Market Talk – November 9th, 2017

Finally we saw a little profit-taking in the Nikkei today, after having touched 26 year highs in earlier trade. The sell-off was not so much but felt more after spending the majority of the day in positive territory. The Yen moved stronger but that was later in the trading day after news of possible delays to 2019 for the US Tax plan. The China cash market struggled for much of the day but recovered towards the close to record a +0.4% increase on the day. The Hang Seng closed up +0.8% after a brief dip around midday. ASX in Australia was also strong following commodity and exporters. The A$ traded heavy most of the day and looks to be heading for the mid 0.75 weekly level.  The SENSEX also gave-up early gains drifting into negative territory by mid-afternoon, but did manage to pop just at the close.

The US news of a possible delay in Tax Reforms certainly hit an already nervous European market today. The core markets were already trading down but this news and surprised poor earnings really shook confidence. The DAX and CAC both closed around -1.4% whilst the FTSE and IBEX both lost -0.8% on the day. Its worth noting that the IBEX futures has fallen further and is in late trading around -1.3% on the day. Almost all indices closed on their day’s lows as traders looked for an early exit. Interesting that although the nerves appeared in equity markets we did not see the run for bonds! Actually, both core and peripherals were sold on the move. Even though many have been looking for this weakness for a while, traders end up selling what they can and not what they should.

All core US markets close around -0.5% lower across the board but many are happy purely that they managed to bounce from opening levels. Having seen the DOW off over 200 points, a 100 point decline actually felt like a relief! Industrials took the markets lower, having heard the likelihood of the Tax delay. Interesting that fixed-income also pressured values but the talk was that it was the High Yield debt that leads market declines, with people hitting any bids they could see. Looking back this year the NASDAQ has rallied over 35% this year so is probably not a surprise many are sitting a little nervous.

2’s closed 1.63% (-2bp), 10’s 2.32% (-1bp), 30’s 2.80% (+1bp), Bunds 0.37% (+5bp), France 0.75% (+6bp), Italy 1.80% (+6bp), Greece 5.04% (+2bp), Turkey 11.82% (-14bp), Portugal 2.01% (+4bp), Spain 1.52% (+5bp) and Gilts 1.26% (+4bp).