Market Talk- September 13, 2018

Following the late US headline that US/China trade talks were likely to resume, all Asian indices opened firm. The positive stance was reflected across all markets, but mainly assisting China – as you would expect. Hang Seng performed the most as exporters and tech companies surged on the news. Closing over 2.5% we saw the last print over the psychological 27k level. Shanghai peaked in early trade but still managed a 1% return on the day. These indices have been beaten-up badly over the year and so it is expected the bounces become more pronounced. The Nikkei had an added benefit as economic data (Machine Orders) helped the optimism, but at a cost to the currency. The Nikkei is again heading towards the 112 handle until the next disturbing headline revises the safe-haven bid again. India was on national holidays and so the SENSEX will have to wait for its responses. However, much is made of currency moves and we are likely to see the return of the INR weakness which posses the RBI the “Do we don’t we” question again.

Although the US/China talks were positive news, it really had had its effect late European hours yesterday. So, the Asian response helped sentiment it was really going to be central bank watch and afternoon price action. Turkey raised rates an additional 6.25% in an attempt to support the ailing Lira. It helped for today, with the Lira rallying over 5%, but worth bearing in mind it has lost over 35% recently. This is still a situation that needs watching carefully, especially after yesterdays speculative talk that Erdogen may appoint himself Head the Wealth Fund. The Bank of England and European Union were never really expected to have too much influence as markets were already reflecting. Both currencies continued to bounce against the USD, but then that works into the time window quite nicely. The strength seen in the afternoon benefit of the US rally, encouraged all indices to join the euphoria and close up over +0.5% across the board.

CPI a little disappointing, but did not really take long for dealers to jump on board. It did hit the USD a touch, but certainly helped stocks as that’s the way they tend to view things these days. We did see a little profit taking as we approached lunch and then the close, but nothing to really get too worried about. US volumes are again a little low, we are even seeing European volumes increase recently, but not so much US. Momentum is looking good with the DOW retaking the 27k level and the S+P the 2900 barrier. Markets are hoping the FED calms nerves after this CPI number, but that is probably the wrong call at this stage in the game.

Japan 0.11%, US 2’s closed 2.75% (u/c ), US 10’s closed 2.97% (+1bp), US 30’s closed 3.11% (u/c), Bunds 0.42% (+1bp), France 0.73% (+2bp), Italy 2.95% (+1bp), Turkey 18.19% (-118bp), Greece 3.98% (-6bp), Portugal 1.85% (u/c), Spain 1.46% (u/c) and UK Gilts 1.50% (+2bp)