Although Asia closed with pretty much a mixed session, it really does not explain the mood or sentiment. Yes, the Nikkei closed lower on the day (-0.1%) but after opening lower and a brief dip thereafter, for the balance of the day the market was bid and closed just below unchanged. Major stocks driving the advance are exporters, such as electrical companies and strong motor car sales overseas. Given that the JGB curve remains flat, you are still seeing insurers and banks finding the economy heavy going. The Yen was stronger in early trade (following the weak stock opening) but has sold off as the trading day has progressed. In China, the core index opened lower and traded positive for most of the day until the close where we saw profit-taking into the close. This resulted in a small positive day for the index but had seen better prices for much of the day. Exports were below expectation (6.9 v’s 7.2%) and imports higher at 17.2 compared to the forecast 16.3. Hang Seng closed down -0.3% but was off the worst of the session. SENSEX is still trading heavy with money being taken off the table ahead of holidays, closing near the day’s lows off -0.5%.
In European trading, the majority of the talk was around the Italian bank Creval whose shares dropped 30% in today’s market. Its need to raise additional cash that is having such a knock on effect to the sector. The news did not help confidence in all the Italian banks and subsequently saw declines of around 5%. Last month the ECB announced rules surrounding ‘Bad Debt’ which will require scheduled provisions due early 2018. It is this realization that the date is approaching is having such a profound impact on cash-raising. Credit Agricole lost 3% after releasing poor results in France. Autos also had a tough day after fresh emission guidelines have been issued, the sector lost around 2% for the day. The UK’s FTSE was a bright spot closing up +0.2%, but when considered from an international perspective actually lost as the currency fell -0.45% on the day.
After a rather uncertain open and with all indices trading heavy, we saw an encouraging bounce with markets closing the day on a strong note. Much of the talk surrounds the tax plan, ‘Trumpflation’ as they have termed it now and the continued flattening of the yield curve. Banks and financials are suffering the curve move, but interestingly the US Dollar continues its move. We have seen a 20% increase in the S+P since the election so the term Trumpflation has been adopted. Towards the close the S+P. NASDAQ and RUSSELL have all made gains of around +0.15%, whilst the DOW plays almost unchanged on the day. Normally, when a market opens and closes at the same levels people are looking for a reversal of trends; here we are seeing the continuation of uncertainty looking for yet more news.
2’s closed 1.65% (+3bp), 10’s at 2.33% (+2bp), 30’s 2.79% (+1bp), Bunds 0.32% (u/c), France 0.69% (+1bp), Italy 1.74% (+5bp), Greece 5.02% (+4bp), Turkey 11.96% (+10bp), Portugal 1.97% (+7bp), Spain 1.47% (+7bp) and Gilts 1.22% (-1bp).
