Asian equity trading was purely a follow-on from the US session retracing much the same issues and momentum. The Nikkei closed positive whilst attempting the stronger trend while the Shanghai trod water for most of the day, despite stronger than expected PMI data but then eventually lost all that in the final hour to close the day down -0.7%. The Hang Seng however, broke into levels not seen in over a year, closing up +0.85%. The continued JPY weakness helped Nikkei exporters but that trend appears to be a little stressed in recent traders comments.
European stocks were trading well until mid afternoon when the US PMI ‘Manufacturing’ data was released. Expected with a reading of 52 the actual release was 49.4; which not only missed forecast being below 50 is a contraction of interest and the weakest number in many months. Core Europe resulted in a mixed session with the IBEX and CAC closing +0.55% and 0.03% respectively whilst both FTSE and DAX closed -0.5% the pair. As Europe closed many were watching Asian futures for a possible guide to the Friday open but hoping US indices retrace much of the early losses. UK PMI was better than expected resulting in a 1% rally in the GBP upon the news, that however lost much of the move towards the US close.
US markets opened weaker and certainly were not helped with the PMI numbers but did see a very encouraging recovery during afternoon trading. By the US close both the DOW and NASDAQ had recovered and closed up whilst the broader S+P managed to close back at unchanged. Concerns around the number now put in question whether a September rate rise remains on the card or not! The first Friday in the month tomorrow and so we see the Non-Farms Employment report. All eyes will be fixed on this on screens at 08:30 EST and 13:30 BST tomorrow looking for a +180k headline and a 4.8% employment rate, any large variation upon these numbers will probably set the trend for the balance of September.
Todays uncertainty in stocks has had a knock-on effect in the Treasury market with bids again seen for the curve. 10’s closed better on the day having seen weakness earlier in the session. US 10’s closed -2bp at 1.56%. In Europe the Bund market was again supported closing 10’s at -0.07%; which closes the US/Germany spread at +163bp. peripheral spreads were marginally wider with Italy 10’s closing 1.05% (+4bp), Greece 7.94% (+2bp), Turkey 9.64% (+bp), Portugal 3.02% (+1bp) and UK Gilt 10yr closing 0.67% (+2bp).