Market Talk- August 21st, 2017

The news of Steve Bannon’s departure on Friday came too late for Asia and so cash markets readjusted in this mornings session. We did see a little move back into the JPY again, but much of that move was Friday evening and so today was a combination of the remnants of this and the concerns surrounding military exercise’s. The Nikkei cash ended the day down around -0.4% but we are seeing the currency trade below the 109 handle and into the 108’s. It was only China’s Shanghai and the Hang Seng of the core that saw positive days, having seen help from the Utilities, Real-estate and Natural Resource exploration (CNOOC). The Australian ASX lost a little ground but not too concerning. Closing down -0.4% on the day the currency drifting towards mid 0.79’s it was again resources and steel that creates the doubt in the index. A pretty mixed open for Asia to start the week but as we have Jackson Hole and we hear twice from Mario Draghi, the fun and games are yet to begin.

Again, it is the DAX that leads core European sentiment lower but markets were drifting even before the US markets opened. The Italian FTSE MIB that led markets lower but it was the DAX that continues to command most of the talk. Industrials, Energy companies and banks that weighed on the DAX; with still a lot of talk surrounding the car manufactures not helping confidence. The overhang and the lack of conviction are seeing European stocks rollover just as US investors take to their desks. Few dealers were commenting that money was taken off the table having seen almost a year of great returns. Banks were a weak sector again today with large names (Deutsche Bank, Soc. Gen, BNP Paribas) all losing a little over 1%. The UK’s FTSE bounced into the close to finish little off whilst the other core closed -0.3% to the DAX -0.8%. The UK produced five new papers with talks of shifting terms surrounding BREXIT and the markets seemed to take the news favourably with both GBP seeing a few buyers and FTSE regaining earlier lost ground.

US markets really were a game of two halves today with initial weakness soon after the opening, being turned to a positive close for the day. Banks continue to suffer and with today move were around 5% lower on the month. Oil was down again after the late rally last week, but closed today around 2.5% on the day. Russell continues to trade below last years closing price with many giving the lack of tax progress as the key reason. Tech also heavy but has still set an impressive performance for the year so far. We are expecting a few headlines later in the week especially Mario Draghi’s speeches, but tax agenda and infrastructure are what many want to hear about and that looks to be even further away the more we discuss it.

2’s closed 1.31% (u/c), 10’s 2.18% (-1bp), 30’s 2.77% (-1bp). Bunds 0.40% (-2bp) which closes the US/Germany spread 1bp wider at +178bp. France 0.69% (-2bp), Italy 2.02% (u/c), Greece 5.51% (-1bp), Turkey 10.35% (-13bp), Portugal 2.71% (u/c), Gilts 1.06% (-3bp).

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