Market Talk — July 20, 2016

Japan finally saw a down day (-0.25%) that could be allocated to the individual performance of Nintendo shares, which declined over 12% today due to the delayed launch of the “Pokemon Go” app in Japan! However, the Hang Seng did return a nearly 1% gain today with Shanghai having a small loss, which was a result as it was down 1% intraday.

The UK released some better data (unemployment fell from 5% expected to 4.9% released). This helped both the stock market and also the currency to bounce. Meanwhile, the debate surrounding BREXIT continues with the new PM Theresa May still adamant that she will not invoke Article 50 until the end of the year. A good performance all around for Europe today with all core’s trading over 1% better with only the UK closing around 0.5% higher. S+P downgraded Turkey (from BB+ to BB), which resulted in the currency losing 1.25% to close record lows against the USD. Tomorrow should be an interesting day when the ECB addresses the market. No one is expecting a move in rates (futures pricing in an 11% chance they move) but the fun and games should be in the Q+A session 45 minutes after the announcement.

The US market has performed well all day and is one of the reasons we are seeing the sell-off in precious metals. Gold currently down around 1.4% and silver 2.7%. Many core stocks are making new highs as we see the DOW hit new intraday levels. All indices closed better but the NASDAQ was the star closing over 1% higher on the day.

Today was our day for stocks so we are awaiting Mr. Draghi to see if tomorrow is the day to concentrate on bonds. Today we saw another extremely poor auction for German 5’s (Obl’s) with not all bonds being sold. That was the reason given that 5’s underperformed the rest of the curve today. 2’s gained 1.5bp (-0.63%), 5’s 3.5bp (-0.5%), and 10’s +2bp (-0.01%). US bonds closed 1bp steeper (and wider) at 1.58%  with 2’s 0.71%. Italy closed 1.24%, Greece 7.76% (+5bp), Turkey 9.82% (+19bp), Portugal 3.04% (u/c), and Gilt 10yr at 0.83% (+3bp).

All eyes and ears on ECB Q+A session at 13:30 BST.