Market Talk- December 17, 2018

Both the Hang Seng and the Shanghai indices recovered from last weeks poor data and the DOW’s late Fridays decline. Volumes continue thin and that appears to be spreading to many markets. It is not uncommon to see markets drier ahead of the holiday season, but this year it seems to gets more attention probably because prices are in decline. Once the bounce back to unchanged was over, both played in a narrow range to close fairly neutral. Japan on the other hand, traded well following the open and managed a +0.65% gain on the day. We are seeing renewed weakness in the Yen, in Asian trading, but looks to have found the safe-haven bid again for the moment anyway. A ray of hope was also displayed in Australia and India, as both markets finished around 1% higher. Overall a fairly quiet session awaiting China, the FED and Germany’s IFO report.

Europe attempted to hold just slightly lower levels Monday, but once the US markets opened that proved just too much of an ask! Growing fears of a global slowdown continue to spread and recent data tend to support that sentiment. China numbers Friday, followed by further BREXIT and European uncertainty are all in the mix ahead of the Federal Reserve and a devastatingly slow retail sector. Talk this evening is that Jeremy Corbyn (Labour Leader) apparently “intended” to propose a no-confidence motion in Theresa May, but then decided he didn’t need to after Theresa May tabled a date for the Parliamentary vote ( Week of January 14th, 2019). If this vote were to happen, it is in her and not the government. BREXIT and all its shenanigans will continue for at least another three months, so buckle in it could get wild! GBP however, has traded higher against the USD as speculation that the FED holds after this weeks move. Most core European bourses closed around 1% lower.

US markets have been heavy all day and are looking to close at their lowest levels for the year. Having retreated from close to 15% from their highs, markets are trading nervous as we await the FED and data starts to slow again. Housing numbers today were their slowest in three years, but there was a pick-up in business activity. Although volumes are better than their 20day average, the 20day average is still way down on levels of previous years. Fewer players are positioning this time of year and after the FED release, you could probably expect even lighter volumes. Interesting that the US Treasury curve saw a parallel 4bp move, whilst European bonds saw rates rise across both core and periphery. Most core indices are off around 2%, but looks as though the NADSDAQ has fallen back in-line with others and not the outsider for a change. Looks like we are still on for the projected outlook. Worth a mention also that the S+P did breach its February low but recovered at the close.

Japan 0.2%, US 2’s closed 2.69% (-4bp), US 10’s closed 2.85% (-4bp), US 30’s 3.11% (-4bp), Bunds 0.25% (u/c), France 0.73% (+2bp), Italy 2.95% (+2bp), Turkey 17.03% (-27bp), Greece 4.30% (+10bp), Portugal 1.64% (-2bp), Spain 1.40% (-1bp) and Gilts 1.26% (+2bp).