Market Update 30/10/13

One line- Shares and bonds rally ahead of Fed meeting that is expected to give clues that recent events in the House have made tapering less likely in the near future.

- Global stocks are at near six year highs ahead of the result of the Fed meeting today. US equities and Treasuries rallied yesterday and the momentum continued through Asia and to Europe this morning. The S&P added 0.6% yesterday, the Nikkei 1.2% while the FTSE is up 0.6% this morning. While almost all investors do not see tapering on the cards, the market is looking for what is said in the Fed's accompanying statement. Gold is up and industrial commodities are firmer while currencies are little changed. http://www.ft.com/cms/s/0/ad7a3438-4113-11e3-8775-00144feabdc0.html?siteedition=uk#axzz2jCJlgISU

- German unemployment rose for the third month in a row in October with 2000 unemployed added to the 2.97 million. The jobless rate was unchanged at 6.9%. Forecasts for German growth in the 4th quarter expect a slowdown from 0.7% in the second quarter to 0.4% growth.  http://www.bloomberg.com/news/2013-10-30/german-unemployment-rises-for-third-month-as-economy-loses-pace.html

- Britain's financial watch dog the FCA will pledge a shake up of the opaque way asset managers in the UK pass on charges to their customers. This follows a report in which the organisation found inherent flaws in the system. http://www.ft.com/cms/s/0/59b33776-40ca-11e3-ae19-00144feabdc0.html#axzz2jCJlgISU

- European banks bill for misconduct grew yesterday as fresh revelations from UBS and Deutsche Bank came to light. The Libor scandal claimed a new scalp with Rabobank, the Netherlands biggest lender, being forced to pay a $1.1 billion fine and agreed to axe its CEO.  UBS has set aside $682 million to deal with legal costs while Deutsche bank has set aside 1.2 billion euros. http://www.ft.com/cms/s/0/5bb4cf48-40c6-11e3-ae19-00144feabdc0.html#axzz2jCJlgISU

- Blackrock's Larry Fink has urged Fed officials to begin tapering as he begins to see bubble like signs in the equity markets and the corporate debt markets. http://www.bloomberg.com/news/2013-10-29/blackrock-s-fink-says-there-are-bubble-like-markets-again-1-.html

Data

S&P 1771.95 0.56%

FTSE 6812.75 0.56%
Nikkei 14,502.35 1.23%

EUR/USD- 1.3760 0.11%
USD/JPY- 98.25 0.06%
GBP/USD- 1.6066 0.12%

Gold- 1348.99 0.29%
Oil (Brent)- 109.13 0.11%

Copper- 331.05 0.99%

 

 

10 year yields

US- 2.49 (-1bps)
UK- 2.56 (-4bps)
Japan- 0.58 (-2bps)

Market Update 29/10/13

One line- Markets mixed as Chinese money markets stabilized and traders look ahead to Fed meeting result tomorrow.

- Markets are mixed following the relief rally yesterday and ahead of the result of the Federal Reserve meeting tomorrow. The dollar index is up 0.2% while industrial commodities are down. The aussie dollar is down 0.6% as the RBA governor Glenn Stevens, voiced his concern at the currency's strength. In Japan a 0.1% drop in unemployment to 4% and a 3.1% gain for retail sales caused yen strength and the Nikkei to lose 0.5%. US stocks were basically flat for the day while European stocks are up this morning as BP raises its dividend. http://www.ft.com/cms/s/0/81bfdb84-4048-11e3-8882-00144feabdc0.html?siteedition=uk#axzz2j0eXHBC8

- China's money rates stabilized after the central bank resumed open market operations for the first time since October 15th. The bank injected $2.13 billion into the market via open market operations. The overnight repo rate fell 3bps to 4.52%. http://www.reuters.com/article/2013/10/29/us-markets-china-bonds-idUSBRE99S04G20131029

- The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 7.75% as the CPI measure 9.84% and GDP growth of 4.4%. The move was in line with expectations and the rupee strengthened on the day. http://www.reuters.com/article/2013/10/29/us-india-economy-cbank-idUSBRE99S05V20131029

- As Iran attempts to fix its battered economy it is offering oil companies more profitable contracts in the region. The ongoing high level talks about the country's nuclear programme give hope that the US sanctions can be lifted. Iran is looking to attract $100bn in investment in the next 3 years. Iran has the world's largest gas reserves and fourth largest oil reserves. http://www.ft.com/cms/s/0/8c55893a-3fe5-11e3-8882-00144feabdc0.html#axzz2j0eXHBC8

