Another weak session for the Nikkei despite a brief run at the psychological 17k mark just ahead of lunch. However, it wasn’t to be and the sentiment from a weak US session finally penetrated what euphoria there was and eventually saw the Nikkei close around 1% lower on the day. In mainland China the Peoples Bank of China set the Yuan rate at 6.7258 as the trend continues to play out and the Shanghai index closed with a marginal loss (-0.2%). HSI closed weaker (-0.6%) as US and European futures were indicating weaker openings.
European indices fell on the back of oil and bond price declines as markets await the FED minutes. Core eventually closed down around 0.5% (DAX, CAC and FTSE, whilst the Spanish IBEX finished just 0.1% lower). One of the main talking point throughout both European and Asian trading sessions was the rally seen in GBP after Theresa May stressed the UK would seek maximum opportunities towards trading with the EU. Cable saw an immediate bounce to mid 1.23’s from the 1.21 lows but did see the selling return as we approached the end of the days trading in the US. The DXY was last seen trading at 98.00 up 0.4% as the GBP bounce was balanced by the EURO and JPY weakness.
Most of the US trading session was spent waiting for the FED minutes and the implications surrounding them. So, upon release the market now talks December the trigger month which was obviously acceptable as far as the markets are concerned since we rallied back into positive territory. One market that is sure in which direction it wants to go and that is the Treasury market. The US curve steepened in todays trading with 2’s closing 0.86% but watched 10’s fall to 1.77% (2/10’s at 91bp). In Europe, still concerns around possible ECB tapering weighs on the market but more because its not working and especially if you start to see the FED increasing rates at a time when the EURO and GBP are also losing ground. 10yr Bund closed this evening at 0.065% closing the 10/10’s spread at +170.5bp. Italy closed 1.42% (+4bp), Greece 8.15% (+2bp), Turkey 9.69% (+7bp), Portugal 3.38% (+3bp) and UK Gilts at 1.04% (+4bp).