Posted Aug 7, 2018 by Martin Armstrong
No new headlines and a strong US market resulted in a positive day for Asia. Finally, we saw some bounce back in the Shanghai index after it has been weak for so long. Today’s 2.75% recovery is a start, but considering the YTD decline sits around -16%, there is still a fair way to go! However, today was an encouraging performance especially as negative prices were registered in the morning session. There was talk of a helping hand, especially upon rumours of President Trump highlighting the underperformance, but these reports were unconfirmed. The Nikkei steadied as the day wore on. After today +0.7% rally you see it is flat YTD. The currency is unsure to make this break and so we watch for Nikkei futures to follow the US strength for guidance after of Wednesday. SENSEX and the ASX both traded in a similar pattern today, challenging both directions but closing lower. The INR and A$ did benefit a little but an unchanged RBA and lack of volume more than anything else.
A quiet but steady day for Europe rather more attuned to an August summer day than middle of BREXIT and US/China trade talks. Core Europe performed returning close to +0.6%, but did see the DAX marginally ahead. Deutsche Bank was one of the best banks stocks whilst Commerzbank balanced as one of the worst. Although the BREXIT headlines have been almost side-lined, the GBP lost early advances closing lower on the day. The Italian issue looks to be nudging its way to the frontline, but we did see the FTSE MIB add 1.25% today. The BTP’s are suffering as money moves away from but has been benefiting from the large supporting buyer. The strong US session supported closing European markets, which looked very likely not to be the case had they been left to ponder.
US markets were strong from the beginning and was evident in lending Europe a supporting hand. Have people woken to the fact that the US markets and the US Dollar are the place to be! Another strong session throughout, with Healthcare, Energy and Tech still leading the rally. Buy-back supported by earnings and the dash of private money entering the market is helping fuel the rush to and through old historic highs. 2872 is the January high in the broad S+P 500 Index and close above that is what many are hoping for this Friday.
Japan 0.11%, US 2’s closed 2.67% (+2bp), 10’s 2.97% (+3bp), 30’s 3.12% (+4bp), Bunds 0.40% (+1bp), 0.72% (+1bp), Italy 2.87% (-3bp), Greece 3.94% (+1bp), Turkey 18.79% (-11bp but did hit 19.10% in intraday trading), Portugal 1.74% (+1bp), Spain 1.39% (u/c), and Gilts 1.32% (+2bp).