Daily Market Chatter (30-September-2015)

FX
G10
Investor confidence remains shaken by the Feds reluctance to raise rates with
currencies seemingly trading as a function of stock market moves and swings in risk.
Fed policymakers conflicting views are raising questions about the CBs ability to
manage its message at such a crucial time. As we enter the business part of the week
and the ensuing data deluge, choppy and listless action continues in the G10 space.
A host of data releases today, the most watched of which will be the US ADP
Employment Change at 4.15pm where a number around 190k is expected. Also of
interest will be UK Q2 final GDP, German Unemployment and EU CPI. Watch for
Fed speakers Dudley and Yellen late on.
EUR Choppy action in European and NY sessions yesterday, initially back as a risk
currency, squeezing the well-worn short trade as equities and high yield markets get
hurt. An early test of 1.1280 failed with the single currency losing some of its shine as
bear pressure enabled a slip below 1.1200 on weak Eurozone inflation data before
stabilising. On newswires, ECBs Weidmann says the central bank should look
through energy-price swings and expansive monetary policy shouldnt be
maintained any longer than necessary but its been a quiet session overnight with
German September jobs data the risk for the currency this morning.
GBP markets appear to be focusing on stocks and commodities, unsure just what
GBPs role is. The currency is currently neither a funder nor a safe haven and should
1.5135 downside break in cable, we could be in for a further period of
underperformance as UK rates continue to soften. Carney disappointed speculators
by choosing not to speak specifics last night in his speech at Lloyds of London,
preferring to talk about the risks to financial stability from climate change. GBP got a
brief lift yesterday as rumours of a EURGBP sell order linked to the UKs
agricultural subsidy payment saw us slip from 0.7430 to 0.7385 but the failure to
hold the move has seen us back up towards 5 month highs on GBPs narrowing rate
advantage.
JPY USDJPY remains tightly range bound around 120.00 with bids stacking up in
the low 119s and exporters happily sitting on top 120.50 and above. JPY has in the
main had a decent quarter as market turmoil has fuelled demand for safe haven
assets, overriding the prospects that US interest rates will increase by year end.
Should stocks continue to plunge, a 119.00 test is on the cards but immediate focus
will be tomorrows Tankan and the weeks US job numbers. Japanese industrial
production and retail sales failed to move the currency earlier this morning.

 AUD off its worst of the week and regaining 0.7000 as swings in risk and a
marginally improving equity picture see us reattempting 0.7025 as month end
rebalancing also had an effect. A few North American and Asian stops are stacking
up through 0.7050 but optionality around 0.7000 should not see us too far from
current levels today. Mixed building approvals data had little effect on the currency
this morning.
NZD with NZ business confidence recovering from a 6 year low and household
lending gaining the most in almost 7 years, NZD has seen somewhat of a short
squeeze as commodities stabilise, albeit at lower levels. Realistically, negativity
persists but the market is becoming impatient with the NZDs inability to have
another look at recent spike lows at 0.6130. Next up, US jobs numbers will get us
moving again.
Prev day Close

% Change
1D

1W

1M

1YR

YTD

EUR USD

1.1261

+0.20%

+1.23%

+0.51%

-10.83%

-6.93%

GBP USD

1.5161

-0.25%

-1.38%

-1.21%

-6.52%

-2.70%

USD JPY

119.69

-0.09%

-0.23%

-1.29%

+9.16%

-0.13%

Source: Bloomberg

EM
It was a good day for EMFX yesterday but a terrible quarter during which there
were big outflows of cash from EM-focused funds. The day started on a weak
footing as investors were worried about the Glencore story and equity markets were
fragile but as London came in most EMFX recovered and the day ended with most
currencies off their lows. We are two days away from the US employment report and
most likely markets will trade sideways until then.
Prev day Close
USD TRY

