QE Expectations Continues To Fuel The Risk Rally

QE expectations continues to fuel the risk rally in markets, market strategist Christian Tegllund Blaabjerg at Saxo Bank writes in Monday’s Wake-Up Call. He also points to tomorrow’s major earnings release by Intel

“This is very important for sentiment in markets and will fundamentally most likely provide a solid insight into how expectations will be in terms of sales growth in 2011.”

Christian Tegllund Blaabjerg

“European equity markets will most likely open around 0.2% higher today after a strong close in Friday’s US session on the back of expectations rising on the content of the QE package from the FED. Prepare for tomorrow’s earnings from Intel. This is very important for sentiment in markets and will fundamentally most likely provide a solid insight into how expectations will be in terms of sales growth in 2011,” Tegllund writes.

More market musing from Saxo Bank:

The earnings season does not get really exciting until tomorrow when Intel reports. Furthermore, the macro calendar is very, very light.

However, do watch out for the FED speakers today. While we think QE2 is now a near certainty, last week a couple of FED members did attempt to talk down the likelihood of more QE at the November FOMC meeting.

Nonfarm payrolls fell for the first time since December 2009 when you exclude temporary Census workers.

The decline of 18,000 jobs was due to a much larger than expected decline in non-Census government workers.

Private payrolls (64,000 vs. Saxo: 65,000) and Census workers (77,000 vs. Saxo: 80,000) came in as expected, but the 83,000 decline in non-Census government job positions surprised greatly to the downside as state and locals really cut back.

The unemployment rate did not increase as expected, but instead remained at 9.6% as the household survey was somewhat better than the establishment (nonfarm) survey.

The former survey saw employment increase by roughly 141,000 while the civilian labor force rose by 48,000, so the unemployment rate actually declined somewhat, but is still rounded to 9.6%. The so-called underemployment rate, which includes marginally attached workers, rose no less than 0.4%-points to 17.1%, which is the highest rate since April.

This was due to a large increase in persons employed ‘part time for economic reasons’ rose by no less than 612,000. In other words, more than half a million additional workers worked part time in September, but would rather have had a full time position.

The very poor labor market report caused equities to rally and stocks ended the day 0.5% higher in the US. Currently, stocks rally both on good news and on all the news, which confirms quantitative easing 2 will soon arrive.

The earnings season will be kicked off by Intel tomorrow, so look for this report. This is important due to Intel’s global exposure – both towards businesses and consumers.


Christian T. Blaabjerg


This week we will have a pretty decent indication how the big global corporates expect 2011 to perform in terms of sales and EPS growth. JPMorgan, Google and GE all reports this week and this will set the tone going forward in the earnings season.

The nonfarm payrolls Friday clearly was a bullish statement in terms of how you should expect the QE announcement in the beginning of November to turn out.

These expectations have so far lifted markets quite substantially and it is hard to envision how these expectations can be met.

By Christian Tegllund Blaabjerg

Market Strategist
Saxo Bank


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