The US’s FTSE all core markets were lower

Core Asian markets closed mostly lower after early gains were reversed. Volumes were thin in todays session as G7, OPEC and discussions around the Federal Reserves next move on rates. Oil drifted lower in Asia as President Trump completed his trip and was about to fly to meet the Pope. Thursday OPEC meeting is expecting cuts with anticipation that they will extend into 2018. India’s SENSEX and the Rupee both suffered after rumours of military raids in Kashmir. Commodity producers were a drag on many indices and so the bid for yen did subside but only marginally. After the Asian markets closed we heard that Moody’s had downgraded China debt from Aa3 to A1.

The China news broke just as European markets were opening. It certainly put pressure on peripheral markets but that could also be explained away by the ECB’s Financial Stability Report which claimed additional pressures are building on Europe as the US starts to raise. With the exception of the US’s FTSE all core markets were lower. However, this had more effect on the fixed-income markets (Greece) than equity indices – see below.

In the US core indices hit intraday fresh record highs but did see the USD under a little more pressure. FED minutes showed little concerns for the central bank over recent marginally weaker data. The market is still pricing-in a move in next month but is debatable whether they go again in late 2017 or early 2018. Although the DXY remains heavy (-0.3% today) it continues to make headway against cable (1.2930 seen intraday). US Home Sales fell from 10yr highs today.

2’s closed 1.28% (-2bp), 10’s at 2.25% (-3bp) and 30’s 2.92% (-2bp). Bunds closed 0.40% (-1bp) closes the US/Germany spread at +185bp (-1bp). France closed 0.83% (-1bp), Italy 2.12% (+1b), Greec 5.95% (+30bp), Turkey 10.32% (-9bp), Portugal 3.18% (+5bp) and UK Gilts 1.07% (+1bp).