The Nikkei was not the main topic of conversation today in Asia as the Shanghai and Hang Seng both outperformed the Tokyo exchange. The HSI closing up 0.85% and was the best performer, until after Asian cash markets closed. Throughout the European and US time zone the JPY has weakened through the 103 handle and that has been the driver for the Nikkei futures (last seen up 0.9%). Japanese unemployment was released at 3% whilst expectations were calling for a 3.1% quote. Much dominates debate surrounding demographics and the 500k a year shrinkage number but still looks more like a currency play really given JPY lost 1.1% in late trading.
After a shaky start European indices managed to work their way to a solid result for the day. The DAX, CAC and IBEX all returned around 0.85% on the day with only FTSE weighing on both sentiment and the group. Miners, resources and energy all had heavy days which certainly had a knock-on effect to the FTSE as it saw a negative day. Even GBP has traded heavy in recent days as the flight into the USD continues. Gold remains heavy and in late Tuesday trading looks vulnerable to test reversal numbers. We still have ADP and Fridays NFP’s to digest before the weekend which will make USD bears very nervous indeed.
Many are blaming the slide in Apple shares as the key reason why stocks are weak in todays trading. However, commodities trade heavy, oil is down over 1%, growth outside of the US is questionable and the USD is the pride of the fleet; all seems logical to us. Expects growth the slow more, expect commodities to remain heavy and expect more strength from the USD – all progressing nicely. Closing tonight with small losses across the board from DOW to NASDAQ.
A very quiet day in the US Treasury market with 10’s almost unchanged at 1.57% (+1bp). US/Bund spread closed +166 as the Germany 10yr closed better bid at -0.09%. Italy 10yr closed 1.10% (-1bp), Greece 7.92% (+6bp), Turkey 9.62%, Portugal 2.99% and UK Gilts closed 0.64%.
The ECB announced in its Weekly statement that their program of QE had reached €990.8bn ($1.1 trillion) – I wonder how the repo market is handling this lack of paper!