Unsurprisingly, the US mood swept into Asia assisting those markets that failed to react Monday. The Nikkei led the gains adding +2.65% onto yesterdays +0.7%. The Yen lost more of the fear rally bid, and we see it currently trading high 105’s with a big figure change looming yet again. As more constructive headlines appear, allaying initial trade-war fears, so we are encouraged to see stocks continue their recovery. This has supported exporter stocks such as Toyota, Panasonic and chip maker, Komatsu (+7.5%). Shanghai and Hang Seng both performed as trade fears tended to subside, especially as China has chosen to dilute possible tensions, which is certainly to its credit – (news that a Chip maker contract helped). In India the SENSEX held steady for much of the day, closing +0.35%, but had more attention in fixed-income than stocks. News that government borrowings would be lower than forecast helped 10yr bonds rally (price – yields fall) from 7.62% down to 7.35%. The INR drifted closer back to the 65 level, last seen a little under at 64.94; outlook remains weak for INR.
European markets were strong following the Asian rally. Given the strong opening (+1%) they failed to add significant gains during the day and so closed with just marginal improvements. There was a lot of talk around claiming the ECB could extend their bond stimulus package and we can see from the levels below the effect on peripheral spreads. The Euro did lose ground against the USD but then so did GBP. BREXIT remains a hot topic on both sides of the Channel and continues to be the focus of hourly news items with many TV stations trawling the streets looking for people that have changed their mind!
Tech has been the main talking point in US markets, much of which started a few days ago with the Facebook fallout. Other tech companies are being hit as many assume social media may have strayed into the media space and wonder if regulation may be forced to adopt a restricted role. This is probably the reason the NASDAQ is down nearly 3% dragging the broader S+P and DOW with it. Interesting that gold has lost ground in this move, especially as we approach quarter end. Treasuries were talked as a flight to quality trade with US curve flattening in the demand, but the timing was out on that call today. Tech, Financials and Consumer discretionary were the biggest hit today with Tesla and Nvidia both down around 8%. Oil off just over 1% supporting the idea that this was a stock rebalancing trade rather than much else. Interesting that the US 10’s were already climbing even as the DOW was up 200 points in early trading. Worth keeping an eye on currencies over the next couple of weeks into Q1 end. Libor/OIS spread now up at 57!
Japan 0.035%, US 2’s closed 2.27% (-1bp), 10’s at 2.77% (-7bp), 30’s 3.02% (-5bp), Bunds 0.5% (-3bp), France 0.73% (-5bp), Italy 1.86% (-5bp), Greece 4.33% (-5bp), Turkey 12.36% (-7bp), Portugal 1.63% (-6bp), Spain 1.22% (-3bp), and Gilts 1.42% (-2bp).
