Market Talk – January 4th, 2018

If you needed proof we have had a positive start to the new year you saw that in Japan this morning. Re-opening after two-day national holidays, the Nikkei added 3.25% today. In fairness, we saw a very narrow range having made the gains from the opening quote, but it was nice to see a 3% daily return even if it is the whole years move so-far. Interesting that the currency remains trading the mid 112 range. We are seeing small selling of Yen as we approach the 113 handle as there appears little resistance until we approach the 114 handle. Another positive day also for Shanghai and the Hang Seng adding +0.5% to yesterdays gains. Energy and Tech seem to be setting the pace this week. Appears a bit of talk around that the oil price increase would help Aramco set the $2tln valuation target it is looking for. Maybe a little too early in the year for that, but that’s a story being used to explain much of the appreciation.

Data is still supporting the stock rally on both sides of the water. Todays PMI print out of Europe reflected the best in seven years and yesterdays US Auto (Ford) release helped European manufactures. Auto’s joined Industrials and Banks in a rally that helped the DAX and CAC register 1.5% gains for the day. Trading from strength to strength we virtually saw no pullbacks for the day as closes were only just away from intraday highs. The UK’s FTSE hit record 7,702 but closed a smidgeon under at 7,695. In late European trading, news that the DOW had breached the hugely psychological 25k barrier certainly helped closing confidence. I was a quiet day for currencies with tight trading ranges for both GBP and Euro.

More strong economic data and now a plethora of “analysts” all claiming the market is cheap, helped to take the DOW to yet more historic highs. It wasn’t that long ago that everyone was claiming stocks had hit their highs and we were about to crash! Now, a calendar change and there’s value everywhere we hear. Tomorrow, being the first Friday of the month is jobs day, but instead of looking for a 200k print, it will be the wage numbers that receive the attention. It is probably the Bond market that reflects news along these lines as the 2/10 curve remains extremely flat.

2’s closed 1.95%, 10’s closed 2.45%, 30’s 2.78%, Bunds 0.43%, France 0.78%, Italy 2%, Greece 3.79%, Turkey 11.46%, Portugal 1.89%, Spain 1.52% and Gilts 1.23%. Incidentally, Greece 2yrs now trade under US 2’s…. Wild eh!