Market Talk – August 18, 2016

Exporters within the Nikkei weighed heavy on the index today eventually closing down 1.55% at 16,486. Watching the JPY trade below par was no surprise the likes of Mazda, Toyota and Nissan all traded around 2% lower. Exports for July were the worst seen in seven years down nearly 25% YoY. China played in a very tight range whilst the Hang Seng performed the best closing up 1%. In late US trading both the Nikkei and Hang Seng following better momentum as the weekend approaches.

Eyes were on the UK again as we saw more economic data post BREXIT. July Retail Sales were expected 0.2% mom but saw actual release at 1.4% and yoy expected 4.2% but showed 5.9%. As a result we saw a another great performance in cable (0.85%). Eurozone inflation was almost as expected and so not too much of a market mover but we did see the EUR followed much of cable’s rally closing around 0.5% better on the day. European banks continue to struggle and appear never able to escape the news. Today there are rumours appearing that the Chief Executive of Monte Dei Paschi di Siena and the former Chairman are under investigation for market manipulation and false accounting. Shares were down 2% today and on the YTD are down 88%.

US market were extremely quiet with many quoting summer vacations and lack of clarity over monetary policy as an excuse. The good news is that they are responding to the strong oil price but also that prices closed on the days highs. Hardly any fresh data anywhere tomorrow so we could well be in for an early start to the weekend.

US bonds traded in a very tight range with 2’s seeing marginally better support than the longer end. 2’s gained 2bp to close 0.70% whilst 10’s closed 1.54%. In Germany still we see demand for Bunds with yields closing lows of the day at -0.085%. Italy 10’s closed 1.07% (-4bp), Greece 7.89% (-5bp), Turkey 9.61% (+12bp), Portugal – still suffering from potential downgrade – closed 2.88% (+4bp); if they are cut they will no-longer be investment grade. Finally, UK Gilt 10yr closed 0.545% (-1bp).