Market Talk- December 5th, 2017

The final hours of the US trading session was a major concern for Asian trading this morning, which probably was not helped when the RBA (Reserve Bank Australia) left rates unchanged. This move certainly helped a bounce for the A$ but didn’t help stocks with the ASX closing down around -0.25%. The Hang Seng traded heavy again as the tech sector led prices lower once again and even finished on its days lows. The mainland closed small down also but volumes were light in hesitant trading. The Nikkei traded heavy in the morning but managed a recovery in the final hour of trading. A less than happy Asian session had a negative effect on Europe’s open also.

A weaker start than many had hoped for but then economic data (PMI’s) were not that supportive, so hardly surprising. the majority of the day was spent in negative territory and relieved by a bounce only at the close. Energy and resources led the markets lower, despite the temporary recovery in the tech sector. The key talking point in Europe continues to be the uncertainty surrounding BREXIT and then Schultz’s response due Thursday. The deeper the UK/European discussions go, the more the rest of the world moves-on. Both sides think it is of global concern, but quite frankly the globe just hasn’t blinked. The US tax issue is the big news and the longer the world takes to respond the further the gap will grow.

US markets traded heavy with many just happy to take some cash off the table and look forward to Christmas. At current levels the market does trade nervously, but given we will have probably seen the majority of Decembers volume by the end of next week, it really should not be a surprise. We have US unemployment numbers Friday and assuming there’s no government shut-down, chances are that’s it for this year. Anytime after next week it will be extremely difficult to attempt to move large size, so expect just Christmas coverage from then on. If we are going to see anything, it will probably be restricted to the currency markets where size can be covered. As we approach the close, most indices are at their lows even though the NASDAQ rebounds. Interesting that all indices finished on the days lows but so did the VIX (closed down 3%)!

2’s closed 1.82% (+1bp), 10’s at 2.35% (-4bp), 30’s 2.73% (-5bp), Bunds 0.32% (-2bp), France 0.62% (-2bp), Italy 1.69% (-2bp), Greece 4.75% (-50bp), Portugal 1.85% (-2bp), Spain 1.40% (u/c), Gilts 1.26% (-2bp).