Market Talk- November 30, 2018

After an initial morning wobble, Asian stocks managed some positive momentum to close the day on a healthy note. The Shanghai suffered from low volume, but the final hours trading closed on the days high gaining +0.81%. The Hang Seng hit its days high late morning and then drifted back to close just +0.21% firmer. This whole week has been trading on anticipation of what results this weekends meeting between Presidents Xi and Trump. Even late today the headlines are thin but a recovery after a weak US opening is adding confidence to Asian futures trading. Confirmation of a slowing Chinese economy was seen earlier upon the release of lower than expected PMI data. Declining financials, energy and commodity prices continues to weigh of producers and this was witnessed again today in the ASX index. Closing down over 1.5% now puts this months decline to 2% and a YTD return of -6.5%. Obviously is better than the Shanghai’s -22% but not as good as the SENSEX +3.5% number. In late US trading the CNY is drifting towards the 6.96 level again and will surely be closely watched Monday following this weekends news.

All core Europe suffered from capital flow as again we see the flow towards the US dominate markets. Both the Euro and GBP lost around -0.5% against the Dollar with CAC, DAX and FTSE all closing the day lower. This weekends papers will be full of G20, BREXIT and Italian budget headlines as there is still so much that can disrupt markets. Talk earlier this morning was that Italy is reconsidering its proposed numbers and BREXIT is never out of the news. Sterling is slipping dangerously close to the weeks lows and looks to have little support from any counterpart. The Bank of England issued concerned warnings this week claiming chaos if there were to be a departure without a deal.

US stocks spent as much of the opening in positive territory as they did in negative. The obvious headlines will come from the G20 meeting and by the time of closing few had been released. Interesting that the capital flow remains US bound and even today was confirmed by the FX movements. The Euro in particular lost almost 1% by end of US trading, with GBP not that far behind! The Yen saw an uncustomary tight range with the whole 24hours remaining within a 30cent range. The final few hours of US trading saw a strong rally after the market assumed China would adopt a more malleable approach following news that US, Canada and Mexico had agreed new terms. The core indices finished up around +0.75% on the day as a result of the USMCA deal. Next week will be interesting to see if the DOT-PLOT declines to meet the market or the market rmoves to reach them!

Japan 0.08%, US 2’s closed 2.81% (u/c), US 10’s closed 3.01% (-2bp), US 30’s 3.31% (-1bp), Bunds 0.31% (-1bp), France 0.68% (-1bp), Italy 3.21% (+1bp), Turkey 16.16% (+31bp), Greece 4.23% (u/c), Portugal 1.82% (u/c), Spain 1.50% (u/c) and UK Gilts 1.36% (u/c).