Market Talk- August 16, 2018

The uncertainty seen in US markets shook Asian indices with all markets opening lower. Fortunately, these proved to be the days lows and most markets rallied from there. The Nikkei even managed to move positive and remained around there for the whole afternoon trading. The Yen traded back to 111 handle, but was to regain the 110’s just ahead of the US close. A narrow range with no clear direction, but has performed well against a ever strengthening US Dollar. Hang Seng and Shanghai both saw a similar pattern but failed to recover at the close. Both lost around -0.7%; although, both are looking better as the US rallies. Of course, earnings have not been as good as many had hoped and a string of liquidations hit the market. Yuan is improving with headlines, but still has few friends. INR spent much of its day trading mid 70’s with a -0.5% decline for the SENSEX also. Money continues to leak from emerging markets and the fear is that if the volumes were better the speed would increase.

Turkey the main talking point again, however the early rally has started to lose its appeal. The talk that Qatar plans to invest $15bn helped Turkey early doors, then the lack of details has raised concerns of this being only a temporary measure and so doubts creep back in! The 10yr bond was back over 21% after having seen a 20.30% morning print. The BIST 100 fell another 3.45%, but the Lira currently trades better by around 1.3% on the day. The other market in focus was FTSE MIB after the highway bridge collapse in Italy. The market finished down 2% with the core stock (Atlantia – owns road management) fell 23% following the news. Both the Euro and GBP held their ground for mush of the day, but is starting to drift as the demand for dollars returns. All core Europe closed at their days highs, leading to optimism for the weeks close tomorrow.

The mood set by futures accelerated once the cash market opened. At one stage we saw the DOW up nearly 450 points, its largest daily gain in five months. Obviously, the talk that trade talks are to be resumed started the rally, but then some earnings beats (Walmart) helped accelerate that momentum. As we close this evening, the S+P is only 30 points away, the DOW less than 1000 and the NASDAQ only 130 points away from record highs. The demand for USD’s continues to expand and the case for owning it just getting better by the day. Even if you are not yet convinced, what other options are there!

Japan 0.09%, US 2’s closed 2.62% (+2bp), US 10’s 2.88% (+3bp), US 30’s 3.04% (+2bp), Bunds 0.32% (+2bp), France 0.67% (+1bp), Italy 3.11% (-4bp), Greece 4.25% (+5bp), Turkey 20.96% (+37bp), Portugal 1.83% (u/c), Spain 1.43% (-1bp) and Gilts 1.24% (+2bp).