Market Talk- January 18, 2018

Martin Armstrong Armstrong Economics

The Nikkei reached another 26yr high in early trading, but unfortunately closed down on the day. Ending the day down -0.4% even with the Yen trading lower also (111.20 last seen). Financials and real-estate led the market lower in the afternoon session. Worth a quick mention is that TOPIX lost -0.7% on the day having seen a health rally recently. Shanghai and Hang Seng saw some encouraging price action with a near 1% gain for Shanghai and +0.4% advance for the HSI. China saw its best close in almost two years and was quickly justified with today economic data released after the close. The forecast for todays release was 6.5% but actually released at 6.9%. SENSEX opened strong and despite a brief sell-off just ahead of the close still managed to advance +0.5% on the day.

Bundesbank President, Jens Weidmann, defended the German economic surplus today despite criticism from the IMF’s Christine Lagarde. Suggesting Germany allocates more money to reforms to boost the long term growth potential. We will hear this weekend whether a government is to be formed between SDP and Conservatives. New elections will need to be called if this is not to be the case. The DAX is obviously optimistic closing today +0.75%, whilst the CAC closed almost unchanged. FTSE lost ground (-0.3%) probably on talk that UK PM Theresa May is rumoured to have offered financial support to France in securing the boarders. We continue to see strong rally in both Euro and GBP as concerns mount of a possible US government shutdown. Oil prices tending to drift over much talk about the possible flood from US Shale producers.

US indices traded heavier today but probably not a surprise after yesterdays fun and games. Although the DOW did see a 170 point decline mid morning, prices have been relatively well behaved in afternoon trading. Both the S+P and NASDAQ played around midday for much of the days volume. Into the close and continuing fears of a possible government shutdown the DOW closes down 100 points. They will need to pass a spending bill before midnight Friday to halt the process.

Japan 0.079% (-0.004bp), US 2’s closed 2.05% (+1bp), 10’s 2.62% (+6bp), 30’s 2.90% (+7bp), Bunds 0.595% (+2.5bp), France 0.85% (+1bp), Italy 1.98% (-1bp), Greece 3.74% (+4bp), Turkey 11.73% (-4bp), Portugal 1.99% (-2bp), Spain 1.47% (-1bp), and Gilts 1.34% (+3bp).

Author

Martin Armstrong

Armstrong Economics

Armstrong pursued his studies of economics searching for answers behind the cycle of boom and busts that plagued society both in Princeton and in London.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.