Market Talk- September 27, 2017

In Asia we saw a similar picture to yesterdays market movers with Shanghai and the Hang Seng both closing higher whilst the Nikkei, ASX, KOPSI and SENSEX all closed lower. The SENSEX lost the most ground today (-1.4%) as it continues to add to its recent losing streak, making this its seventh day in a row of losses. There was talk that the Nikkei declined together wit the currency, which is never a happy medium. The Yen was last seen in late US trading at 112.75, pushing its way towards the 113 handle. Its has been the recovery of the DXY that seems to dominate many conversation earlier, as we watch the progress of the bounce gain momentum. Yellen certainly helped the cause but watching the price action of treasuries and the average yield allocated at this evenings 5yr auction will only aid the USD and pressure Euro currency and govy paper – especially peripherals. This is also supporting the talk of safe-haven liquidation as short-term paper suffers and gold losses $35 in two days. Obviously, the news that China has taken the huge step towards North Korea has eased peoples tension.

The latest from Yellen’s speech last evening did not help European currencies today as both the Euro and GBP suffered around -0.4% declines against the US Dollar. It did however have the adverse effect on assets and so we saw similar gains for core Stock Indices (DAX, CAC and FTSE). The IBEX performed best rallying near 2% on both Trump’s wish for a single strong state and also news that the Catalan independence vote is deemed illegal. I am sure we will hear more about this as we proceed, but will be very interesting to watch Week, Month and Quarter end numbers this Friday. Also late talk that Mario Draghi has cancelled his BOE appearance due Friday – much speculation as to the reason for the cancellation.

This mornings session started as we have the past two trading days, strong at the open then drifting as we proceed. Today however, having lost opening euphoria we heard more talk of corporate tax cuts (to 20% down from 35%), but it was the rise in treasury yields that helped the market as bank stock found fresh buyers. This was the market reaction as GOP speakers address the press, but we will hear directly from President Trump towards the end of today trading session. The Durable Goods release was better than expected at 1.7% against a forecasted 1%; whilst New Home Sales were down 2.6%. Trump press conference announced the reforms and the DOW drifted marginally into the close. However, it was the NASDAQ and the broader Russell that set the pace, ending the day at +1.2% and +2% respectively. Details were a little light on repatriating cash but the dynamic scoring and expensing for capital investment have the potential to be motivating for the markets.

2’s closed 1.47% (+3bp), 10’s at 2.31% (+8bp), 30’s 2.86% (+9bp), Bunds 0.47% (+6bp) closes the spread +184bp (+2bp). France 0.76% (+6bp), Italy 2.14% (+3bp), Greece 5.68% (+13bp), Turkey 10.76% (+8bp), Portugal 2.42% (+6bp) and Gilt 10yr at 1.38% (+5bp).