- Deutsche Bank's profit fell 94% following a fall in income from debt trading and money put aside for legal costs. Net income in the three months through September fell to 41 million euros from 747 million in the year earlier period. The figure undershot analysts estimates by 400 million euros. The shares are down 3.3% this morning. http://www.bloomberg.com/news/2013-10-29/deutsche-bank-profit-falls-94-as-trading-revenue-slumps.html

Data

S&P 1762.11 0.13%

FTSE 6750.51 0.37%
Nikkei 14,325.98 0.49%

EUR/USD- 1.3757 0.20%
USD/JPY- 97.61 0.07%
GBP/USD- 1.6095 0.29%

Gold- 1345.98 0.49%
Oil (Brent)- 109.17 0.40%

Copper- 328.25 0.41%

 

 

10 year yields

US- 2.51 (-1bps)
UK- 2.59 (-1bps)
Japan- 0.60 (-1bps)

Market Update 28/10/13

One line- Risk on moves as concern over the Chinese banking system subsides.

- As concerns about the Chinese banking system wanes global equities closed in on 6 year highs. The Nikkei added 2.2% on a weaker yen and the Hang Seng added 0.5%. Industrial commodities are firmer with copper up 0.2% and brent trading up 0.8%. Treasuries sold off marginally and gold is flat. http://www.ft.com/cms/s/0/1cb2c432-3f7f-11e3-9657-00144feabdc0.html?siteedition=uk#axzz2j0eXHBC8

- RBI Governor Raghuram Rajan is expected to raise rates tomorrow for the second straight month as India's consumer inflation was 10% in a year ending last month. The rupee has strengthened 9% since Rajan took the reins but is still down 13% against the dollar for the year. http://www.bloomberg.com/news/2013-10-27/rajan-seen-raising-key-rate-again-to-tame-fastest-asia-inflation.html

- The outrage over the activities of the NSA continues as German paper Der Speigel alleges that Merkel's mobile phone activity has been monitored since 2002. Leaked documents were the source. What is not clear is the extent of the monitoring- whether conversations were monitored or whether it was only data about calls made that was collected. http://www.ft.com/cms/s/0/65044af4-3f15-11e3-b665-00144feabdc0.html#axzz2j0eXHBC8

- Optimism is growing in Europe that the recovery is gathering momentum. Housebuilding is picking up and car registrations have ended their decline. Anecdotal evidence in the tourism industry also indicates a change of fortunes for the area. While there are a growing number of optimists many managers are wary of being to positive about the recent growth. http://uk.reuters.com/article/2013/10/28/uk-europe-recovery-idUKBRE99R05220131028

- Britain's energy regulator is on course for a battle with the "Big Six" energy providers in Britain as consumer costs increased by double figure %'s but wholesale costs only increased 1.7%. Energy company bosses are to appear in front of the energy select committee on Tuesday as anger mounts over the price increases.  http://www.ft.com/cms/s/0/8c375508-3d67-11e3-b754-00144feab7de.html#axzz2j0eXHBC8

Data

S&P 1759.77 0.44%

FTSE 6725.38 0.06%
Nikkei 14,396.04 2.19%

EUR/USD- 1.3811 0.07%
USD/JPY- 97.62 0.21%
GBP/USD- 1.6205 0.25%

Gold- 1351.74 0.08%
Oil (Brent)- 107.64 0.66%

Copper- 328.25 0.41%

 

 

10 year yields

US- 2.51 (+1bps)
UK- 2.62 (+1bps)
Japan- 0.61 (0bps)

Market Update 25/10/13

One line- Risk off moves on Chinese bank concern while the dollar continues to sell off.

- Asian markets sold off as concern about Chinese banks remains in focus. The seven day repurchase rate in China touched above 5% overnight. The Hang Seng lost 0.6% while the Nikkei was perhaps the biggest loser sliding 2.8%. Yen strength vs the dollar was a large contributor to the decline. While the dollar slides Treasury yields are falling as traders revise their prediction for the beginning of tapering. European stocks are broadly flat this morning while the S&P added 0.3% yesterday. Industrial metals are declining as the market takes risk off the table. http://www.ft.com/cms/s/0/ba1af31a-3d23-11e3-86ef-00144feab7de.html?siteedition=uk#axzz2iX5GUUWU

- Emerging stocks are headed for their largest weekly decline in two months as week earnings and Chinese bank concern has affected sentiment. Earnings missed estimates for more than half of the 90 companies in the MSCI Emerging Markets Index. The index is off 1.6% this week. http://www.bloomberg.com/news/2013-10-25/emerging-stocks-head-for-steepest-weekly-decline-in-two-months.html

