Posted on January 11, 2016 by Martin Armstrong
With Japan closed (Coming of Age Day) we were forced, yet again to watch the excitement unfold on the Chinese exchange. Most of the talk was on the foreign exchange market where the off-shore currency quote (CNH) saw a huge jump (940bp) on the Hong Kong overnight quote to a 6.5850 (last seen +1.5% against the USD) and obvious liquidity concerns. Having had the PBoC set rates at 6.5701 rumours again around official intervention saw the off-shore market set its largest one day move since launch in 2010. Shanghai eventually closed 5.3% lower with HSI finishing 2.8% down. Late in the US session we are seeing both the China 300 and HK HS50 bounce 1% and 0.35% respectively.
Europe opened marginally weaker then spent 90% of the trading day in positive territory only to dip on the close. Not too much to get excited about but DAX closed -0.25%, FTSE -0.7% and CAC down 0.5%. Oil and currency being blamed – if someone needs a daily excuse! If people are really looking at the Oil price as a stock market leader then given today price action for the black gold, US stocks performed amazingly well! Eventually closing mixed (DOW +0.3%; NASDAQ -0.1% and S+P +0.1%) having seen triple digit losses at one stage. Markets really are torn in all directions especially when you look at FX swings (+/- 2% in a day), Oil price decline (6% today), Economic data (292k Fridays NFP v’s expectation of 200k) and with fewer players than usual you can expect further volatility.
The US Bond was probably one of the quietest markets around Monday with the 10yr registering only a 4bp (2.14-18%) yield range. The curve really is torn between a safe-haven (stock counter play) bid the front end closed almost unchanged at 2’s 0.94% and 5’s 1.6%. While the long end is still smarting from the NFP surprise (despite the very rally weekend hide away) closing at 2.17% and 30’s at 2.97%. The German Bunds suffered a little today losing 2bp to close 0.55% (US/Bund closes 162bp) while the Italian 10yr closed at 1.60%.
Worth a quick mention are the Emerging Market currencies and their continued weakness against the US Dollar. The Russian Rouble breached the 78 handle (big figure) today seeing a high of 78.371 a loss of around 1.75% on the day. The Turkish Lira also lost around 0.6% and was last seen around 3.034. The DXY closed 98.92 (+0.35%).
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