Market Talk- September 17, 2018

Another day another US/China trade headline dictating direction and concerns. One has to wonder if President Trump and the Washington Trade team are tagging it and playing good cop bad cop with the negotiators! President Trump is apparently insisting they impose additional tariffs, yet negotiators are attempting new talks. Meanwhile, the trend for both the Shanghai and Hang Seng were back to hitting bids again. Losses today of 1.2% and 1% respectively, pushes them to near 52-week lows, but then the hurricane obviously had an impact sentiment. There were brighter spots for the ASX and SENSEX as they managed a positive +0.25% after their weak openings. Japan has been interesting as they return to trade stock values for currency. The Yen flirted with 112 again, but has strengthened into the US close on Trump’s anticipated announcement. There are still rumours around that some Japanese banks are facing US Dollar funding issue’s, but apparently not a sever in recent weeks.

Europe has had a reasonably quiet time o the stock front, but is seeing strength in currencies. Both the Euro and Sterling made ground against the USD on headlines of a kinder BREXIT, which may well be a little too optimistic for the date. Italy made signs that they would comply and address the EU’s budget restrictions, which also saw the FTSE MIB accelerate over 1% today. Italian BTP’s also tightened their spread to core as 10’s gained 14bp in todays trading. Early trades created the days lows for most core, but a late headline that President Trump would update the stage of the China Trade Deal shook confidence.

Core US indices were lower despite the DOW managing a mid morning bounce. Into the close the President’s announcement spooked prices and we saw a quick 100 point drop in the DOW. The rumours are negative but will be digested in Asian trading. Tech stocks remain under pressure with Amazon and Netflix leading much of the decline with profit-taking weighs on confidence. By the close we were looking at a 1.5% decline, with everyone preparing for bad Trade news. Markets are pricing-in fresh tariffs of $200bn so will be interesting to hear todays conclusion. It will be interesting to see what occurs from this news, but quarter end closes are even more anticipated.

Japan 0.11%, US 2’s closed 2.78% (u/c), US 10’s 2.99% (u/c) US 30’s 3.11% (-2bp), Bunds 0.46% (+1bp), France 0.77% (+1bp), Italy 2.84% (-14bp), Turkey 18.30% (+11bp), Greece 4% (-4bp), Portugal 1.82% (-2bp), Spain 1.48% (u/c) and UK Gilts 1.53% (u/c).