Market Talk February 15, 2016

Today’s rally in the Nikkei must have been a huge breath of fresh air for the BOJ (Bank of Japan). After opening 2% firmer the market went from strength to strength with good volume it eventually closed +7.1% on the day. Banks regained some of their losses from last week with SMFG, Mitsui, Mitsubishi UFJ and Nomura all closing between 8.5 and 10% higher on the day. In China the PBOC (People’s Bank of China) moved the FX rate to its strongest level for a while resulting in a close of 6.4911 1.2% firmer. The Shanghai did show a strong performance towards the close having bounced off of a 2% decline closing -0.6%. However, the Hang Seng did show some positive signs closing 3.1% firmer on the day.
In European trading all indices followed the strong Nikkei with impressive gains of between 2 and 3%. IBEX (Spain) returned an even greater performance (+3.3%) but is bouncing off a very poor showing last week. The one sector that will have been happy with Asia overnight gains will have been the banks! Given the amount of negative press over the weekend, any type of headline could very easily have turned the banking sector back lower. Having taken a bit of a beating last week these guys must have thanked their lucky stars Asia (Nikkei) performed as it did today. Just to be on the safe-side Mario Draghi did happen to mention that the Central Bank is ready to ease policy if market turmoil threatens outlook.

Core Fixed-Income markets traded weaker but also saw peripheral spread trade back-in. The German 10yr lost price (gained yield) to close at 0.30%(+6bp). US cash market was closed but the futures had lost around half-a-point to close around 8bp higher (1.81%).

Gold saw a lot of profit-taking as the confidence returned to stocks and eventually closed $1209 (-2.4%).

Most traders will be looking to the FED again mid-week when we get the FOMC Minutes released. Europe (Germany) has the ZEW confidence data announced and then later we will see UK CPI release (expectations are for -0.7% m/m and 0.3% y/y).