Market Talk – August 8th, 2017

We did not see a clear direction for core Asian indices today as we played between the positive and negative for most of the day. A typical August Tuesday with slow trade, low volume and no direction but we did have economic data to digest. Chinese released Export numbers for July increased by 7.2% whilst forecasts were at 11%. Imports also missed at 11% against an 18% expected as the bridge continues to widen. The Hang Seng closed better +0.6% (Auto shares the leader) with the main Shanghai closing just +0.1% firmer on the day. The Nikkei gave back a little of yesterday afternoons rally and closed off -0.3% but was probably only reflective of the strengthening currency bounce. The Australian ASX closed up +0.6% but with the lack of data was also undertaken in very quiet conditions. Worth keeping an eye on the South African Rand as lawmakers decide the fate of President Zuma.
The morning session for Europe appeared a repeat of yesterday with weakness around lead again by the DAX. We saw Production Index from Germany and France earlier with results weaker than had been expected, which is another reason why the DAX underperforms. GBP struggled also losing momentum after a fairly positive start after the July UK retail sales dropped 0.3% from previous month releasing at +0.9%. Afternoon trade focused on the US markets and were encouraged by yet another strong opening. The DXY strength also helped turn European indices positive as the Euro and GBP both came under pressure. BREXIT news also hit sterling after it was announced that the UK would not be paying a divorce payment – but will they make a payment under a different heading!
US markets set yet more highs in the morning session even with volumes at summertime levels. We are still watching the tech sector take us higher even with yet no further word along the tax reform or infrastructure plans. A lot of talk suggesting the market continues to trade on expectation of these proposals being actioned – which, if correct would suggest the market is venerable to irrespective of what the FED may or may not do. The afternoon was hit just ahead
of the close on geopolitical nerves after the Trump comments towards North Korea. DOW, S+P, NASDAQ and Russell all hit to close down around -0.2% which provided an opportunity for the VIW to rally 12% (11.13 last seen). Disney release just after the close but the most interesting story will be the ending of the Netflix relationship.
2’s closed 1.35% (u/c), 10’s 2.27% (+2bp), 30’s 2.85% (+2bp), Bunds 0.47% (+2bp) closing the spread at +180bp (u/c). France 0.75% (+2bp), Italy (1.99% (+1bp), Greece 5.37% (+1bp), Turkey 10.39% (+1bp), Portugal 2.80% (+1bp), UK Gilts 1.15% (+2bp).