With no missile test Saturday or new geopolitical news over the weekend, Asian stocks opened on a positive note. The Chinese central bank loosened some financial restrictions which also added to the positivity for both domestic and regional markets, combined to support all markets. The central bank move opens the market slightly, returning responsibility to players rather than being tied by regulation. This is a positive step in opening domestic and on a day when producer prices improved way above consensus at 6.3% while estimates were at 5.6%. Shanghai closed +0.35% and Hang Seng +1.05%. The Nikkei performed best at +1.4% but did see the yen lose -1.4% now in the mid 109’s. So, as long as you are long the Nikkei currency hedged, you had a good day! The Australian ASX gained +0.7% benefiting o the back of the euphoria throughout the region and sees the A$ slightly weaker (-0.3%) but still above the psychological 0.80 level. SENSEX closed +0.6% but we do have plenty of data Tuesday to get the market excited.
European rallied benefited both on the back of the stronger Asian session but also as a result of hurricane Irma being downgraded to a tropical storm. Insurance companies led the rally with banks also joining the surge as bond markets watched curve start to steepen and the possible likelihood of less write-downs. The light relief came for insurers in the knowledge that because claims may not be that high – there is less risk the insurance companies will be forced to liquidate stock. Also, given the damaged is, hopefully, not that extensive that may continue to put the FED on the side-lines for the balance of this year. Interesting that the US Dollar found a little strength today gaining against the yen, euro and GBP. The DXY was last seen close to the 92 handle an improvement of near +0.6% on the day. GBP could have a busy week with the BOE meeting on Thursday but also key economic data CPI and Average Earnings also.
The US markets finish a great day all around for stock markets. The DOW rallied over 250 points with the S+P gaining over 1% and the NASDAQ 1.2% better to complete a great day. However, worth noting that we are still below the intraday highs which is a warning to not get over complacent with this move. The “silly-season” has another six weeks to run with plenty on the horizon to be concerned about. Gold eased from recent highs closing down almost $20 a decline of 1.5% on the day.
2’s closed 1.32% (+6bp), 10’s at 2.13% (+8bp), 30’s closed 2.74% (+7bp), Bunds at 0.34% (+3bp) closing the spread 5bp wider at +179bp. France 0.63% (+2bp), Italy 1.95% (u/c), Greece 5.38% (-1bp), Turkey 10.33% (-2bp), Portugal 2.76% (+1bp) and UK Gilts 1.04% (+5bp).
