Market Talk — October 21, 2015

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Although the trade numbers from Japan were below forecasters’ projections, the street was abuzz with speculation of further BOJ intervention; so we saw the Nikkei close up 2% today. The same could not be said for Shanghai (closed down 3.5%) whilst the HSI was closed for a public holiday. European indices really could not decide on direction but after a shaky start the DAX they did manage to close up almost 1%. Both FTSE and CAC were in and out of positive ground all day, both eventually closing better, but only marginally. This is big earnings season and so far results have not been that great.  The dealers we spoke with today are all of the opinion that cash is king at the moment and it is no time to be a hero. The street is running scared of a big move as market positions are being wound-down.

Oil had yet another weak trading session with continued concerns over additional supplies and rising stockpiles. The TWI flirted with $45 (-2.4%) in most of the days trading whilst Brent fell 1.8%  to close $47.85. Gold and silver were also weak today losing 0.9% and 1.5% respectively.

The main performers today were the bond markets. The U.S. Treasury market saw buyers of long-dated paper and saw the curve flatten. 2s trod water around 0.63% whilst 10s and 30s were both better by 4 and 5bp respectively. 10s remain just above the psychological 2% level still (closing at 2.02%) which put the TY/RX spread at +144bp.

On the FX side of business, the U.S. Dollar has started its march yet again. The talk in America was of the CAD breaking back above the 1.30 level again (last seen at 1.3132 (-1.2%) and fears that the previous high of Sept. 21 will be breached! The A$, Rouble, Zloty, Brazilian Real and HUF all lost ground to the U.S. Dollar again. The DXY closed +0.2% at 95.10.