Market Talk- January 16, 2019

It appeared the rally seen in US stocks was insufficient to impress Asia with core markets closing mixed. Japan’s Nikkei returned some of yesterdays gains falling -0.55% with the Yen also trading a little heavy this evening, now with a 109 handle. It was a less than decisive day for Nikkei opening almost where it closed. Volumes are still light and that is hurting securities companies and banks with Nomura losing almost 3% today. China’s markets continue to focus on various measures implemented to bolster growth, but the markets are yet to decide the quality. Shanghai and the Hang Seng closed almost unchanged, having spent the day in and out of positive territory. Not too much movement for either the ASX or SENSEX, so lets just scoot onto BREXIT.

So Theresa May lost the BREXIT vote by a 230 margin and Jeremy Corbyn tabled a motion of no confidence vote in the government. The House voted on this this evening and the result was narrower than expected (325/306) but nether the less a win for conservatives to remain. The most popular reasoning now appears to be an acceptance that leaving maybe delayed. Sterling recovered all of the 1.5% it lost Tuesday. By the close of US hours yesterday we were back to unchanged and has today, remained in a very tight almost unchanged range. Market consensus on trading desks today has been for a ‘soft BREXIT’ or even calls for a cancellation of Article 50. There seem to be as many options as there are opinions being discussed and all as the March 29th date approaches. Gilts were a little weaker today as fears of higher greater debt issuance spread. Interestingly, European bank share were some of the best performing shares today as speculation spread that mergers could be imminent and also that Deutsche bank may partner outside of Germany. Both CAC and DAX were up around +0.4%.

US banks shares have set the tone for todays market positive run, having released stronger, broader and better than expected numbers. Although, BREXIT has dominated headlines around the world, it appears US markets are watchful yet undeterred as they remain in this positive run. The capital flow is becoming evident everyday with rising US markets, coupled with improving trading volumes. By the close of trading, all indices were a touch off of their days highs with the DOW +0.6%, S+P +0.22% and NASDAQ +0.15% as the Huawei news broke. The US Dollar index continues its steady bull run, but should probably not be a surprise given the uncertainty running around the globe.

Japan 0.02%, US 2’s 2.54% (+1bp), US 10’s 2.72% (+1bp), US 30’s 3.06% (-1bp), Bunds 0.22% (+2bp), France 0.63% (+1bp), Italy 2.75% (-9bp), Turkey 15.52% (-22bp), Greece 4.20% (-3bp), Portugal 1.70% (+3bp), Spain 1.37% (-1bp) and UK Gilts 1.31% (+6bp).