The Nikkei did manage a positive close for the end of the week but finished down just over 2% on the week. The JPY continues to play around the par level until the stock markets decide their direction. Shanghai and Hang Seng closed mixed in thin summer trading in what can only be described as lethargic trade. With very little in the way of data to get excited about in either Europe or the US markets were content to drift into the weekend.
European morning was a follow-on to the lethargy seen in Asia and so it was not until an afternoon announcement by the UK did the market show any signs of life. Mid afternoon in Europe the media announced UK PM (Theresa May) wants to trigger Article 50 by next spring. GBP fell over 1% upon this announcement. Meanwhile in Europe bank shares continue to weigh on markets as the uncertainty around liquidity, Derivatives exposure and irregularities weigh heavy on the books. Core indices closed around 0.75% lower with IBEX extending that loss to -1.2%. UniCredit was temporarily suspended when it hit 5% down, however by the end of the day the stock closed 6.5% lower.
The lows in US indices were struck shortly after the opening bell and they spent the remainder of the session trying to reclaim lost ground. Eventually we closed lower but pretty much near the days highs, yes lower but they attempted a positive close. Looking ahead to next week we have to wait until almost the end until we hear from Janet Yellen at Jackson Hole and the hope we will hear some intention toward current conditions.
Bonds were weaker on both sides of the pond with Europe possibly losing a little more than the US. In Treasuries we saw a 4bp parallel shift with 2/10’s closing unchanged at 83bp, with 10’s closing 1.58%. Bunds lost a little more ground closing at -.03% closing the US/Germany spread at +161bp. Periphery markets also lost ground to core closing Italy +6bp at 1.13%, Greece 7.86% (-3bp), Turkey 9.58% (-3bp), Portugal 2.98% (+10bp) and 10yr Gilts at 0.62% (+7bp).