Market Talk- February 12, 2018

It’s always a difficult trading environment when one large market is closed (Japan Monday), but following last weeks volatility we have seen a quiet bounce-back in quieter conditions. That bounce-back has been more visible in US futures than Asian cash even with the Shanghai closing +0.8% firmer today. The KOPSI (+0.9%) and SENSEX also enjoyed a bounce today (+0.9%), but is being helped by a trending weaker INR. The Australian ASX, NZX and Hang Seng were all were all little changed (small negative) today, as financials weigh the ASX down and real-estate the HSI. Oil has helped a touch today, we saw a bounce after last weeks huge decline, also talk that IMF reports a recovering global economy. Don’t think we’d be too keen to run with that support for oil prices!

Following the late rally in the US from Friday and the fact that Asia was relatively well behaved, Europe opened 1% firmer and managed the maintain that bounce. Continued talks around Angela Merkel and coalition discussions, after she declares her wish to move forward. Also, much talk surrounding the announcement of the large hedge fund shorting European stocks. Worth keeping an eye on the currency play here also! BREXIT news was quiet but can’t be that far away as GBP declines against the Euro. Barclays has been charged by the SFO related to the 2008 Qatar assistance deal. In the afternoon session we followed the strong US performance and closed near or on the days highs. Tomorrow will very much depend upon how the US finishes with Asia only a glancing reflection, given the holiday shortened week.

The DOW cash was already 200 points better at the opening and was to build from there. Just ahead of the close we were over 500 points higher, a day gain of 2.3% but also joined by the core. The VIX lost a little over 13%, last seen around 25.25. The mood was helped by Trumps infrastructure spending plan, but could also have been an excuse for bouncing prices. The 10year Treasury note fell (price terms) with yield hitting 2.87% taking yields back to recent lows. Oil did bounce initially but seems to have given much of that back in the last hour or so. A5 00 point move may seem constructive possibly excess but in the final 30 minutes we gave back nearly 25% of that back! Should be interesting tomorrow as we do have a weak close which Asia will concentrate on. Wednesday is probably key data to focus on with the release of the latest CPI data.

Japan 0.07%, US 2’s closed 2.08% (+4bp), 10’s 2.86% (+5bp), 30’s 3.15% (+2bp), Bunds 0.76% (+2bp), France 0.99% (+1bp), Italy 2.03% (-1bp), Greece 4.19% (+14bp), Turkey 11.67% (-3bp), Portugal 2.05% (-2bp), Spain 1.47% (u/c), and Gilts 1.60% (+3bp).