An orderly open for Asia with an oil rally ($50.5 TWI) following on from a positive US session really leading momentum. We did see a wobble just ahead of lunch but that was only short-lived and as trading remains thin due to China’s absence. All in all we closed firmer on both the Nikkei (+0.5%) and Hang Seng (+0.2%) but still see the JPY trading heavy losing around 3% so far this week. However, tomorrows Asian market will be focusing on whether the US could return from early weakness after we saw Initial Claims miss expectations (+249k against a forecasted 257k). In late US trading we are seeing the JPY trade with a 104 handle.
It is quite refreshing that we do not have to keep watching the same bank stock as today it has been reasonable well behaved, remaining within a 2% range is perfectly acceptable. Peripheral bond markets were a concern ahead of a busy issuance calendar but these worries were short-lived as they were taken in relative comfort. France, Spain and the UK issued paper but it is the Gilt auction plan that is concerning the Gems. Talk that the UK is ready to borrow for infrastructure spending has many nervous especially as sterling continues to trade heavy. 10yr Gilts yield around 0.80% whilst the underlying currency hits 31 year lows (down 15% YTD) will require more domestic support than usual as international investors will fear currency losses.
Core US markets are looking healthy ahead of tomorrows NFP having recovered from early losses. Oil maintained its lead having heard support from US inventories on Wednesday and OPEC friendly headlines. The main event for US markets is tomorrow where expectations are looking for a +175k headline number and an unchanged 4.9% rate.
Treasuries attempted to reclaim some of yesterdays losses but to no avail with 10’s last seen at 1.74% (+4bp). Germany saw a little uncertainty reappear following a marginally weaker stock market but eventually closed -0.02%; that closes the US/Germany spread at +176bp. Italy closed 1.34% (-2bp), Greece 8.11% (-1bp), Turkey 9.45% (-1bp), Portugal 3.48% (+5bp) and UK Gilts closed 0.86% (5bp).