Bylov: Inter-Markets Trading View

Jan Bylov, chief analyst at Nordea Markets, is a "rare specie" among analysts, as he is looking himself at all asset classes and uses inter-market approach in analyzing the markets. He writes in the summary today:

Equities – UK banks being crushed

More UK intervention was not received well and UK banks were crushed yesterday. Clearly, the troubled financial sector has not passed its nadir yet which ultimately will provide an encouraging sign… when it occurs! With Buffett saying US in an “Economic Pearl Harbor” and a former official at the Irish central bank warning “Help Ireland or it will exit euro” and Spain’s long-term sovereign credit rating downgraded investors remain concerned on the day of inauguration of President Obama. I continue to see two scenarios: 1) investors either perceive that the background macro environment is getting even worse than understood back in November causing new bear market lows ahead or 2) investors are currently being deceived by the reported statistics on how the situation was back in November/December. I stand aside still.

Bonds – Weak setback in German Bunds

The amount of bond issuance and ECB not cutting rates again until March combined with yields recently touching new record lows are perceived to cause recent day’s setback in most benchmark bonds. Still, in a wider perspective central banks and governments will not hesitate to support the long end of the curve to secure low yield house financing and attractive price levels at which the public can sell the enormous amount of government bonds to finance the various banking and fiscal packages. If right we are “just” witnessing a temporary setback with the overall bull trend in government bonds which so far is supported by the slow/weak setback in German Bunds. I continue to stalking German Bunds for better levels to re-buy once again.

Commodities – Quiet

Following the commodity collapse during Q2 -08 all sectors have experienced the best recovery during December and until recently; this unusual recovery advocating that the commodity collapse has come to a halt. Now, prolonged range trading is very likely ahead of the next major directional price move, and I maintain that the transient investment theme of a “global deflation and economic recession” very well could have been discounted by the price extremes experienced during late 2008. Consequently, the ongoing and unprecedented official intervention in the global economy - and weak hands gone - argue that commodities are in the best period experienced for several months.

Currencies – “Economic Pearl Harbor” and “Help Ireland or it will exit euro”

A new round of bad news has surfaced with Buffett saying US in an “Economic Pearl Harbor” and a former official at the Irish central bank warning “Help Ireland or it will exit euro” and Spain’s long-term sovereign credit rating downgraded. A tough day and times ahead for the new US President Obama, and while the euro news follows the script of intensifying focus on the internal euro challenges it also appears to have stabilised the Scandi recovery. As a consequence, I this morning chose to cash in a net profit from my short EUR/NOK and EUR/SEK positions hoping to short again from better levels as I suspect upcoming increasing international attention on the overvalued euro currency faced with its first recession and severe trouble within the indebted PIGS countries…and not least behind the US business cycle downturn. I stand aside for now.

Consider as a probability ...
ADDED: re Commodities ... weak hands gone?