Market Talk – November 7th, 2017

The Nikkei (+1.75%) had the strongest session in Asia today, helped by the continued rally in oil (+3% on Monday) prices and strong earnings. The Nikkei reached new 26 year highs earlier on optimism of growth, mergers and fresh international investment. The index moved stronger from the opening, eventually closing at the highs of the day and levels not seen since 1992. The currency was very well behaved playing just under the 114 handle for most of the day. The Hang Seng equally performed well closing at its days high adding 1.3%. The index moved in sympathy with the oil rally and comfort in Australia leaving rates unchanged. This unchanged moved by the RBA also added a 1% move for the ASX also. SENSEX traded weaker from the opening bell and eventually closed 1% lower.

Europe was not so fortunate as Asia, with many indices coming under pressure in today’s trading. The corporate news was not so great but we heard a mixed bag from domestic Housing in the UK to Danish Shipper Moller Maersk. Although the Housing numbers in the UK were better than expected (Halifax Index 4.5 versus 4% expected) it even held the currency as a whole, it was the such a strong number that eventually took its toll on GBP. Having already heard from the Bank of England last week, mortgage takers are breathing a sigh of relief once it became know that rates rise are to be slow and measured. The FTSE, DAX, and CAC all lost ground ending with losses of around -0.5%, whilst the Spanish IBEX returned -0.85% for the day. The sentiment was heavy from the opening with all markets struggling to make any gains. The Euro and GBP were also under pressure trading lower against the USD for the majority of the day.

US markets have been lower for all the session, with very little sign of changing direction. The DOW has been heavy all day opening positive but unable to stay, we have been around 30 points lower and playing within a tight negative range all day. The general market drag has seen renewed vigor in the VIX index, gradually pushing values up 8% to mid 10’s. This pause has is starting to affect the broader Russell 2k which lost around 1.3% with volume increasing. We have seen a 15% rally this year and looks as though some are happy to take a little off ahead of Christmas. Earnings are starting to turn for some stocks (Priceline and Trip-Advisor today), but also Financials continue to weigh on sentiment. The yield curve is not helping matters, with today’s bid for long end bonds hindering the curve. We saw 2/10’s close the flattest in over ten years today, at 69bp.

2’s closed 1.62% (+1bp), 10’s 2.31% (-4bp), 30’s 2.78 (-5bp), Bunds 0.32% (-5bp), France 0.68% (-8bp), Italy 1.69% (-10bp), Greece 4.98% (-1bp), Turkey 11.86% (+29bp), Portugal 1.90% (-17bp), Spain 1.40% (-7bp) and Gilts 1.23% (-3bp).
* Please note these are three-day changes and therefore relating to last Wednesday’s closes.