China’s trade balance (released overnight) was not great (Est. $40bn but the actual release was $45.56bn and exports contracted 1.8% in April) and had a negative effect on equities from the open. The Nikkei and Hang Seng were heavily influenced by oil’s rally given the very sad news of the Alberta fire incident. Japan and Hong Kong rallied with core indices closing up 0.68% and 0.25% respectively.
Oil was still the main talking point when European equity markets opened, but after a slow start the markets moved ahead. Session highs were seen (as oil turned lower) just after lunch, but it was downhill from there for the markets that were still open. DAX closed up 1.1%, CAC up 0.5%, and then FTSE was down on the day at -0.2%. Energy and Miners were the big draw on the UK market but there was more publicity from David Cameron (UK Prime Minister) announcing that BREXIT could endanger peace, which certainly has the markets guessing. FTSE MIB (Italian Exchange) is worth a mention this evening as it suffered closing down almost 1% because of the continued weakness in banking stocks.
U.S. stocks have seen a fairly quiet start to the week as the majority of the moves were seen prior to the U.S. open. Oil did open strong earlier in the day but lost all of its gains ahead of the U.S. open. European stocks also retraced all of their gains. By the close, they forgot about earlier trading and began focusing on tonight’s China CPI and PPI data expectations. CPI is expected tonight at 2.4% and PPI -3.8%.
DXY closed this evening above 94 at 94.15, +0.3% on the day. The U.S. dollar made major ground against the JPY and the Russian rouble (+1.2% a piece), +0.8% against the AUD, and +0.5% against the Canadian dollar. Many emerging market currencies lost ground as continued uncertainty from political to natural disasters surrounded many markets and unnerved growth.
The safe-haven bid today was again the fixed-income markets on both sides of the water. The U.S. Treasury market saw good demand across the curve with 2-10’s all falling 3bp but did see 30s lag that move a little (-1bp). 10s closed this evening at 1.75% whilst over in Europe the German 10yr Bund closed at 0.125%; closing the spread at +162.5bp. 10yr Italy closed 1.46% (-3bp) and rumor has it that Italy is to launch a new 50yr issue, Greece 8.07% (-9bp), Turkey 9.69% (+6bp), Portugal 3.26% (-3bp), and UK Gilt 10yr at 1.41% (+0).