We opened the first day of the month with a strong Asian session with indices up nearly 2%. In Japan, the Nikkei added 1.85% with a weaker Yen, associated energy stock comfort and helped by a huge earnings expectations from Sony (+11%). The Yen is now comfortably into the 114 handle and will now be talked through 115. Shanghai was also positive but by just a small margin on the day. Hang Seng was another strong performer closing at its days high. Closing up +1.25% it gained help from the casino stocks after gaming revenue are showing strong performance. Australia’s ASX also closed better on higher commodity prices but China’s performance is another benefit. SENSEX, Karachi, and KOPSI all closed around 1.5% better on the day with much fresh cash now finding a home ahead of year-end.
Having seen a positive Asian session, European and US futures were all well up ahead of their cash openings. The DAX (+1.75%) set fresh historic highs in the morning as manufacturers, resources, and auto’s performed. Helped also by the fact that they were playing catch-up having been closed yesterday. Its performance was steady, having opened strong the gains were held closing almost at days highs. The CAC did hold some of its move closing +0.2% better but did suffer in late trading. The UK’s FTSE closed down on the day, having lost all of the openings gains. Not a great day for the GBP either as that too lost -0.25%. We are expecting the BOE to announce rates tomorrow and if they move will be the first hike in a decade. The market has priced in a 90% probability of a 25bp hike, but it is the vote split and the pace of this change. Currently, the market displays a very shallow hike cycle so any deviation from this will have an impact. All comments will be carefully examined for clues of the balance between choosing inflation or currency loss. A move back to a 2% reference will see the currency suffer.
Although we saw US futures markets all expecting positive earlier in the day, by the time cash opened the sellers were in values dipped. We eventually saw the Russell and NASDAQ close down on the day. DOW and S+P did still close firmer but way down from earlier levels. The FED decided to leave rates unchanged but most expect December a done deal. In its briefing, they mentioned a better economic outlook. The labor market remains strong but sees future inflation “soft”. ADP came in better than expected at +235k against a +200k forecast. Having seen this ADP print it is likely many will be revising their number for Friday’s NFP.
2’s closed 1.62% (+2bp), 10’s 2.37% (u/c), 30’s 2.86% (-1bp), Bunds 0.37% (+1bp), France 0.76%, Italy 1.79% (-2bp), Greece 5.19% (-20bp) New bond issue helping revive confidence, Turkey 11.51% (+1bp), Portugal 2.07% (+3bp), Spain 1.46% (+1bp) and Gilts 1.34% (+1bp).
