubletop formation. More recent the stock is about to create another doubletop formation with the trend channels bottom as the neckline. The neck-line though could prove a very strong support line for the stock. Would the stock close beneath this level with enhanced volume it would be very bearish and indicate a target zone at 180 SEK. The stock is losing momentum currently and the stock is also somewhat overbought according to RSI. A stop loss could be placed beneath the support line at 220 SEK. We are technically negative in the short and middlelong term whilst we are continously positive in the long term due to the uptrend being very stable historically.
Tagmaster
TagMaster close to further outbreak
TagMaster has for more than 1 year been traded in a positive trend channel. The stock broke through the ceiling of the trend channel at the end of last year after a rectangle formation triggered a buy signal. The volume has decreased after the stock has been unable to establish itself above the ceiling of the trend channel. MACD just recently broke through the signal line, indicating that the market has a bullish view of the stock. This together with that the stock is close to its support level and the ceiling of the trend channel creates opportunities, where the stock most likely is about to break through the ceiling once again. The support level is to be found at 1.2 SEK where a stop loss is set tentatively slightly below. The resistance level is around 1.5 SEK. The technical view of TagMaster is positive in the short- and long-term.
