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Market Talk – January 28, 2016

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Japan opened weaker (mostly following the poor close on Wall Street) but was also influenced by the poor Retail Sales (Est -0.1% v’s actual -1.1%). However, after the initial shock prices recovered on rumors of additional stimulus expected to be announced tomorrow (following its two day policy meeting) but even that could not stop the Index from closing down 0.7%. Shanghai was also not so positive after opening in the red it remained heavy, extending its decline into the close. With the Index settling -2.9% we continue to hear concerns over the slowdown which also hit shares in Alibaba reputed to be down 3.7% today and also China Shipbuilding -10%. The Hang Seng however, closed firmer (+0.75%) as shares in Galaxy Entertainment rose 5.1% on better than expected December earnings.
All core European indices drifted lower as the day wore-on! Despite FTSE attempting to break the mould by the end of the day it too turned negative. DAX -2.4%, FTSE -1% and both CAC and IBEX down around 1.5%. Deutsche Bank got the blame for the poor DAX performance producing a $1.25bn Q4 pre-tax loss in its Investment Bank which was enough to send the shares down 5.4%. Banks shares were under pressure also in Italy after the Sovereign and EU allow Italian Bnaks to sell their holdings of so-called Non-Performing Loans (NPL’s). Shares in Banca Monte Paschi Siena closed down 7.9% and Banca Popolare di Milano declined 9.5%.
US shares had yet another volatile day eventually regaining yesterdays losses to close around +0.7% across the board. After yesterdays sentiment boaster (Face Book who reported after the close) and Amazon are the two stocks that are pulling this market along. With closes today of FB +15.5% and AMAZON +8.9% we even saw a bounce for Apple today (closing +0.7%).
Healthy gains also today for Oil after rumored reports Saudi (OPEC) and Russia were considering cutting production easing the glut that currently exists within the market. WTI and Brent closed firmer both recording close to 4.5% gains apiece.
Given the rebounds in many core markets we are seeing the USD’s rally return some of its gains. Today the Russian Rouble and the Turkish Lira saw a healthy fight back with also the DXY losing ground to close at 98.64 (-0.32%). Saw a good bounce also in the South African Rand (+1.7%) after the Reserve Bank raised rates by 50BP to 6.75%.
The US Treasury market was reasonably quiet as most of the activity remained in stocks. The US 10yr note closed almost unchanged at 1.98% (-1bp). 10yr Bund closed 0.405% (-4.5bp) Spread closed +157.5bp. Other 10yr yield closes are as follows:- Italy 1.51% (+1bp); Greece 9.18% (+11bp); Turkey 10.62% (-13bp) and finally UK 1.67% (-4bp).