Market Talk- September 8th, 2017

Governments and central banks across the world are still concerned about the lack of inflation or significant growth and we saw evidence again in that today from the Japanese Q2 GDP release. Well below estimate of 4% this mornings release came in at 2.5%. Mario Draghi also commented on growth concerns in yesterdays ECB meeting and it is also being questioned in the Federal Reserve as well. It didn’t help the stock market which closed down -0.65% with financials and exporters leading the decline and this again encouraged the yen dash as we now watch the mid 107’s trade. 10yr JGB’s traded negative for most of the day. One bright spot was the Hang Seng but that was large cap’s reflecting the US holding yesterdays levels. Still worth keeping an eye on the Chinese yuan as yet another stronger set today (6.5032) making this a double digit gain in days. SENSEX closed small up today still helping its impressive 10.5% YTD gain.

The European core closed with little movement but probably expected given all the uncertainties. So with the ECB September meeting now behind us all attention is to focus on October with much anticipation. Later this month we have the German elections, but markets remain sensitive to headlines whether they be geopolitical, weather, downgrades or just plain old economic data. We saw the initial rally in gold peak close to our suggested target ($1362), meanwhile inflation remains subdued and bond markets respond. The BREXIT negotiations do not sound to be progressing that well with the UK now declaring that they are only legally obligated to pay up-to-date! GBP traded well on data recovering some of yesterdays lost ground against the Euro.

DXY was one of the top topics this week with it currently trading at 20 month lows (last seen 91.35). A lot of concerns late in the day about hurricane Irma as it approaches the shores of Florida. The insurance companies, along with banks were sold this afternoon resulting in the DOW giving-up much of the days gains. Both the broader S+P and NASDAQ closed lower, even as Wholesale Inventories insufficient to hold them. Oil traded heavy also today falling over 3%, could be the inventories but as the trend remains negative dealers are forced to look for a reason at every unexpected turn. A late topic was China possibly closing-down some Bitcoin exchanges after the news earlier in the week that regulators banned organizations from raising funds in coin.

2’s closed 1.26% (-1bp), 10’s closed 2.05% (u/c), 30’s 2.67% (+1bp), Bund 0.31% (u/c), spread unchanged at +174bp. France 0.61% (u/c), Italy 1.95% (+4bp Can Italy really be trading 10bp through the USA!), Greece 5.39% (+1bp), Turkey 10.35% (-4bp), Portugal 2.75% (+5bp) and Gilts 0.99% (+2bp).