With Japan returning to the market place after the three day Golden Week holidays and the seeming calming settlement for Europe after the Macron win in France the Nikkei returned +2.3% in todays trading. Early Asian trading saw the Euro move into the 110 handle but could not hold gains even for the Asian close. All the talk in Tokyo now is when the Nikkei closes above the 20k mark again as the next target they all want is 20,817k – the previous intraday high seen summer 2015. We saw more nerves in China as money continues to leave core markets (Shanghai -0.85%) but also saw weakness in the currency – trading over 6.900 again. The Hang Seng followed the core markets firmer closing with a +0.5% gain for the day. The ASX also performed closing up +0.6% following the confident rebound in energy but also was the balance as the A$ fell again on the back of further declines in metals prices (Iron Ore).
Some must be wondering why the CAC dropped in todays markets, closing with losses of almost 1% after Macron won! It is probably explained by the fact that the result was exactly as many had expected and already priced in; the old adage ‘Buy the Rumour sell the fact’ springs to mind. BREXIT negotiations will probably take the majority of the headlines for the next couple of weeks when the UK goes to the polls for the June 8th election. It appears the sudden realization that someone needs to pay for this party is starting to dawn on the remaining members, once the UK stops contributing especially if there is no payment or a settlement in sight! Still – plenty of time for that so let us focus on today and the balance of this week. DAX and IBEX both lost ground, following profit-taking after the recent runs. FTSE managed a small gain but did see the GBP fall by around -0.35% and the EURO lose -0.65%, its first decline in three days. We will probably start to hear the more talk of the ECB concerning tapering for the June meeting. This is what bond markets will be focusing on from here on in and with peripheral markets all heading south today it will be a small door to exit if the main buyer is trying to close it ahead of them.
We saw strong positive moves early in the US session but sadly could not be maintained to close small down. In early hours trading we saw intraday highs for the S+P and NASDAQ as the move into the currency also highlighted this being a strong signal. The DXY was last seen trading just under the 99 handle but had recorded a +0.45% positive return for the day. There is a lot on the agenda again this week but probably find more focus on Fridays Retail Sales and CPI for future guidance. We also have a host of FED speakers which may influence markets but the trigger is more likely to be key data points rather than individual opinions.
2’s closed 1.33% (+2bp), 10’s 2.38% (+3bp), 30’s 3.02% (+3bp). Bunds closed 0.41% (+0bp) which closes the US/Germany spread at +197bp. France 0.84% (+0bp), Italy 2.22% (+7bp), Greece 5.54% (-16bp), Turkey 10.23% (+0bp), Portugal 3.37% (+3bp) and UK Gilts 1.14% (+3bp).
A relatively calm day after all the hype whipped-up over the past few week but it will be interesting to see how peripheral spreads hold-up if/when we start talking tapering!