Market Talk – November 24th, 2017

Having had an extremely quiet day Thursday with Thanksgiving holidays in the states, many kept an eager eye on China following yesterdays 3% share decline. We did see the repeated weakness for most if the day, but managed an impressive rally just ahead of the close to finish small higher (+0.1%). The talk surrounding tighter lending rules already hit bond prices lower but failed to affect the equity in todays trading. Given that it is Western governments that are over leveraging, the guess is any weakness here in Asia will probably be short-lived. In Japan the Nikkei spent most of the morning in the red but rallied in the final hour to also close a touch firmer (+0.1%). Although this sounds impressive price action, when considering the Yen’s move it should have been considerably more. The Yen was playing low 111’s which implies people are back in-search of a safe-haven. Admittedly, the DXY did not trade too well Friday which actually lines up very well for this weekends ECM Point. The SENSEX managed a small positive (
+0.3% Friday but even that is looking toppy and declines seem to be forecast of Tuesday 28th.

Europe has seen more strength in the DAX today after business climate data hit new highs. Also, talks that there could be a grand coalition are being taken as very positive. However, the key talking point surrounded the banks and reports that Europe is preparing to loosen rules about bad bank dispels. This news helped all bank shares but had a an added benefit to some of the weaker peripheral banks shares. Interesting that the government bond market is starting to feel the pressure and sellers look to be taking the lead currently. Therefore, we saw a mixed closed with core DAX and CAC both around +0.3% and FTSE small down.

US only a half-day session but what they did see was all positive. A small gain of around 30 points for the DOW and was followed by small gains across the curve. All eyes will be on the retail numbers over the weekend and any signs of outperforming last years will be reflected within the treasury curve. Another week of curve flattening with 2/10’s closing the week 3bp flatter at 59bp.

2’s closed 1.74% (+1bp), 10’s 2.33% (+1bp), 30’s 2.75% (+1bp), Bunds 0.36% (+1bp), France 0.69% (+3bp), Italy 1.81% (+6bp), Greece 5.21% (+2bp), Turkey 12.68% (+7bp), Portugal 1.92% (+4bp), Spain 1.48% (+4bp) and Gilts 1.25% (-2bp).