3.0397

% Change
1D

1W

1M

1YR

YTD

-0.49%

+0.55%

+4.45%

+33.37%

+30.09%

USD INR

65.955

-0.14%

+0.11%

-0.79%

+6.80%

+4.62%

USD IDR

14,691.0

+0.12%

+0.96%

+4.44%

+20.54%

+18.59%

Source: Bloomberg

G10 Rates
Decent data day ahead in the UK kicking off with house prices at 10am and followed
by GDP at 12.30. Market sentiment has been extremely negative since the FOMC and
the curve has flattened aggressively with mar 16 short sterling now trading only 6
points above 3mL. I am of the belief that the BOE will not be hiking before Q4 next
year but the curve is still too flat and we're starting to see fast money looking to fade
as are we.
CPI in Europe follows at 13.00 although data really has little impact on the EU and
its more quarter end that could provide some excitement. There was some
disconnect in the fx swap market yesterday for the turn with good arbitrage

opportunities but most desks seem reluctant to take the risk and are well funded in
advance of the actual date.
Chicago Purchasing Manager the best we get out of the US releases but a full table of
FED speakers today with Dudley at 16.30 followed by Yellen and Bullard around
11pm. The timing on Yellen could be significant as London will be going home and
you could see a decent reversal of recent flattening in the front end if they continue
their 2015 meetings are both live. Of greater consequence will be the potential
government shut down and implications. Hopefully congress will manage to avoid
the embarrassment but politics is not so far removed from playground squabbles
que Corbyne and his 'kinder, grownup' politics that include unlimited benefits for all
financed by magic beans.
UST Yield

Prev day Close

5Y

Change (basis points)

1D

1W

1M

1YR

YTD

1.38%

-4.2

-5.3

-17.1

-38.0

-27.5

10Y

2.05%

-4.4

-8.3

-16.7

-43.8

-12.0

30Y

2.85%

-2.3

-9.1

-10.9

-34.4

+10.2

$ Mid Swap

Prev day Close

(bps)

1D

1W

1M

1YR

YTD

5Y

138.6

-5.1

-9.7

-23.4

-54.9

-38.9

10Y

200.9

-5.6

-12.1

-22.0

-62.3

-27.7

30Y

252.4

-3.9

-12.8

-15.3

-65.3

-17.8

Source: Bloomberg

Change (basis points)

Source: Bloomberg

Derivatives
Rates
US Treasuries rallied again yesterday as market participants are pricing a lower
probability of rate hike in October.
Risk-off sentiment is back on the table. As a result, Gamma points are trading higher
and vega firms up.
In the GCC area, AED and SAR rates volatilities are still decreasing liquidity
remains poor.

Fx
G10 vols trading softer over the last 24 hours especially in USDJPY 1m -0.23 and
AUDUSD 1m -0.40.
USDJPY spot failed to break 119.50 as stocks recovered. Equity markets still look
bearish and the skew looks relatively low. 1m 25RR currently trading at -1.28.
USDINR vols unchanged despite the RBI surprising the markets with 50bp cut. Spot
did trade higher after the decision but has since corrected lower. 1y 25RR trades at
+3.50. Trade idea: Sell USD Call INR Put, Expiry 1y, Strike 70.00, EKI 74.00, AKO
64.00, 1y NDF 70.00, Premium USD 2.40%.

 Axes:

Better buyers of GBPUSD vega

Better buyers of EURUSD vega

Commodities Market
The average price of gasoline in the US has fallen by 9cts/gal to $2.35/gal in the last
two weeks according to a survey and comes despite solid demand for the product
and marginally firmer crude oil prices. Kuwaits oil minister has dismissed the
likelihood of an OPEC/non-OPEC summit by the end of the year as he claimed that
non-OPEC producers would not be committed to measures aimed at stabilising oil
prices. Meanwhile, a big rise in long positions has seen net length in ICE Brent crude
jump by 11,973 lots to an almost two-month high of 173,819 contracts in the week to
September 22.
WTI fell below $45/bbl as US industry data showed domestic inventories expanded
and OPECs second-largest producer increased output.
Stockpiles were up +4.6m bbl last week, and remain around 100m bbl, well above the
5-yr seasonal avg. Iraq boosted crude production this month by 17% from year
earlier, Oil Minister Adel Abdul Mahdi said yesterday. Oil is down more than 25%
from this years closing peak in June amid speculation global glut that drove prices
to 6-yr low will be prolonged.

