Market Talk- January 22, 2019

The economic slowdown, voiced now by the IMF, has had an understandable impact on the Asian markets today. Probably the result of the weekend Chinese data, but at any length we now have a nervous market that is back looking for the bid! The Japanese Index is retreating from a one months high with dealers looking to liquidate longs, even as the Yen gains small ground. The Nikkei eventually closed down -0.47% having spent much of the morning attempting to hold early gains. However, in the final hours industrials and exporters started to decline in sympathy with other exchanges within the region. Despite recent efforts by the Chinese government, the weight of uncertainty appears to keep a heavy lid on prices with both Shanghai and the HSI closing weaker. The main Shanghai closed off 1.18%, while the Hang Seng did manage a small bounce into the close -0.7%. The CNY is back above 6.81 and the INR is again drifting weaker (last seen 71.45 -0.25%).

European bourses suffered pretty much from the same fate as prices drifted throughout the day. Concerns surrounding global growth, probably overly hyped from Davos, tended to play on sentiment and that encouraged the safety play. Yields from core to periphery were lower as the uncertainty edged the nervous toward fixed-income. Earnings have also been weaker than expected and probably cemented by UBS’s Q4 numbers adding to the mix. Financials were hit across the board with big names (HSBC, Santander, BNP Paribas ) all suffering losses today. The markets will await more headlines from Davos tomorrow when we will hear business leaders conclude the IMF’s findings and repeat China’s GDP number again and again. GBP rallied 0.6% following talk that another referendum and even talk of taking a No-Deal off the table is boosting the hype. Looking as though this has run its course now as so much has been priced into the equation.

US future were already trading lower ahead of the cash open as they followed both Asian and European indices. Afternoon headlines adding to the concerns were that the US had rejected a China preparatory talks offer certainly wobbled confidence. Today being the first trading day for the US markets to respond to the China GDP number, the slowdown forecast from he IMF and the headlines coming from business names in Davos, has seen values drift in the uncertainty. It was probably the fear finally saw the number, but despite it being the lowest GDP in nearly 30yrs, it is still 6.6%! Eventually, we did see a small bounce at the close, but only to prevent a close at the days lows. The NASDAQ led the decline and finished the day down -1.9%, while both the DOW and S+P were off around -1.3% the pair. The Dollar is recovering from its hit also, which sets it up nicely for an interesting week.

Japan 0.01%, US 2’s 2.58% (-3bp), US 10’s 2.73% (-5bp), US 30’s 3.06% (-4bp), Bunds 0.23% (-2bp), France 0.64% (-1bp), Italy 2.74% (-1bp), Turkey 15.36%, Greece 4.10% (-2bp), Portugal 1.72% (-2bp), Spain 1.33% (-3bp) and Gilts 1.32% (u/c).