We did NOT elect the Weekly Bearish today in the Dow Jones Industrial
Japan tried to hold overnight gains but by the time the rest of the Asian markets opened it was too late and the selling pressure just increased with time. Nikkei closed down 94 points (-0.5%) but the futures quote dropped an additional 3% (or 500 points) to hit a low of 16,575. Both Shanghai and HSI continued lower with the western markets and all blamed Oil, US data (Empire Manufacturing) and the long US weekend for reasons to be fearful. Oil hit a 12yr low today when both WTI and Brent traded below the psychological $30 mark. Brent continues to underperform and remains under the WTI price. Last seen was WTI at $29.65 (-5%) and Brent at $29.15 (-5.6%); we also saw Nat Gas down 6% at $2.10.
It really is no surprise that European and US stocks markets took all day to find a bid. The DAX, CAC and FTSE were all seen down around 2%-2.5% with an additional 1% loss into the US session. Worth a mention ahead of the weekend is how poorly some of the peripheral stock markets have performed YTD and especially Portugal down 3.8% today (-11% YTD) and also Spain -2.8% today and also down 10%YTD. Towards the close we did see a slight recovery with markets bouncing off of their lows. However, the nerves remain so do not be surprised to see 2% daily move a common occurrence for the foreseeable future.
Given all of the uncertainty the flight to quality was seen but not as much as could have been expected! Gold rallied $12 to $1091 – not really that much conviction. The US Bond market rallied with many remarking that 10yr notes dipped below the 2% level but even here was only marginal. The US curve saw a flattening theme with 2/10 2bp flatter at 118bp. The best performer were 30yr closing 8bp lower at 2.81%. The US/German 10yr spread closed +156bp. In the peripheral markets Italy saw the opposite effect with their curve. The front end closed 3bp lower at 0.57% whilst 10’s closed 1.57% (only 2bp flatter). Yes, the spread US/Italy is +46bp US over!
Although we continue to see a move into the USD this has not (as yet) been reflected in the DXY. Closing this evening around 99.05 is just a marginal move from yesterdays close. Despite the JPY and Euro performance (+1% and +0.5% against the USD) the weakness of GBP (-1.1%) balanced their strength. As expected we continue to see Emerging Market currencies suffer notably the Turkish Lira -0.85%, INR -0.75% and Russian Rouble -1.8% today.