Asia was a mixed with a strong Hang Seng (+0.75%) an unchanged Nikkei and a slightly weaker Shanghai (-0.55%), which after yesterdays ECB Q+A session was actually very promising performance. However, it was not to last and as soon as Europe opened then the selling began. It started in the fixed-income markets but by afternoon had infected equity markets also.
The DAX, CAC, IBEX and FTSE all closed lower on the day but were heavily influenced by the US markets as soon as they opened. German Export data did not help as was expected at 0.25% (m/m SA) but came in at -2.6% whilst the previous release was +0.3%. French Industrial output was also weak, expected at +0.2% but was released at -0.6%. With all core European indices losing over 1% many were thankful this is the last day of the week.
US markets were due a correction and that is exactly what we saw today. Ahead of US cash market open the futures were heavy with losses of around 0.5% expected. In the opening few hours the selling got heavier and by afternoon the DOW was off over 300 points and the NASDAQ and S+P down over 2%. Towards the end of the afternoon session we hear people are concerned running risk over the weekend and so we see the Friday afternoon long liquidation gain momentum. The DOW closes nearly 400 points lower on the day with the S+P and NASDAQ off 2.5%. The first time we have seen a correction in a while and was certainly well overdue – don’t be too influenced by the events of one day. The VIX gained 30% and was last seen at 16.5%. Oil sold off also and last seen around 4% lower on the day.
US curve saw more steepening (+4bp) with 2’s closing up 2bp at 0.79% whilst 10’s lost 7bp to close at 1.67% (2/10 closed 88bp). German 10’s actually closed in positive yield today which was the first time since July, closing at +0.01% (US/Bund spread closed +166bp). Italy 1.25% (+9bp), Greece 8.12% (+5bp), Turkey 9.50% (+15bp), Portugal 3.14% (+9bp) and UK Gilt 10yr at +0.86% (+10bp).
