Market Talk – May 23rd, 2017

A mixed session in Asia with no clear direction provided in any of the core markets. Saddening news coming from Manchester, England of the appalling bombing incident at a children’s music concert shocked both markets and people across the world. Police commented that they are treating it as a terrorist incident. The Nikkei, ASX, Shanghai and SENSEX (-0.65%) all closed lower with the last the lowest on the day. The only outlier was the Hang Seng that closed firmer but only just at +0.05%! Oil retreated from yesterdays gains which contributed to the negative sentiment felt at the close. The Yen played in a very tight range for most of the day until late European when it lost ground trading up to 111.75.

Refreshingly strong economic data was welcomed by Europe after we saw better PMI’s in Germany (59.4% after a 58 forecast). The horrific attack in England led the Prime Minister Theresa May to suspend her election campaign ahead of the 8th June election. GBP appeared under-pressure for the majority of the day. What is concerning markets, although they obviously do not feel it is something to be overly concerned about, are the debt relief negotiations that were suspended and expected to be revisited again in three weeks time. Late in European trading hours we saw oil prices weaker after rumours that President Trump announced plans to liquidate nearly half of the US stockpiles.

US markets seemed equally quiet and happy to retain the tight lethargic pattern but then as gold started lower (-$12), so did the Euro and GBP whilst stocks made a move higher. The Auto sector lost ground on reports authorities are taking action over the emissions scandal, whilst all other sectors closed positive. The VIX has drifted in the past few days since the large drop seen last week. The USD started a recovery from recent losses late in the day just ahead of the FED minutes. GBP closed on the lows of the day accelerated as the Euro joined the sell-off reversing gains seen earlier in the day.

2’s closed 1.30% (+2bp), 10’s at 2.28% (+4bp), 30’s 2.94% (+4bp), Bunds 0.41% (+2bp) which closes US/Germany spread at +187bp (+1bp). France 0.84% (u/c), Italy 2.11% (-1bp), Greece 5.65% (+16bp), Turkey 10.41% (-1bp), Portugal 3.13% (+3bp) and UK Gilts 1.08% (+1bp).