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Market Talk — October 20, 2015

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After a strong open the Nikkei spent the rest of the day clambering to remain in positive territory. Eventually closing +0.45% higher, the Nikkei inspired the Chinese (Shanghai) into a 38 point end of day rally to finish up at +1.1%. The HSI never managed to trade above Mondays close; it finished off the lows but still down 0.37%. All European indices opened positive but collectively fell into the red as bids faded and drove prices into negative ground upon ECB news.

The market talk is that the ECB will continue to discuss bank lending conditions but with doubts of further QE creeping in. The ECB meet Wednesday/Thursday with the announcement followed by the Q+A, all from Malta this time. All main European markets closed marginally lower between -0.12% and -0.65%. The U.S. markets are also having difficulty holding on to the recent rally and the DOW spent most trading around unchanged! The NASDAQ and the broader S&P were both under pressure all day as earnings failed to meet expectations or forecasts were overly optimistic.

The bond markets saw weak trading conditions all day, especially in Europe. After the Christian Noyer comments the 10yr bund in particular lost ground, losing around 6bp to close at 0.64%. The spread TY/RX tightened to close on the day at +142bp. Peripheral bonds all tightened to the core government as all markets traded lower (higher yields) but at a marginally slower pace than the German decline. In the U.S., we saw a parallel shift in the curve with 2s through to 30s all losing around 4bp.

In currencies, there really is not much to write home about. The euro made ground following the ECB’s Noyer comment but failed to capitalize on it throughout the rest of the day. Sterling lost what the euro made, and so we saw the DXY (US Dollar Index) close almost unchanged at 94.91.

Oil lost a little more ground but in the scheme of its recent activity was really not that much (closed down 0.7% at $45.84).