Saxo Bank Publishes its Investment Outlook for Q4 2014

Copenhagen, Denmark (ots/PRNewswire) - The US, China and Europe are
all headed for another Minsky moment but
this challenging environment for investors can also be a fertile
trading environment.

According to Saxo Bank [http://www.saxobank.com/?noredirect=true ],
the online multi-asset trading and investment specialist, the
flipside of quantitative easing has been the mountain of debt that
the globe has accumulated over the last few years.

In its latest Quarterly Outlook report for the financial markets, the
bank said Asia's foreign debt has soared to $2.5 trillion from $300
billion in a decade, and China is spending a fortune just to manage a
debt service cost that stands at 39% of GDP. The US is not faring
that much better where interest on US government debt costs 6% of the
budget in 2013 despite neglible interest rates and the debt load has
nearly doubled to 80% of GDP in 10 years. The bank said that the
western world continues to ignore the need for the kind of
fundamental structural reform that will enable private
entrepreneurship to flourish and grow.

Chief Economist Steen Jakobsen commented: "It's time we talked about
debt. It is the elephant in the room that no-one wants to discuss,
but it has now grown so large that the foundations are shaking.
Whatever the timing, the US, China and Europe are all headed for
another Minsky moment.

"Never has the gap between the reality and the perception of the
present economic situation been greater. Yet, never have the
opportunities to trade this been better. The world is not ending,
it's getting ready for a new beginning where we must address the
elephant in the room - debt."

Saxo Bank's Chief Economist says that debt only gets reduced two
ways: by writing it off or through superior growth. Neither is
politically or practically feasible during the next quarter which
means that interest rates globally must remain unchanged-to-lower
while we play pretend-and-extend one more time before Minsky gets his
proper place in the limelight.

As we head into Q4, the markets aren't going to get what they want:
the US is not on an easy and smooth path to better days accompanied
by a gentle Fed tightening. As the US recovery hits the low ceiling
amid a raging USD bull, we will see uncertainty and volatility rise
sharply about what comes next. Bonds will rally one last time and
volatility will rise as well.

Commodities

Looking at gold priced in other currencies, Ole S. Hansen, Head of
Commodity Strategy, finds that most of the weakness has been related
to dollar strength, with gold measured in euros up almost 10%
year-to-date and around half that against the Japanese yen.

Ole S. Hansen added: "We view a continued rise of the dollar in the
final quarter as being gold and silver's main challenge with the
current slowdown in China, Europe and elsewhere potentially leading
to less aggressive expectations for how hawkish the US Federal
Reserve can and will be."

The energy sector will struggle during the early part of the final
quarter with the seasonal slowdown in US refinery demand leading to
the usual rise in inventories. Additional price weakness is
eventually expected to be met by a response from OPEC, if not before
then during the next meeting, which is planned for November 27. The
downside risk could be extended if OPEC fails to show unity with
Iraq, Libya and eventually also Iran. All will be looking to increase
market share at a time of falling demand for the cartel's oil.

FX

As commodities are weak and bond yields are already low, to John J.
Hardy, Head of FX Strategy, this suggests that the market is very
concerned about global demand and growth potential - not to mention
the potential for disinflation/deflation. Among currencies, it seems
that the market has been very late in discovering that we are near
multi-year lows in major commodities indices as we enter Q4 and that
there is a considerable degree of further downside potential for
commodity currencies on the weak commodity theme next quarter.

John J. Hardy said that his favourite question for Q4 is what if the
ECB fails to move straight to QE (as the market has fallen all over
itself to anticipate)?

He commented: "There is a strong anti-QE contingent within the ECB,
led by the German Bundesbank. There is also strong German political
resistance to direct central bank purchases of sovereign debt because
this funds fiscal shortfalls by EU member governments. Along the same
lines, then, what if the ECB targeted long-term refinancing
operations and asset-backed securities

purchases prove smaller than the market hopes, while the realisation
dawns that the barriers to QE will likely take considerably more time
to overcome?"

According to John J. Hardy, a slower than expected expansion of the
ECB balance sheet could slow the euro's decline, and even see it grow
stronger against the weaker corners of the market if disappointed
euro carry traders see rising volatility (which tends to negatively
correlate with carry trades). Elsewhere, he expects continued USD
strength to remain a prominent theme.

Equities

Equities are still fairly valued globally and are by no means in
bubble territory. Based on the low interest rate environment and a
still growing global economy, equities still remain the most
attractive asset class.

Peter Garnry, Head of Equity Strategy, commented: "In our Q4 outlook,
we present three trade ideas on equities that fit into our overall
picture of the world, but also to direct your interest towards
countries, sectors and stocks that would normally come to mind. We
recommend being long the US natural gas segment following a 21% crash
from the highs in June, short India on unjustified high valuation and
bet on negative economic surprises, and finally long Goldman Sachs on
a pickup in the US economy and capital markets activity."

Link to report:
https://www.tradingfloor.com/publications/quarterly-outlook

About Saxo Bank

Saxo Bank is a leading online trading [http://www.saxobank.com/forex
?csref=b1744_Link_boilerplate_pressrelease ] and investment
specialist. A fully licensed and regulated European bank, Saxo Bank
enables private investors and institutional clients to trade FX,
CFDs, ETFs, Stocks, Futures, Options and other derivatives via three
specialised and fully integrated trading platforms; the browser-based
SaxoWebTrader [http://dk.saxobank.com/lp/webtraderdemo?csref=b1748_L
ink_boilerplate_pressrelease_danish ] , the downloadable SaxoTrader
[http://www.saxobank.com/demo-account?csref=b1746_Link_boilerplate_pr
essrelease ] and the SaxoMobileTrader
[http://www.saxobank.com/trading-platforms/saxomobiletrader ]
application available in over 20 languages. Saxo Bank also offers
professional portfolio and fund management through Saxo Asset
Management who accommodates high-net worth private clients and
institutional investors and provides banking services and advice to
retail clients through Saxo Privatbank. The Saxo Bank Group is
headquartered in Copenhagen with offices throughout Europe, Asia,
Middle East, Latin America and Australia.

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