Market Talk – February 2nd, 2018

 

It was expected to be a crazy fun-filled week and today has confirmed wild status! The Nikkei ended the session down 1% and saw the currency lose 1%. Guess they didn’t really have a direction provider having seen Wall Street whipsaw 200 points in either direction. The nerves are definitely being felt now, which is supporting a return to the “Cash is king” re-approach. Tech and financials were the drag on performance, while talk that the central player put the bid under JGB’s. Tech’s also weighed on the KOPSI resulting in a 1.6% decline. Shanghai and the ASX both closed firmer, but the A$’s 1% decline probably helped there. Another big talking point in Asia was the disappointing Indian budget yesterday. Many had hoped for more structured support but this was not to be and the SENSEX declined 2.65%. Fortunately, the GMW (Global Market Watch) Monthly saw the INR change (indicated by the turquoise color). The Rupee was under pressure (-1.1%) throughout the day and grew as US numbers provided broad support for the Dollar.

Europe opened heavy as many discussed Deutsche Banks results – with such a miss it’s not a surprise the stock ended with a 6.3% decline! Spanish banks were also heavy, today with Caixa (-3%) and yesterday with BBVA falling 6% over the past two trading days. Overall, the CAC, DAX, PSI, OMXC, FTSE MiB, AEX and BEL 20 were all around 1.5% lower today with the UK’s FTSE losing -0.65% but with an additional loss of 1% on the GBP. Energy and gold have also seen significant losses today following earlier poor sentiment and then impressive US economic data releases.

The worst week in two years, is how many are calling this week for US indices. A better than expected jobs report has added to the fears that higher interest rates will halt the explosive stock market rally. Having seen the DOW off nearly 300 points, it looked as though we had a chance to rally mid-session. However, that was not to be and then a 400 point loss eventually led to a near 700 point (-2.6%) decline. Higher rates have been supportive of the currency and in late trading, the DXY flirts with the 89 handle. Everything so far has been choreographed perfectly. We achieved the January high, announced the high was in place and the turning point arrived on the 29th, and it has been off to the races ever since.

Japan 0.095%, US 2’s 2.14% (-2bp), 10’s 2.84% (+5bp), 30’s 3.08% (+6bp), Bunds 0.77% (+4bp), France 1.01% (+2bp), Italy 2.04% (+9bp), Greece 3.62% (-2bp), Turkey 11.40% (+7bp), Portugal 1.99% (+7bp), Spain 1.46% (+6bp), and Gilts 1.58% (+5bp). Much of this move was during the US trading day and so we have to wait until Monday and see how European core and peripherals respond. Guess is, many will be waiting for the buyer to poke his head up!

 

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