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Market Talk – February 4, 2016

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Japan was again the talking point of the session with yet another down day. Initially, the index opened up 0.5% but it was just a matter of time until the sell orders hit the screens again and we were all looking for the bid. The stronger Yen was one reason being provided and we did see exporters (Toyota) lose another 2.2% in today trading. However, by the close of play the Nikkei was off a further 0.9% and has fallen an additional 1.3% in late US futures trading. China saw a slightly better tone for the Shanghai after the PBOC injected more liquidity into the system. There is a lot of talk in Asia of large Hedge Fund interest in the Yuan. Rumors that they anticipate a speedier currency weakness may come under increased scrutiny especially ahead of Chinese Luna New Year. Shanghai and Hang Seng both closed up just over 1%.

In Europe all core Indices had a mixed but volatile session. FTSE performed well (+1.1%) following mining stocks, with the strength spreading to IBEX to close +1.85% on the day. The CAC and DAX were not so fortunate closing unchanged to -0.5% lower. After yesterdays run the GBP drifted in aimless trading today. Main reason being the MPC voted 9-0 to keep rates unchanged and even took a dovish tone. Credit Suisse reported poor Q4 results which resulted in a loss for the year and even forecast unfriendly outlook (Shares took a 10.9% hit on the day).

In the US despite choppy, volatile conditions stocks closed positive for the day with dealers just happy the markets retained yesterday late sentiment. VIX remains low 20’s. Some weak economic data took the shine off the market and even Fed Dudley provided a warnings forecast but it really is tomorrow’s number that counts. The first Friday in the month and so it must be the unemployment release. The estimate is for a release around 190k (low I admit) so all eyes will be on the trading screens at 8:30AM (US) 13:30PM London for guidance for the rest of February.

Gold continued its march closing around the days high of $1155. Oil cam off its highs into the close which wobbled some of the less convincing players.

Given the weaker data seen today we saw support for the Bond Market. The curve 2/10’s flattened with 2’s down just 2bp (to close 0.70%), while 10’s lost 5bp (to close 1.84%) to close 2/10 at +114bp. German 10yr closed 0.30% (+3bp). Peripherals lost a little ground in all the uncertainty closing at the following levels: Italy 10yr 1.53% (+10bp); Greece 10yr 9.25% (+12bp); Turkey 10yr 10.35% (-6bp) and finally Gilt 10yr at 1.56% (+3bp).