Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Equity rally has stopped for now Equity rally has stopped for now Equity rally has stopped for now

Equity rally has stopped for now

Equities 5 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity update we highlight that macro numbers are doing the best this year against expectations and that it could support equities. Once again we highlight DAX and Nikkei futures as the markets with most momentum as these markets are high beta plays on the global economy. India has been a darling for years but recently growth has come under severe pressure and we highlight the fact that India's equity valuations seem disconnected from macro reality. Finally we focus on Ford Motor that had its debt downgraded to junk status by Moody's.

The equity rally seems to have stopped as equities did not extend gains in Asia session. It seems investors are waiting for the important ECB meeting on Thursday before adding more risk. Recent macro developments do not warrant risk-off here, so our short-term view remains that equities are bid, but longer term our forecast is that the global economy is likely to slip into a recession unless we massive stimulus from both monetary and fiscal policies on top of some US-China trade deal.

Economic surprise index is likely turning positive

The entire year has been a one-way street on bad macro numbers against expectations but luckily for investors that has not spilled into bad returns. Centrals banks made a historic U-turn back in January and February which has elevated risky assets and now macro numbers are no longer disappointing against expectations as measured by the Citi Economic Surprise Index on the G10 countries. The index is likely to push into positive territory very soon and the macro momentum is strong relative to expectations. This could extend the rally in equities.

Source: Bloomberg

Nikkei futures still look the strongest on JPY flow

As we have been highlighting the since late last week the DAX and Nikkei futures look the strongest on price momentum. Both equity markets are high beta plays on the macro economy so if risk-on continues these two markets would likely see further momentum. In today’s session Nikkei futures looked relatively strong against a backdrop of more mixed equity markets in Asia. The move is partly currency flows weakening the JPY but also rising sentiment on the macro economy. 

Source: Saxo Bank
Source: Saxo Bank

Is India a train wreck about to happen?

For years investors have been in love with India. The world’s largest democracy had positive demographics and a low urbanization rate setting the country up for decades of super growth. Everyone piled into the country’s equities getting good returns in both local and foreign currency. But recently the growth engine as been sputtering with news yesterday that car sales in India had it worst ever fall in August down 24%.

On top of that, India’s banking sector has eclipsed Italy as the world’s worst bad-debt pile. We are potentially watching a credit crunch in the making. More strangely is it to see equity valuations in India with MSCI India Index valued at 1.5% dividend yield which makes Indian equities much more expensive than US equities which are already expensive in a developed market context.

Stocks to watch

Ford Motor is in focus as Moody’s downgraded the carmaker’s credit rating to junk status as cash flows and operating margins are expected to remain weak the next two years. It obviously bad for Ford Motor which has been struggling with a weak share price the past five years. The downgrade means higher financing costs which come at a bad time as the economy may slip into a recession within the next 12 months and the car industry is seeing increasing capital expenditures to fund the transition to electric vehicle technology. The company’s debt has a current credit default swap price of 183 basis points which is in line with Bloomberg’s default model. The 1-year default probability is 0.29% which at levels not seen since 2012.

Source: Saxo Bank

Apple will announce at 17:00 GMT its 13th iteration of the iPhone which is seeing slowing demand. The company is getting around 50% of its revenue from the iPhone so it’s an important event for Apple investors to watch. But Apple understands future growth is not coming from the iPhone but its Services segment (essentially digital sales) and its streaming business in TV and music.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.