Market Talk- October 24, 2017


Having just seen an uncertain US session, Asia was a little confused which way to take markets from the opening bell. Still, it appears as though Shanghai and Hang Seng want to cancel each other out which a very much mixed session. The Nikkei had another strong day resulting in 16 days of consecutive gains. Retail participation was rumored to be pushing values better with banks (Mitsubishi and Mizuho around +1.5%) and exporters leading the run. The Yen was extremely well behaved but we do still have much to come to the balance of this week. With the impressive US performance late afternoon, we are seeing Asian futures follow suit and so are expecting a strong Asian opening.

Headlines for Spain were subdued, BREXIT more in the news after French PM Macron visited Ireland to discuss border arrangements. Even with the simmering news headlines the IBEX still traded briefly negative before closing up +0.4%. GBP was not so fortunate losing -0.6% to test the 1.31 handle. We will probably see a little more volatility tomorrow when we see Q3 GDP released for the UK. Expectations are around +0.3% (Q on Q) and anything less will make the 1.30 handle a target. We did see a Directional Change today so could well see a weaker print. The most positive news came in the form of US stocks (again), after more encouraging corporate results. We still wait with bated breath the ECB meeting and announcement due Thursday.

US markets opened with positive momentum as corporate numbers continue to beat expectation (Caterpillar and 3M) also raising future expectations. The DOW performed the best of the core rallying over 200 points (another record high) at one stage in the day. US PMI hit a nine-month high up at 55.7 for October. All markets really have been jumping on the back of the US indices but you should keep an eye on currency. As we see the move accelerate into the USD even a flat-line US market will benefit international investors via the exchange rate.

2’s closed 1.58% (+1bp), 10’s 2.41% (+4bp), 30’s 2.92% (+4bp), Bunds 0.47% (+4bp), France 0.88% (+5bp), Italy 2.04% (+5bp), Greece 5.45% (-2bp), Turkey 11.35% (+5bp), Portugal 2.28% (+2bp), Spain 1.65% (+4bp), Gilts 1.35% (+4bp).

A fairly calm day for core European bonds, as many now wait for the ECB’s next move. Peripherals will eagerly await Thursday’s announcement as any news of edging back will seriously impact current levels.

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