Market Talk- July 31, 2017

Energy, Industrials and Financials were the sectors leading the Hang Seng in todays trading and we highlight those because it closed up almost 1.3%; not bad for a Monday! Hang Seng helped much of these gains after better than expected results and the announcement of share buybacks. The core Shanghai also closed better (+0.65%) but had to shrug off a disappointing PMI earlier in the day. Services came in at 51.54.5 compared to previous 54.9, whilst the Manufacturing 51.4% compared to 51.7 forecast. The yen remains the safety bid for Asia, trading for most of the day around the mid 110 range. The Nikkei closed lower (-0.18%) still nerved by the Korea news over the weekend and the lower than expected Industrial Production number 1.6% against an expected 1.7% release. Gold improved initially but lost most of those gains as European trading began.

Core European indices traded heavy for the majority of the day with the CAC suffering the major share of the decline. Both the DAX and IBEX were off around -0.35% as the auto sector came under yet more pressure but closely followed by Financials. Much talk that money is returning to Europe but because it is needed at home, rather than expansion abroad – interesting but that’s the chatter. The HSBC result helped European banks but the support was not to last. Inflation data edged better but only just. 1.3% was the release, better than the previous 1.2% June number, but market needed much more to turn the geopolitical nerves that continues to haunt European summer trading. There was talk that Uber will be releasing its own credit card but details were light on this today.

Earnings continues to aid the US rally which saw the DOW better by around 100 points mid-day. All day it appeared as though we were going to close above the psychological 22k level but despite a second attempt just prior to the close we lost ground in the final fifteen minutes. The DOW was the only index to close positive Monday as the broader S+P and NASDAQ appeared to suffer month end profit-taking. The majority of the index have reported now, so the ground is set for additional position building in the H2 of 2017. Tech suffer the most but has had a great run recently. Home Sales rose 1.5% for last month but the big data will come this week when we will see Non-Farm Payrolls release this Friday.

2’s closed 1.35% (u/c), 10’s 2.29% (u/c), 30’s 2.90% (+1bp), Bunds 0.54% (u/c) spread unchanged at +175bp. France 0.8% (u/c), Italy 2.08% (-3bp), Greece 5.29% (+2bp), Turkey 10.33% (u/c), Portugal 2.81% (-4bp) and Gilts 1.23% (+2bp).