MENA Fixed Income

Yesterday US equity indices failed to rebound as many expected after their 2-3%
dive on Monday only closing flat to slightly in the green. Think we have more
downside there to be honest. European equities were no better closing the day in
red. China still closed and will open next week, will be interesting to see where it
trades and lets not forget we have NFP on Friday.
GCC credits were a bit weaker, no surprise there but compared to Asian credits GCC
was an outperformer, the only downside was the liquidity which was a bit thin
yesterday with multiple accounts in the Wait & See Mode and other accounts not
interested in trading at quarter end.
Not really much to talk about in terms of specific curves/names other than DPW 37s
got hit a couple of times pushing the paper more than 1.5pts lower. Bahrain curve is
still heavy mainly the 22s and 23s although we started seeing a shy buying interest
coming last night.
Kingdom of Bahrain has sent an RFP for a new bond issue, should be interesting to
see where they print, Bahrain is Baa3 rated by Moodys and BBB- by both S&P and
Fitch. Would be a buyer of Bahrain on any selloff.
We were active in multiple names making markets 5x5 and can accommodate size in
selected names. Please contact the desk for live prices. We traded names including

EMIRAT 25s, DOL 21s, BAHRAIN 20s, COMQAT 19s, ETISALAT 24s, RASGAS 20s,
TAQA 17s & TAQA 23s. As for Sukuks we were active on the DUGB curve in good
size, we also traded JAFZA 19s, NAKHL 16s, RAKS 16s, ADIB 15s and a couple of
other names but in smaller sizes.
Change (basis points)

Indices

Prev day Close

(bps)

1D

1W

1M

1YR

YTD

JPMEMBI Sov

459.6

+5.2

+36.6

+40.0

+130.9

+72.2

Sovx CEEMEA

285.1

+1.3

+13.7

+5.9

+49.2

-30.6

Itrax Xover

280.8

-92.9

-54.7

-59.6

+24.0

-65.1

Source: Bloomberg

Change (basis points)

Indices

Prev day Close

(bps)

1D

1W

1M

1YR

YTD

ADGB 5Y

80.6

+1.4

+18.1

+17.3

+26.2

+17.1

Qatar 5Y

79.6

+0.2

+17.1

+16.0

+18.4

-2.6

Dubai 5Y

214.4

+6.0

+13.0

+11.2

+44.4

-12.2

Source: Bloomberg

Continued

Overnight market headlines

Global News
US consumer confidence rises in September
Euro-Area sentiment unexpectedly rises to four-year high
German CPI flat in September, HICP falls
UK consumer confidence falls as economic expectations darken
India cuts interest rates more than expected as RBI front-loads
India eases bond curbs on foreign ownership
Asian stocks climb as global sell-off eases but head for worst quarter since financial
crisis along with currencies; 10yr treasury fall after gaining Tuesday
IMF warns of coming spike in emerging market company failures due to rate hike
Traders said to flee emerging markets at fastest pace since 2008; Investors sold $40bn
of assets in Q3

Middle East & Africa News

Bahrain said to send RFP for new bond issue
Fitch says GCC sovereigns unlikely to close aggregate budget gap
Fitch says Kuwait and Qatar have more tolerance to maintaining capex
Saudi's Acwa Power targets 2016 IPO on domestic bourse
Emirates Dnata acquires 30% stake in Italian ground handler
Egypt expects $12.58bn in additional revenue for 2015/16
Saudi shares hit by weak oil, commodities; UAE, Qatar retreat while Egypt down
modestly
Iraq plans to borrow more from the IMF to plug budget deficit
Tunisia sees 2016 economic growth rising to 2.5%
Kenya central bank working with Treasury on fiscal position; has ample FX reserves
Zambia to review FX rules after currency slump
Please refer to our daily news summary if you wish to read the full articles

