A quiet market for many in Asia ahead of Chinese New Year and the subsequent national holidays. In Japan the inflation data was marginally better than previous (+0.1% v’s prev. +0%) which helped the Nikkei add additional gains but were slowed somewhat by Consumer Price data. However, this had an effect on the JPY which drifted more into the 115’s handle in late trading as focus again starts to turn more toward US Dollar recovery than JPY weakness.
European markets closed weaker but appeared more on weekend lethargy and profit-taking rather than any real concerns as trading volumes remained low. FTSE was the only core performer but that was probably on the back of a slide seen in sterling. As we listened to the US/UK press conference, markets were very much in control with no madness headline reactions or exaggerated rumors surrounding subject matter. This is the first the two have met and on appearance looked open, considerate and friendly and comes at a time when queue jumping was necessary. On European bourses banks stock led much of the decline with talk that UniCredit was down over 5% and UBS missing on Q4 comparable numbers also hindering the wider sentiment. Oil prices were heavy today also declining expectations surrounding the OPEC optimism drifted and US production steadily increases.
US GDP released weaker than anticipated which dampened the stock market record week. US Q4 GDP expected at 2.1% came-in at 1.9% but was countered by PCE Prices with Durables as volatile as ever (Expt. +2.6% released -0.4%). After an extensive week the stock market finally saw gains of around 1% whilst setting new record highs. The enthusiasm for the market this year has been encouraging but with many still on the side-lines it will be interesting to see how we fair with China off next week.
US 2’s are closing unchanged at 1.22%, with 10’s sneaking back a couple of beeps at 2.48%. Germany also 2bp tighter at 0.46% closes the US/Bund spread at +202bp. Italy 2.22% (-5bp), Greece 7.03% (+23bp), Turkey 10.96% (-6bp), Portugal 4.07% (u/c) and Gilts 1.47% (-4bp).