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Market Talk — May 12, 2016

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With the US markets having provided the momentum for the opening it was not surprising that Asian equity markets opened with a reluctant bid. Earlier in the day we had heard from the IEA regarding oil supplies and although this was still a discussion point in Tokyo it needed additional enthuses to lift markets higher. This was eventually found in the JPY when again, weakness led to movement  and eventually we were back trading with a 109 handle. Eventually, we saw the Nikkei back in the black closing +0.4% higher on the day. Sentiment alone was insufficient to lift the Hang Seng and that market closed down 0.7%. Shanghai was to close almost unchanged with the currency being marked a little weaker (at 6.4959).

Europe turned negative today after oil prices dipped around mid-afternoon session. These were accompanied by worryingly weak metals prices, a banking sector decline that appears to be moving from country to country (UBS shares down 6% today) and a Euro that spent all the day in negative territory only to be followed by US stocks when the cash market opened. One dealer commented that the DAX looked great at the top and horrible at the bottom as many were caught with false breaks. Closings on the day were weak with the DAX, CAC, FTSE all closing around 0.8% down on the day.

US markets also could not a move either as it seemed many markets are struggling for clues in which direction they should be moving! With the DOW and S+P closing almost unchanged many were thankful the NASDAQ did trade all be it lower! Apple was heavily traded with many calling time on its decline. Currently, at 90.20 it has fallen over 2% but does lie on some strong support at these levels. We had a slew of FED speakers again today and it does appear as though they are starting to talk rates up again.

The DXY closed this evening at 94.16 (+0.3%). Gains were made against the Euro, AUD, and JPY. GBP did make headway after the BOE left rates unchanged but all of those gains had been reversed by the close.

US Treasuries were unnerved by the FED speakers and we saw rates a little higher across the curve. 2’s gained 3bp to close 0.755%; while 10’s gained 2bp to close the 2/10 curve at +99.5bp.

In Europe the German Bund curve was also weaker with 10’s closing at 0.155%; closing the US/Germany spread at +159.5bp. Italy closed 1.50% (+3bp), Greece 7.25% (-5bp), Turkey 9.69% (-4bp), Portugal 3.21% (-0.5bp) and UK Gilts closed 1.40% (+1bp).