It really felt like a day of two-halves today after a lack-lustre Asian session and a weak European morning. The Nikkei was again a talking point (or at least the JPY was) but Shanghai too saw a bit of volatility as we flirted toward the 3k level early afternoon only to recover by the close. Better than expected PMI in China helped sentiment but many reported they are keen to see tonight’s FED minutes and anxious to see the BOJ’s reaction to recent currency moves. In late US trading we see China 300 and HSI futures up 0.65 from their earlier cash closes.
Europe opened weak and remainder that way until the close. At one stage we saw the DAX, CAC and IBEX all off around -0.5%; by mid-morning trading only to be reversed upon the Oil Inventories release. Given the oil rally all core European markets performed well to reverse all losses and gain on the day. Upon the Inventories release markets took a renewed lease of life and we saw encouraging rallies across many indices. The result of this is an indication of how nervous stocks market are! All core Indices closed the day.
Although, the US Indices had already bounced from the lows and ahead of the Minutes release after the initial wobble it was back to the races again. We saw from several sources (within the Minutes) that the wait and see mode is “prudent”! We heard that the future path (of monetary policy) could be lower than forecasted! Also, upon release and given “almost” full employment, the market starts to price zero chance for April and less even out to Autumn until any movement. One interesting discussion we learned was about future US Dollar strength. Here at least they are aware but will probably be less equipped as market realize there is no capable competitor. DOW, NASDAQ and the broader S+P saw renewed vigour into the close setting the foundation for a healthy Asian/European sessions tomorrow.
Interesting we saw a 200 point range in the DOW today but remains within the 17420/17845 boundaries we expressed yesterday. Many analysis will start to talk of a Pennant soon and the likely breakout to be expected!
Given the 5% rally in the Oil price today, it was no surprise we saw a 2% rally in the Russian Rouble. The JPY was the other top currency talk given the Yen sudden expectation of a 109 breach after the Minutes release, this puts it at almost 18 month highs. GBP was down 1% in London morning but had recovered much of that by the close due to the trade being heavily crowded.
Fixed-Income markets were weaker across the board despite early stock weakness. The US Treasury 10yr traded within a very narrow 4bp range of between 1.72 and 1.76% all day. Early weakness was held after the Minutes release but did start to drift into the close given the performance of stocks. Closing at 1.75% closes the 2/10 0.5bp steeper at 101bp. German 10yr Bund closes 0.12% and puts US/Germany at +163bp. Italy 10yr closed 1.28% (+1bp), Greece 8.80% (+1bp), Turkey 9.68% (+2bp) and Gilts closed 1.38% (u/c).