Market Talk – October 10th, 2016

Market-Talk -R

Asia started poorly on the back of a weaker oil market until Russia announced it would be willing to cutback its oil production in respect of the OPEC decisions. Oil bounced over 3% on the Asian day reversing the mornings losses. In Japan the Nikkei traded heavy most of the day but recovered off of its lows by the close. In China the PBOC set the Yuan rate at 6.7008 its weakest level in over six years. The Shanghai exchange traded better as the day went on eventually countering the weaker currency with a 1.45% higher close.

Europe never has a day where people are not talking about Deutsche Bank and today was much the same. The lack of announcement over the weekend concerning the DOJ pressured DB shares from the opening and by mid-morning shares were down around 3%. There were also early rumours that the Qatar investor was thinking of liquidating; a rumour that was quashed by late US trading with the announcement that the investor could possibly ADD to their position rather than liquidate, taking their shares from 6.1% to possibly 10%! The shares rallied and were last seen actually up 3%. All core European indices closed up around 1% from FTSE at 0.75% to DAX at 1.25%.

It was a fairly quiet day for US stacks after the second presidential debate despite Europe setting the stage for a friendly market. We did see a strong opening with the DOW up around 200 points but this strength was not to last. Still most indices closed with 0.5% gains the better levels just could not be maintained but the NASDAQ did return the best at 0.75%. The strength in the US Dollar took a lot of the shine off earlier stock performance with the DXY again flirting with two month highs at the 97 level.

US treasuries closed 10’s at 1.72% with German 10yr Bunds at +0.055% closing that spread into +166.5bp. Most of that weakness has come from the Bund sell-off with Treasuries close to unchanged. Italy closed 1.39% (+1bp), Greece 8.11% (-3bp), Turkey 9.52% (+7bp), Portugal 3.41% (-14bp) and UK Gilt at 1.02% (+5bp) – The sell-off in Gilts continues in anticipation of additional supply.