Market Talk — April 25, 2016

This week all eyes will be focused on Central Banks, namely the BOJ, RZB and time again for the Federal Reserve. Stocks have started the week on a nervous note with all core markets falling as talks of further easing weighs on sentiment. The Nikkei and HSI both attempted early recoveries but to no avail closing down -0.8%. The Shanghai managed a small recovery from early lows but still closed -0.4% down. In late US futures trading the Asian indices hit an additional 0.6% lower inline with US markets but a recovery into the close was extremely welcomed.

Oil was a given reason for early losses in Asia but that had all been forgotten by the time Europe opened. Having seen a positive start to the week prices started to drift and only managed a small bounce only to be hit again into the close. With many central banks all expressing concerns around growth it should be no surprise that miners and energy (EDF in the CAC) led the way lower. German IFO released a little weaker than forecasted, 106.6 was the print, whilst the expectation was looking for 106.7. Early DOW action did not help Europe and we closed down around 0.8% across all core indices.

US futures were already trading 0.4% lower when the cash market opened and so we saw a pretty rapid decline resulting in the days lows. Energy and Financials were the leaders on the way down whilst Consumer Staples and Telecoms led the rally back up. Volumes are quite light but is really to be expected ahead of central bank announcements on both sides of the globe later in the week.

A lot of the action was in the European Bond Markets today as Bunds and the peripherals started to be tester. The spread between US and Germany tightened again to close this evening at +162.5bp. US 10’s held-in really well only losing 1.5bp on the day (closing 1.895%). 2/10 tightened 1bp to close +106bp. German Bund 10yr lost 3.5bp, closing at 0.27%. Italy 10yr closed 1.53% (+6bp), Greece 8.28% (+7bp), Turkey 9.07% (+10bp), Portugal 3.28% (+2.5bp) and UK Gilt closed 1.61% (+1bp).