Japan took a turn for the worst today led predominantly by Exporters (Toyota, Nissan, Honda) all down around 5.5% but even they were led by the Nobel House (Nomura). Nomura reported a 49% drop in Q3 profits and then saw its shares plunge 10.2% in todays trading. The Nikkei closed down -3.15% on the day and even in late trading in the States futures recovering slightly from the days low (16,618) but is still down an additional 310pts (at 16,890) -1.8%. HSI also had a poor day closing down 2.3% whilst the Shanghai Index finished the day small lower just -0.3%. Both the HSI and China are bouncing with US stocks and are currently +0.6% higher, while the Nikkei struggles.
In Europe it appeared as though it was the DAX that was applying pressure across the board. Other core markets (FTSE and CAC) each had a moment to shine moving into positive territory at one stage but once we saw the ADP number all Indices were shaken again. Closing on the day DAX -1.55%, CAC -1.3% and FTSE -1.4%. IBEX and FTSE MIB (Italy) faired even worse closing down 2.55% and -2.9% respectively. Again it was Energy and Financials that led the way despite seeing a rally in the oil price late in the day. Some of the Italian banks were top topic again (Banca Monte Pischi Siena -6.7% and Banca Popolare Milan -9%. We even saw Deutsche Bank resume its downward trajectory losing another -3.8% today. This puts the YTD decline around -30% and a 1yr Rtn of -43.7%.
The US had a very significant swing today with initial weakness (-250 points) only to produce a stellar bounce back to close up +180 (+1.1%). Dealers claim the Dow is following Oil, after the Inventories (+7.8mio Barrels last week) were released but shortly after the release Oil rallied 8%. Then dealers are claiming it was the USD weakness (-1.5% against the basket tdy – latest data ISM release questions FED intentions) that stocks were following but then stocks bounced! For whatever reason the volatility is here for a while; so best to settle-in and play the ride.
In the Fixed-Income Market we also saw wild times when the US 10yr note briefly traded through 1.80%. We closed way off the highs (prices/low yield) as stocks bounced but even in this market volumes were sketchy. German 10yr Bund closed 0.275% but we will have to wait until the European open to see the true spread (last seen +159bp). Peripherals closed; Italy 10yr 1.43% (-5bp); Greece 10yr 9.13% (-3bp); Turkey 10yr 10.41% (-21bp) and UK Gilt 10yr at 1.53% (-1bp).
US data today ISM released weaker than forecasts (53.5 v’s 55.1) shook the market and especially the USD. With the DXY falling 1.6% to 97.21 gains were seen for most EM currencies together with core Euro +1.55% and GBP +1.3%. Gold also returned a solid day with a gain of +1.4% and also strong performances for Silver +2.85% and Platinum +3.2%.
We are finally starting to get the breakout to complete the retest in the Euro which has been vital to achieve. This is also helping gold as well. We need these counter-trend moves to end the consolidation the market have been trapped in since the book-squaring at year-end.
