You can always expect a quiet session when one of the major centers are out for a bank holiday, and that was what we saw yesterday. Not that dealers needed much of an excuse after last week’s fun and games. Asia did have a weak session after all the talk of the possibility of the Federal Reserve raising rates in September; we saw most Asian equity indices lower by around 1%.
Europe lost most of last week’s positive energy and we saw 1-2% losses across the board for DAX and CAC whilst FTSE remained closed. The DOW did swing within a 300-point range but that does not feel as spectacular after last week’s 1000-point days.
Oil had quite a volatile day on Monday, initially lower around 2.5%, but in the late U.S. session saw good buying ending almost unchanged on the day. The TWI/Brent spread still trades around $4.75. Early Asian talk of continued China slowing has hit the black gold to Monday opening levels (-3%). Gold was treading water for much of the fairly quiet session but has managed to bounce in early Asian trading Tuesday. More talk of Chinese demand out of U.S. Treasuries is prompting the black gold/yellow gold rumors.
The U.S. Treasury market performed well despite all the talk of the Fed beginning its tightening maneuver. The curve did flatten as all the buying was cantered at the longer end. 2/10s flattened 3bp that put the 10yr yield at 2.18%. The spread TY/RX 10yr spread closed yesterday at +139bp; we did see it trade +135bp at one stage yesterday.
The U.S. Dollar Index still trades around the 95.50 level. GBP lost ground on Monday but this was offset by equal euro strength. The Russian rouble returned much of last week’s gains as energy prices were hit ending the Monday session 1.25% lower.
