Market Talk – August 20, 2015

Trading Community

Another very poor performance from Asian equity markets rolled over into Europe and the U.S. All Asian markets lost between 1% – 3.5%. In Europe, FTSE was the best of a poor bunch, only losing 0.6%, whilst the DAX and CAC were both down over 2%. The U.S. fared no better with the DOW and S&P, which were both off 1.3% (at the time of writing) with the NASDAQ down 2%. The Asian futures markets trading in the U.S. are lower from their close by an additional 1.5% (Nikkei and China). Tomorrow could be an interesting day.

The bounce in gold continues (last seen +$24 at 1152 +1.85%) providing much needed support for the miners. Silver and copper both following the rally and bouncing 2% on the day. Gold has rallied to our first target resistance level between 1140 and 1155.

The bond markets were again the main benefactor in what many are describing as a perplexing yield curve play. The front end (2yr notes) were down (+1bp at 0.6625%), whilst 5’s managed just 2bp performance last seen 1.48%. The star performers were the 10’s and long bond (30yr), which were both down by 5.5bp to yield 2.068% for 10’s and 2.758% for 30’s.

In Europe, the rumors are, “More elections in Greece!” Mr. Tsipras has allegedly decided to call a snap election for September 20 — so is the word on the street. As a result, the Greek 2yr note traded lower +135bp to yield 12.79%. Greek 10yr paper was last quoted 25bp higher at 9.58%. Other peripherals were also weaker on this uncertainty with Portugal, Spain, Italy, and Turkey all lower on the day to the core. TY/RX spread was last seen +148bp.

In the currency market, the DXY (US$ Index) was a little lower at 96.05 (-0.3%) with EM currencies still under pressure with INR down 0.55% and the Russian Rouble falling by another 1% today to close 67.10.

Oil did flirt briefly with the $40 (TWI) but in late trade is seeing a healthy bounce into the close; currently up +1.25%. The spread between TWI and Brent is slightly narrower this evening at $5.80 (TWI 41.30 V’S Brent $47.10).