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Market Talk – October 14, 2015

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Globally, it has not been a pretty day for equities. Asia and U.S. indices are down with the worst being the Nikkei (off 2%) and that carried into the U.S. session losing another 1%. It appears the world has finally awoken to the fact that the economy is on life support with little to no sign of a recovery anytime soon. Today’s sell-off started early when China announced weaker than expected CPI numbers. Estimates were around 1.8% but the actual was announced at 1.6%. Then in the U.S., we had Retail Sales and PPI. Sales were expected 0.2% and came in at 0.1%; PPI forecasted -0.7% and was released at -1.1%.

The U.S. dollar lost ground as the street talks of possible rate hikes being pushed back into 2016 as a result of the numbers. The U.S. Dollar Index (DXY) was down around 0.9% today with the last trade seen at 93.97. Commodity currencies claimed back some of yesterday’s ground with Brazilian real, A$ and Russian rouble all making between 1 and 2%. Even some core currencies fought headwind today on the possible rate-hike delay with Norwegian Krona, Singapore Dollar, Euro and GBP all making headway. Sterling was helped along with data in the form of Claimant Rate (this measures people claiming but actually looking for employment) and employment rate. For the claims we saw estimates of -2.1k but an actual print of 4.6k, whilst the rate came in at 5.4% which was the lowest seen since in over five years.

Global bond markets all performed as equities fell with the US Treasury market making ground on the German Bund. The TY/RX 10yr spread closed 2bp tighter at +143bp. Again the belly of the US Treasury curve performed with 5’s and ten both better by 8 and 9bp respectively; whilst 2’s were down 7 and 30’s were down 6bp. This puts the 10yr at sub 2% again this evening – with last trade seen at 1.97%.

Precious metals also saw good rally today closing up around +1.8% at $1187. Both silver and copper followed suit both up over 1.5% on the day as this week’s target for a Panic Cycle.