We saw a healthy Asian session today with the Nikkei up almost 1/5% at one stage following the impressive US mood. The market could not maintain its strength closing up 0.9% which was a small reaction to some mixed data but did provide Europe with some opening guidance. The Shanghai market was closed today for a national holiday and so it was Hang Seng that took the lead. However, it was the currency market, namely GBP, that was the big story overnight after Theresa May (UK PM) had stated that Article 50 will be triggered no later than March 2017. This had the immediate effect of a sterling decline down to the 1.28, a fall over the weekend of -1.25%.
Europe traded reasonably well but German markets were closed and so Deutsche Bank was not the focus of attention – for once! FTSE and GBP continued to collect that accolade with cable hitting a 31year low (1.2816) after the Prime Ministers weekend comment. The balance was GBP down and so cable up. CAC and IBEX were little changed although IBEX did end at -0.4% weaker as uncertainty and rate hike concerns start to push peripheral wider. Italian banks also moved lower today after a Milan court ruled that Monte dei Paschi di Siena, Nomura and – guess who “Deutsche Bank” – for alleged financial crimes; so you will need to watch the shares again tomorrow.
The DOW traded weak from the off even though it was a reasonably quiet trading day. Shortly after the opening bell the DOW hit triple digit declines but managed a close well off its days low. Various FED speakers were commenting that rates should be moving soon the most vocal was probably NY President William Dudley in an event that was closed to the media.
As a result of the rate concerns Treasuries traded heavy for most of the day but the selling was well controlled. Eventually, we saw a 2bp parallel rise across the curve closing 2’s at 0.79% and 10’s at 1.62%. Although the German stock market was closed the Bund market was open with 10yr Bund closing -0.09%; which closes the US/Germany 10’s at +171bp. Italy saw more selling of BTP’s closing +8bp wider at 1.26%, Greece 8.10%, Turkey 9.39%, Portugal 3.37% (+7bp) and UK Gilt 10yr at 0.73%.