Market Talk- February 14th, 2018

Ahead of a short week for China holidays and the release of US CPI data, it was no surprise we saw a mixed session in Asia. The Nikkei continued its bearish move with a decline today of -0.45%, briefly flirting with the 200 day MA but bouncing by the close of play. The Yen remains well bid as continues to be seen as a safe-haven harbour for Asian investors and has just exceeded a daily bearish reversal (seen in Socrates GMW) – next stop high 106’s. Japan’s GDP did release lower than expected at +0.5%. the Hang Seng benefited from strong financials and real estate with a +2.25% positive close. Shanghai also finished higher, up +0.5% but are now off on public holidays. KOPSI and SENSEX we both over 1% firmer with exporters and tech leading the way.

Europe started on a firmer note but much of the morning was spent waiting for the important US data releases. Ahead of the release all core equity markets were trading higher. However, as we all know now, the data was stronger than forecast and that hit everything. The DOW Futures for example traded from +170 points to -325 and then throughout the day traded steady. Europe all closed higher with 1% gains for DAX, CAC, IBEX and a near 2% for the FTSE MIB. The UK FTSE found it difficult making ground, but did see a healthy bounce in GBP in afternoon trading.

Today was always going to be about US CPI and Retail Sales and we certainly had our share of excitement. Cash, obviously, still had an hour to go before the opening when the numbers were released and so much of the volatility was done by then. Most concentrated on the CPI and a better than forecast release. By the time cash opened we were almost back to unchanged, and so after a brief spell in the red we were off to the races. The DOW gaining over 250 points (1%) trailed behind the broader S+P (+1.35%) and the 1.9% recorded in the NASDAQ. Still looks like people are trying to come to terms with the idea that higher rates is a sign the economy is doing better and people want private rather than public assets. Still a lot to play for this week so keep an eye on Socrates.

Japan 0.06%, 2’s closed 2.17% (+7bp), 10’s 2.91% (+8bp), 30’s 3.18% (+6bp), Bunds +0.76% (+2bp), France 1.00% (+1bp), Italy 2.06% (-1bp), Greece 4.39% (+7bp), Turkey 11.84% (+3bp), Portugal 2.05% (-6bp), Spain 1.50% (-1bp), and Gilts 1.64% (+2bp). The stock rally and consequent bond market sell-off happened US afternoon trading, so most of the European yields have yet to catch-up!