Amid subprime panic, global equities position for new relative lows within March

Amid subprime panic, global equities position for new relative lows within March

Torben Krogh Nielsen says fallout from subprime meltdown will hit financials still tender from last month’s selloff. And look for oil prices to slide even if tomorrow’s inventories are bullish.

FX strategist Kristian Siggaard-Jensen looks for February US retail sales figures to disappoint today, and expects a reading in at a paltry 0 to -0.3% against market consensus of 0.3%, a setup that should spark a round of EUR/USD buying at the 1.3200 level. In other currency developments, Siggaard-Jensen expects some volatility in the emerging market pairs this week, and says EUR/HUF offers the best risk/reward for long positions in this regard. \"Disappointing US retail sales figures coupled with the upward revision in Q4 GDP out of Japan should support a stronger JPY, which will spill over into the EM pairs. USD/TRY and EUR/TRY have both gone higher in recent sessions as well, so there’s a nice setup for short-term gains here as well. \"

Equity strategist Torben Krogh Nielsen offers comment ahead of today’s Goldman Sachs Q1 earnings report, which comes amid fast-spreading market concerns about larger economic fallout from big-bank exposure to subprime mortgage loans via leveraged trades based on subprime indices. \"Financials have been carrying the market for a long time, and haven’t recovered significantly since last Monday. Big bank exposure to the subprime meltdown comes at a time when they were already limping from the February 27 selloff,\" says Krogh Nielsen. \"Any admission of forward-looking exposure to subprime indexes is going to impact the tape, and in the case of Goldman Sachs, will do so ahead of the bell on Wall Street. I wouldn’t expect them to feel forced to make direct reference to their exposure to subprime defaults – but they’ll want to do so. They’ll be looking to reassure their own investors this week.\" Meanwhile, Krogh Nielsen’s thematic forecast for global equities remains intact – he says current activities are still \"a low-volume bounce that has lost its original gusto,\" and says markets will see new relative lows within March.

Futures strategist Mårten Alden says crude prices will slide this week ahead of Thursday’s OPEC meeting. \"Consensus ahead of OPEC is that there will be no production cuts this time out – they’ll wait for prices to come off a bit and provide some economic relief to oil-producing countries.\" Although Wednesday’s weekly inventories are expected to show a draw in crude and distillates, Alden says that even bullish build numbers will \"only trigger higher sell levels.\" If the slide in oil prices is too substantial before Thursday, oil prices will show heightened vulnerability to rhetoric from OPEC ministers. Alden is selling April crude at $59.50, the 20-day moving average level, for the next two sessions, targeting the 50-day moving average of $58.55 and then $57.80.