Market Talk- June 26, 2018

Markets really are unsure of what to believe and what to follow! First, they react negatively to the additional tariffs storey and then they bounce because it may have been a false start. Today we saw the Nikkei recover much of the early morning losses to substantiate a positive close. Having seen the index open almost -0.75% lower, the balance of the day was spent recovering as the Yen turned down once again. Battling with the 110 handle, it wasn’t until late in the US trading session that this handle was breached and we traded at the 110.30 level. Exporters had been champing at the bit most of the day, but tonight’s close is probably a green light for them from Wednesdays open. The Asian morning saw the lows for most of the region and non more so than the Shanghai and Hang Seng. Both recovered well and almost the highs of the day even though there was still a negative close. Tonight’s strong US rebound sets the stage for positive gains tomorrow. The SENSEX however, was almost the reverse. Having seen positive moves for much of the day, by the close we gave back lots to close with only a small gain. The INR really is offering no help and even an attempt at breaching back below the 68 handle, all attempts failed and close weak once again.

Europe appeared not much different to Asia. The SENSEX probably mirrored a similar pattern. but even that was outweighed by the currency. The FTSE closed +0.4% but if you see the -0.4% decline in the GBP it was pretty much a zero-sum game. The DAX and CAC both lost small ground, but we did see a better bid appear for the FTSE MIB. The Euro was back under pressure again today also with many watching for the close on Friday. Not only is Friday be the end of the month it is also quarter and half year end. The Euro lost ground too closing down -0.5% on the day, but is still above the recent 1.1550 level that many are watching.

By the time the US markets opened much of the trend was in motion and momentum took us through. The lack of negative news certainly helped and all core traded positively. The treasury market saw a 1bp parallel negative shift across the curve and even though the uncertainty remained, it was not enough to derail the bid. A positive session with jitters surrounding the oil announcement, but the bid for the US currency is helping balance any doubt. There is still money on the side-lines, a bid for dollars and nerves within the EM world, all many are looking for is a dulling of the trade talk headlines and the money will be put to work.

Japan 0.03%, US 2’s closed 2.52% (-1bp), US 10’s 2.87% (-1bp), US 30’s 3.02% (-1bp), Bunds 0.32% (-1bp), France 0.71% (u/c), Italy 2.82% (+3bp), Greece 4.07% (u/c), Portugal 1.82% (+2bp), Spain 1.34% (u/c), Turkey 16.26% (+15bp) and Gilts 1.29% (-1bp).