The strong US session ran into Asia resulting in strong performances for both the Nikkei and Hang Seng. Both closing around 0.75% higher the main pull was from financials but this is just a rebalancing from the losses they suffered earlier in the week. China remains on national holidays and so we wait until Monday to see how the Shanghai exchange deals with recent movements. In late US trading the Nikkei futures have given back todays cash gain (-0.75%) whilst the HSI trades just 0.35% lower than the close. China 300 was last seen trading at 3135 but obviously the liquidity has been extremely poor. BOJ meeting next week and there is much talk surround additional QE so worth keeping an eye on the JPY and the month end reversals levels.
European markets were dominated by the news storey around Deutsche Bank and the US DOJ’s request for $14bn for the settlement of miss-selling of Mortgage Backs Securities. DB shares opened down 7%, which obviously hindered the DAX performance throughout the day. By the close of the weeks trading DB shares were 8.5% lower, with the overall resulting in a 1.5% decline for the DAX. The implications of the DOJ request hit other European bank shares with RBS closing -4.5%, Commerzbank -2.5%, UBS and Barclays also down 2.5%. Other core indices saw CA and IBEX close 1% lower, whilst the FTSE lost 0.3%. What was interesting today was that the currency failed to act as the pressure valve today as both the Euro (-0.85%) and GBP (-1.75%)both lost ground against the USD. There were rumours this was US position liquidating purely from the time of executed orders.
US stocks traded heavy for most of the day but did manage to close off of the lows. The sentiment feels bearish which was probably not helped by today sentiment index (US Mich) was expected at 90.8 but was released at 89.8. Many were talking about next weeks FED meeting and the will they/won’t debate but meanwhile the DXY continues to rally; closed this evening +0.9% higher on the day at 96.08.
US Treasuries saw support at the long end flattening the 2/10 curve by 5bp (2’s closed 0.77% and 10’s at 1.69%) at +92bp. German Bunds closed marginally better bid at 0.01% which closes the US/German spread at +168bp. Italy 10’s closed 1.34% (+1bp), Greece 8.45% (+1bp), Turkey 9.55% (+3bp), Portugal 3.39% (-1bp) and UK Gilt 10yr 0.87% (-1bp).