Another weak close for US markets and again, that sentiment just rolled into Asia and the mood was set for the day. Japan took the brunt as stocks lost another 1% as financials led much of the way following a disappointing BOJ’s unchanged stance. This inspired a revival of the Yen safety bid and took it into the 110 handle in early trade. However, as confidence has moved-on and following more FED speakers, we see the majority of volume trading the mid 111’s range. Although the Shanghai index lost almost 1% today, the Hang Seng managed a +0.5% positive return as tech and various political issue’s are discussed. Both India and Australian indices opened better, but both succumbed to the regions sentiment, the result of which was a 1.9% decline for the SENSEX and a -0.7% loss for the ASX. Worth an additional note is the decline in the A$ the past few days. The global slowdown has hit the currency and is off 1.5% the past couple of days and around -10% for the year.
Little surprise really that confidence data is releasing under expectation and is being supported by retail and trade numbers. However, if you were watching the European bond yields you would be forgiven to have missed this whole segment! Core and peripheral bonds are not reflecting the concern as yields continue to decline as the one buyer scoops up paper into the year end. We did see Italian and Greek paper widen today, but still on the month they are 64bp and 32bp tighter the pair. Core stocks held in pretty well for much of the day, but then US derivative players hit the market again and cash followed suit. Most managed a positive close but were only marginally higher. The Euro has taken the hit instead this week and after a volatile week closes -0.6% on the day and -6% on the year. GBP finally saw a relatively tight range today, which was a surprised given the 20% decline in November new car sales release.
US opened well and traded over 400 points higher in the DOW during the first few minutes following New York FED member comments. However, the selling soon resumed as many highlight government shutdown, Syria, index rebalancing, derivatives liquidations and a confused Federal Reserve. Today has also proved to be the largest traded volume of the year. Option expiration, couple with the index rebalancing has all combined to produce an extremely active day. Goldman Sachs (-7%), Visa, Apple and Boeing were some the worse performers for a variety of reasons and not all good! We have seen the NASDAQ drop another 3% today (8% on the week), but also the DOW and S+P have fallen 2% today which around 7% on the week. The worst week for the DOW since the financial crisis. The FED has attempted to clarify its view following Jerome Powell’s conference on Wednesday and that is re-steepening the curve. 2/10’s has gone back out to 15bp, a 3.5bp move in two days.
Japan 0.03%, US 2’s closed 2.64% (-3bp), US 10’s closed 2.79% (u/c), US 30’s 3.03% (+1bp), Bund 0.24% (+1bp), France 0.69% (+2bp), Italy 2.82% (+9bp), Turkey 16.09%, Greece 4.30% (+5bp), Portugal 1.67% (+3bp), Spain 1.39% (+2bp) and UK Gilts 1.31% (+5bp).