Market Talk- January 18, 2019

The rumoured report of US weighing possibilities of easing tariffs certainly helped Asian markets to open on a positive note. The Hang Seng and Shanghai markets made steady progress as the day wore-on. The rally was well rounded with all sectors adding to the gains. Given the recent domestic support for China, it was the Shanghai index that made the best gains for the day at +1.42%, but then the HSI was not far behind at +1.25%. In US trading hours the reports are that China has offered to boost US imports over a six year period, which would take it to 2024 past the re-election year. We will have to wait fr Monday trading to see the benefits for Asian cash markets, but obviously futures are taking a positive 1%+ leap. This announcement has also helped US markets rally, as well as the bid for US Dollars. The Yen continues to loose ground on these reports and in late US trading is 0.6% weaker to the USD and flirting with a 110 handle.

The bullish confidence and positive sentiment displayed in Asia, were carried through to European markets resulting in pleasant results. Friday turned out to be the best day since early December with core markets closing up around 2%. The DAX was the star performer of the core, ending the day up 2.63% at its days high. Exporters, auto’s and tech were all consistent with the bull run, but probably worth to mention that the German tech index rallied over 3% today. Despite the civil unrest being seen in France the CAC also shone today with a +1.7% return being recorded. The UK FTSE looked to have joined the party with a 1.95% return, but once you consider that Sterling lost 1% against the US Dollar, the sparkle is removed slightly.

US markets were already on a positive path even before the friendly Chinese news, but this just propelled them even further. Talk on many screens that, if there is truth in the rumour, then it would aim to reduce the US deficit to zero by 2024. Interesting that the bond market saw flattening coming from the front end as 2’s rallied 6bp to 2.61%. This following the largest gain in Manufacturing data in ten months, is now re-pricing much of the forward strip. Todays gains for core US markets are now pushing performance for the year close to double digits. Certainly, the small cap’s are at 9.72% YTD. The DOW is lagging a touch at the moment (+5.65%) but we are just entering corp. earnings season. Monday is national holidays in the US for Martin Luther King Jr. Day, but is also BREXIT respond day – so worth switching the screens on just in case; could be interesting.

Japan 0.01%, US 2’s 2.61% (+6bp), US 10’s 2.79% (+6bp), US 30’s 3.10% (+4bp), Bunds 0.26% (+2bp), France 0.66% (+2bp), Italy 2.73% (-3bp), Turkey 15.51% (+12bp), Greece 4.15% (-3bp), Portugal 1.72% (-3bp), Spain 1.34% (-2bp) and UK Gilts 1.35% (+2bp).