Given the long weekend approaching in Japan, there was no let up for the yen weakness today as we broke into the 112’s finally. The Nikkei closed better bid as Exporters again rallied off the back of the declining currency. Many are speculating we breach the 20k again next week, but given so much is yet to come this week it certainly makes things difficult with a three day holiday over all the possible turbulence. Australian CB left rates unchanged. This evening in the US the FED starts its two day meeting – however, no change is generally anticipated across the floor. The Hang Seng also closed firmer after the May holidays gaining +0.4% on the day. Strong performances seen in the US NASDAQ also helped Japan’s TOPIX rise almost 1% as demand increases for Tech stocks. The SENSEX closed small better today after an impressive run the past five months. The 30k level is possibly proving a tough obstacle so we shall watch this closely in the next couple of weeks as Q2 could be the turn forecasted.
All core European markets closed positive as earnings continue to post better than expected with BP a classic example (+1.5% higher on the day). Markets and sentiment are taking an extremely nonchalant view of this weekends election in France and it presents the danger of buy the rumour sell the fact scenario. Away from the IBEX (+0.9%) it was the CAC that led the rally (Banks one of the big performers) closing up around +0.75% with the DAX and FTSE close behind. It is worth noting that the CAC has underperformed the DAX so far this year so we can expected volatility next week whatever the outcome of the French election.
The US session could be accepted for a consolidation phase as we see the core mixed at best. The NASDAQ was the weaker but probably understandably having set record after record highs
in recent trading. The broader S+P and DOW closed small better but there is still so much on the agenda the balance of the week. Automakers were on average down around 4.5% following poorer than expected April Sales numbers. Wednesday we see the FED decision, the ADP number, ISM and a mixture of large corporate earnings released. Apple, Facebook and Tesla probably eagerly awaited as a preview into alternative thinking. Oil again was weak following additional concerns surrounding inventories – prices implying weaker still according to the forwards curve.
2’s closed 1.26%, 10’s 2.29% and 30’s 2.98%. Note the rally in long end following speculation that Ultra Long Treasuries are being considered. It was mentioned by Steve Mnuchin that UL’s (speculation being 50yrs) are being considered with many banks circling prospective buyers for required yield. This may well result in less 30’s issued in the run-up to 50’s. Depends upon the yield but anything with a 4% handle could attract interest. Bunds closed 0.32%, France 0.81%, Italy 2.29%, Greece 5.84% (bail-out looking more likely with creditors taking a lesser haircut than expected), Turkey 10.21%, Portugal 3.52% and Gilts 1.09%.