Market Talk – February 1, 2018

You could probably say that Asia is being ked less and less by US markets as they increase in volatility. It’s not unusual the past few days to see 400 point swings in the DOW! So, what do you follow – the last thirty minutes of trading? The Nikkei opened better and just went from strength to strength, eventually closing up +1.7%. The currency could probably take some responsibility as it declined 0.45% as it flirts with the 110 handle. Various corporate supporting stories (Fujifilm Holdings rally 12%) but also remarks in a couple of the large banks helped strong gains for the finance sector. Commodity gains helped the ASX and KOPSI but could not help core China. The Shanghai index was quick to reject its initial positive opening and trended lower from there. Positive PMI data was not enough to turn sentiment as we start the new month.

Disappointing Corporate results and a differing US trend, saw profit-taking and uncertainty drive markets today. Economic data release (Manufacturing PMI) failed to live up to expectations which certainly hit confidence early on. Having heard the unchanged FED announcement overnight, was as many had expected which tended to encourage long liquidation. European bond markets were also trading lower (price so higher yield) but were still being led by a heavy US treasury market. CAC, IBEX, and FTSE lost -0.5% but the DAX suffered the most losing 1.5% with industrials, healthcare and auto’s hit most.

The markets are no longer a one-way bet as volatility finally returns to the street. Although, if you were to look at the VIX, today losing 1.2% to 13.38, you would be forgiven it was another wild day! Many are questioning whether it really remains an indicator if so few own the market. There remains cash on the sidelines, as many we read deployed it into the bond market the end of last year. The DOW eventually closed small higher (+35 points) having seen 150 swings in both directions. NASDAQ lost 0.4% but that has been running very well recently. Still, have some tech’s to report after the bell and NFP’s tomorrow. Looks as though this volatility is here for a while, which appears enforced as we watch 30yrs breach the 3% handle.

Japan 0.09%, US 2’s 2.16% (+1bp), 10’s 2.79% (+7bp), 30’s 3.02% (+8bp), Bunds 0.73% (+4bp), France 0.99% (+2bp), Itlay 1.95% (-7bp), Greece 3.64% (-5bp), Turkey 11.33% (-6bp), Portugal 1.92% (-2bp), Spain 1.40% (-2bp) and Gilts 1.53% (+2bp).