Market Talk- September 20, 2018

A somewhat unconvincing day for Asia with no market really standing out from the crowd. Even with Trade Talks hitting all of the papers, the markets look to be dismissing much of the hype. Yesterday was a good example of an optimistic bounce, but the trend remains firmly lower as capital leaves the recent speculation and returns home. Core Shanghai and the Hang Seng both meandered either side of unchanged as uncertainty rules. The Nikkei saw a similar pattern as most watched the currency and JGB’s. Across all regions markets are reacting off of what the US markets do. The US is about the only sovereign that truly knows what it wants and the DOW, S+P and NSDAQ are dictating to the world. The INR is now nervously close to printing a 73 handle and even with this weakness the SENSEX saw sellers. The capital flow continues out of risk and back into core.

A steady performance for much of the day was completed with the help of a strong US opening. It was the US opening that caught many off-side and helped Europe closed with gains of over 1%. As many assumed stocks were topping out, the US opening helped maintain levels, but interestingly did not follow forward. It certainly looks as though people are starting to accept that its capital flow that dominates these markets and that remains into the US Dollar. Late in European trading currencies were giving back some of the days gains, probably as realisation that the FED will be raising again soon and that will push the currency. BREXIT news today focused on Theresa May and the split within government, but also talks EU members are fearful time is running out. Lots of rumours within the UK that elections could be imminent, but that is probably the last thing the public wishes to hear. They have decided already, just get on with the best you can do – but get on with it.

In better than average volume, we are finally starting to see fresh cash enter the market. Ahead of Q3 end, money is coming off of the side-lines as the mood accepts the strength. The NASDAQ rebounded with a 1% return and the DOW reciprocated making new highs with its own 1%. The S+P also hit new numbers while adding +0.85% to the YTD return. Whatever fears there are around the globe concerning trade were dispersed in the NYSE today, as money starts to play catch-up. The capital flow is into the USA and looks like people are finally starting to believe it – at long last! Watch the Friday close for the numbers and lets see how Q3 finishes.

Japan 0.12%, US 2’s closed 2.8-0% (-1bp), US 10’s 3.06% (-2bp), US 30’s 3.20% (-3bp), Bunds 0.47% (-2bp), France 0.78% (-1bp), Italy 2.88% (+3bp), Turkey 18.29% (+24bp), Greece 4.03% (-2bp), Portugal 1.86% (-2bp), Spain 1.50% (-2bp) and Gilts 1.58% (-3bp).

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