Market Talk- June 13, 2018

Interesting the price action in Asia following yesterdays events and action. The Nikkei was the only core market to record a positive return today, but probably weighted by the currency decline and safety boost. The Japanese index made steady progress throughout the day to close at the high, which was the complete opposite to China’s indices. Both the Shanghai and Hang Seng opened negative and tended to drift for the duration. Both closed at their lows reversing much of what was seen in yesterdays trading. Concerns that Trade Talks, rising rates and credit issues will outweigh yesterdays Summit conclusion, especially over the short-term, lead to much liquidation. The SENSEX was making progress but lost its advantage into the close, but did still manage a positive return. However, it is still necessary to keep an eye on the currency as its tends to drift in quiet days and is now looming close to last months lows – a trend that looks to have plenty more room to run.

Core Europe was content to sit where it is and wait for the ECB (and the FED) to update them on how the situation lies. Volumes are increasingly light, even for this time of year, which could be balanced by the amount of money still sitting on the side awaiting clarity. Gold plays almost unchanged, but we are seeing oil continue to drift. Lets just move on to the US session because it will change upon the FED rate decision.

Federal Reserve raises 25bp and announces a press conference following every FED meeting for 2019. The stock markets were unsure initially how to play things, but prices eventually sold off. By the close the DOW had lost 120 points almost in the last few minutes of play. The market appears to be attempting to come to terms with rising rates actually being good for the economy. Lets see how we trade after other central banks have met and the reaction of bonds and the currency. The treasury curve continues to flatten with another 2bp tighter today. 2.59% appears to be the magic number on 2’s and we saw that extreme during the last sell-off. 10’s are still under the psychological 3% – for now! It will be interesting to watch the European markets after the ECB press conference Thursday.

Japan 0.05%, US 2’s last seen 2.54% (u/c), 10’s 2.96% (-1bp), 30’s 3.09% (u/c), Bunds 0.48% (-1bp), France 0.84% (-3bp), Italy 2.78% (-4bp), Greece 4.50% (+4bp), Turkey 14.79%, Portugal 1.93% (-3bp), Spain 1.40% (-1bp) and Gilts 1.36% (-4bp).