Market Talk- October 4th, 2017

Even in Asia the markets appear to be lacking in commitment, despite price increases day after day. The Nikkei gave-up the mornings gains, but still managed a small uptick for the close. For the third day in a row, the Yen rejects playing for long with a  113 handle, reflecting continued uncertainty. That was not the case for the Hang Seng which is happy to search for the years high, but though rejected still closed at 2017 high (+24% YTD). RBI left rates unchanged resisting calls for a cut to spur growth. A lot of talk in Asia surrounding FX exposure especially given the amount of debt issued outside their own currencies over the past few years – Malaysia, Indonesia and some Middle East countries mentioned. The chances of the FED moving are priced at around an 80% probability of a FED hike in December, so data and Fridays numbers will be very closely watched all around the globe! Core China market remains closed.

The weekends events in Spain were no given much market attention last Friday but as the week progresses headlines are being repeated everywhere. The IBEX has dragged sentiment down across the region and this evening closed down 2.85% on the day. Bono’s also out another 5bp in todays trading. The banks were some of the key losers within the index, as the call for independence continues. The GBP saw a little renewed confidence early in the trading day but was back at unchanged by the time the US markets were closing.

US market appears relentless in this rally and continues to edge toward that 23k target. Again records are set and broken and all within what many term, ‘Silly Season’. September and October are notoriously crazy periods and 2017 will probably be known as ‘no-vol’ (zero volatility). Still, we still have a few weeks to play before November is with us – so there is still time yet!  Markets liked the ADP report with 125k expected actually released at 135k. Banks are joined by energy stocks with industrials not far behind. The next FED Chair will command much talk into the weekend, but will get a rest at 08:30 Friday morning when the NFP are reported. ISM this afternoon adds to all the other strong data points that go to assist this rally.

2’s closed 1.47% (-1bp), 10’s 2.33% (+1bp), 30’s 2.87% (+1bp), Bunds 0.45% (-1bp) pushes the spread back to +189bp. France 0.74% (-1bp), Italy 2.18% (+3bp), Greece 5.48% (-1bp), Turkey 10.73% (+1bp), Portugal 2.38% (+1bp), Spain 1.76% (+5bp), and UK Gilts 1.38% (+3bp).