Continued

Key data points Global

Major Stock Markets

Prev day
Close

Change
1D

1W

1M

1YR

YTD

GLOBAL
Dow Jones Inds. Avg

16,049

+0.30%

-1.72%

-2.90%

-5.83%

-9.95%

S&P 500

1,884

+0.12%

-3.02%

-4.47%

-4.47%

-8.49%

Nasdaq Composite

4,517

-0.59%

-5.03%

-5.43%

+0.53%

-4.62%

Nikkei

16,931

-4.05%

-6.31%

-10.37%

+4.68%

-2.98%

Hang Sang

20,557

-2.97%

-5.69%

-5.14%

-10.36%

-12.91%

Shanghai

3,038

-2.02%

-2.50%

-5.24%

+28.52%

-6.08%

Mumbai Sensex

25,779

+0.63%

+0.49%

-1.92%

-3.20%

-6.26%

DAX

9,450

-0.35%

-1.26%

-7.89%

-0.25%

-3.62%

CAC 40

4,344

-0.31%

-1.91%

-6.65%

-1.64%

+1.66%

FTSE 100

5,909

-0.83%

-0.45%

-5.42%

-10.77%

-10.00%

DJ Stoxx 50

3,030

-0.32%

-1.50%

-7.33%

-6.08%

-3.70%

FTSE MIB Index

20,727

-0.16%

-1.45%

-5.54%

-0.79%

+9.02%

SMI Index

8,323

-0.69%

-1.79%

-5.68%

-5.79%

-7.35%

MENA
Abu Dhabi - ADX

4,476

-0.89%

-0.65%

-0.40%

-12.34%

-1.17%

Dubai DFM

3,554

-0.78%

-1.98%

-2.95%

-29.52%

-5.82%

Saudi Arabia

7,337

-1.42%

-2.79%

-2.46%

-32.41%

-11.95%

Qatar

11,275

-1.39%

-2.45%

-2.49%

-17.87%

-8.23%

Bahrain

1,275

-0.21%

-0.67%

-1.87%

-13.62%

-10.62%

Kuwait

5,751

-0.23%

+0.65%

-1.19%

-24.54%

-12.00%

Oman

5,761

-0.12%

+0.33%

-1.89%

-23.03%

-9.18%

Egypt

7,332

-1.05%

+0.88%

+1.09%

-25.28%

-17.87%

Turkey

74,258

+1.29%

-1.12%

-1.27%

-0.91%

-13.37%

Source: Bloomberg

Major Commodities
Prices

Change

Prev day
Close

1D

1W

1M

1YR

YTD

WTI Oil $/bbl

45.23

+1.80%

+1.69%

-8.07%

-50.38%

-15.09%

Brent Oil $/bbl

48.23

+1.88%

+1.01%

-10.93%

-49.05%

-15.87%

Gold spot $/oz

1,131

-0.29%

-0.16%

-0.26%

-6.44%

-4.81%

Silver spot $/Troy oz

14.64

+0.37%

-1.12%

+0.02%

-13.84%

-6.73%

Alluminium 3MO $

1,564

+0.84%

-1.57%

-2.43%

-20.33%

-15.57%

Nickel 3MO $

9,875

+0.00%

+1.91%

-1.84%

-40.78%

-34.82%

Copper 3MO $

4,970

+0.10%

-2.13%

-3.21%

-26.28%

-21.11%

Source: Bloomberg

NBAD Global Markets

Contact details
G10 FX & Rates

EM FX & Rates

Craig Tredgett

Hussain Askar

Craig.Tredgett@nbad.com

Hussain.Askar@nbad.com

Alison Higgins

Ahmed ElAlami

Alison.Higgins@nbad.com

Ahmed.ElAlami@nbad.com

G10 FX Spot

Non-Linear Rate &Derivatives

Phil Muldoon

Hein Van Der Wielen

Phil.Muldoon@nbad.com

Hein.Wielen@nbad.com

Nourah Al Zahmi

Vijesh Peris

Nourah.Alzahmi@nbad.com

Vijesh.Peris@nbad.com

Mohamed Bouzoubaa

MENA Fixed Income

Matthew Locke
Matthew.Locke@nbad.com

Mohamed.Bouzoubaa@nbad.com

Naoufal Alami
Naoufal.Alami@nbad.com

Market Insights & Strategy

Chavan Bhogaita
Chavan.Bhogaita@nbad.com

NBAD Global Markets

Tel: 00971 2611 0111
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