Asia was encouraged by the wests acceptance of the Italian vote and especially the Euro’s strength. Bouncing off of the key 105 levels has created a triple bottom which, if breaks, propels the market lower. we were already aware of the Nikkei’s performance through the futures contract and so cash opening created the days highs slowly descending into the close. However, it still produced a +0.5% return on the day as the Yen drifted back towards the 114 handle. One of the major topics discussed through Asian trading was the rumored weakness in the Yuan fixing. Rumours circulated that the fixing had been nearly 9% weaker at 7.49 but proved to be false and was set at 6.8575 by the PBOC. The offshore continues to trade marginally weaker at 6.8800 as we approach the US open. The Shanghai index drifted into marginally unchanged at the close while the Hang Seng reflected major European strength.
Europe resumed yesterdays strength as the currency continued its run, at least it did in early trading. All core indices closed better the IBEX performing the best (+2.4%) with the DAX and CAC around 1% firmer. The UK’s FTSE managed just 0.5% after news of stricter regulation from the FCA impacted heavily on the likes of IG Group (falling 38% in todays trading. Italian PM agreed to delay his resignation helped the MIB FTSE to close over 4% higher today. On the whole a slower market than yesterday with many waiting for Mario Draghi’s address in Belgium Thursday when he delivers the ECB press conference. The street expects a six month extension of the bond buying programme. However, that said prices are starting to question this given todays weakening of Bund through Treasuries.
“A comfortable day” was the remark by one of the US dealers today as core indices maintained their recent performance. Economics data was within expectation with a marginal beat on the Factory Orders numbers (2.7% m/m). However, in the final hour of trading we managed to firm the market into the close to return solid and steady progress with the Telecoms leading the way. DOW and Russell close at market highs. S+P missed by a smidgeon.
The one thing that was highlighted in todays Bond Markets was that the German Bund weakened as Treasuries remained unchanged – tightening that 10yr spread. We closed this evening with US 10’s at 2.39% (-1bp) with the Bund closing 0.38% (+4bp); closing the spread at +201bp). Italy closed 1.94% (-4bp), Greece 6.61% (+20bp), Turkey 10.88% (-21bp), Portugal 3.59% (-7bp) and UK Gilts unchanged at 1.405%.