- The UK economy grew at its fastest rate in three years in the third quarter growing GDP at 0.8%, the largest quarterly increase since 2010. As macro indicators for the UK improve investors are beginning to question whether Carney will have to bring forward a rate rise. The pound strengthened 0.1% this morning against the dollar. http://www.bloomberg.com/news/2013-10-24/u-k-gdp-growth-seen-accelerating-to-strongest-in-three-years.html

- Japanese inflation is near a 5 year high at 0.7% showing a slight slowdown from the 0.8% measurement in August. Economists are concerned by the source of the inflation which is not from stronger aggregate demand, but rather the product of a weaker yen making imports more expensive. http://www.ft.com/cms/s/0/edb19484-3d0c-11e3-86ef-00144feab7de.html#axzz2iX5GUUWU

- Samsung electronics quarterly profit surged 26% to a record high matching estimates. While Samsung has posted record profits in 6 of the last 7 quarters it may find it hard to maintain momentum without a new hit gadget following unsuccessful launches of the Galaxy Gear smartwatch and the Galaxy Round phone. http://uk.reuters.com/article/2013/10/25/us-samsung-earnings-idUKBRE99N1MB20131025

Data

S&P 1752.07 0.33%

FTSE 6710.60 0.04%
Nikkei 14,088.19 2.75%

EUR/USD- 1.3805 0.03%
USD/JPY- 97.16 0.12%
GBP/USD- 1.6210 0.05%

Gold- 1343.11 0.27%
Oil (Brent)- 106.70 0.27%

Copper- 324.15 0.67%

 

 

10 year yields

US- 2.51 (-1bps)
UK- 2.64 (+1bps)
Japan- 0.61 (0bps)

Market Update 24/10/13

One line- Markets mixed as continued concern about Chinese banks is weighed against a seven month high for China's PMI.

- Concern about Chinese banks is replaced by optimism in Asia and Europe this morning as China's PMI came in at a 7 month high of 50.9, exceeding forecasts. The Nikkei added 0.4% while the FTSE is up 0.3% this morning. Safe havens are selling off with Treasury yields climbing and the yen and dollar selling off.  http://www.ft.com/cms/s/0/c9448194-3c5b-11e3-9851-00144feab7de.html?siteedition=uk#axzz2iX5GUUWU

- Emerging stocks sold off for a second day as investors weigh worries about Chinese banks. The MSCI emerging markets index sold off 0.2%. http://www.bloomberg.com/news/2013-10-24/most-emerging-stocks-rise-as-indian-shares-gain-china-slides.html

- The Spanish unemployment rate fell for a second quarter as the economy emerged from a two year recession. While there are improvements the unemployment rate sits at 26%. The Ibex 35 index is up 21% this year. http://www.bloomberg.com/news/2013-10-24/spanish-unemployment-falls-as-economy-emerges-from-recession.html

- The trend in developed country's central banks is to extend the easy money while the inflation outlook is benign according to the IMF which predicts <2% inflation for 2014. While this may be the case concern is growing that assets, especially housing, may be overvalued. http://www.bloomberg.com/news/2013-10-23/central-banks-drop-tightening-talk-as-easy-money-goes-on.html

- Credit Suisse revealed disappointing third quarter earnings that fell well below analyst predictions. In response the investment bank said it would overhaul its rates trading business which has been affected by increased regulation, higher capital requirements and subdued markets.  http://www.ft.com/cms/s/0/8136cdaa-3c68-11e3-a8c4-00144feab7de.html#axzz2iX5GUUWU

Data

S&P 1746.38 0.47%

FTSE 6691.93  0.26%
Nikkei 14,486.41 0.42%

EUR/USD- 1.3796 0.15%
USD/JPY- 97.38 0.00%
GBP/USD- 1.6179 0.09%

Gold- 1335.90 0.18%
Oil (Brent)- 107.87 0.06%

Copper- 326.40 0.11%

 

 

10 year yields

US- 2.50 (-1bps)
UK- 2.61 (+2bps)
Japan- 0.60 (0bps)

Ray Dalio

A back to basics, big picture view of the workings of economies from one of the greatest macro investors on earth. http://www.youtube.com/watch?v=PHe0bXAIuk0

Market Update 23/10/13

One line- Broad risk off moves on Chinese bank concern with stocks, energy and industrial metals down while the yen, the dollar and government bonds are rallying.

- US and European stocks rallied yesterday on weaker than expected jobs data with 148 000 non farm payroll jobs added compared with a 180 000 forecast. The US unemployment rate dipped 0.1% to 7.2%. The data supports the market view that tapering is very unlikely in the near term. The S&P and the FTSE both added 0.6%. http://uk.reuters.com/article/2013/10/22/uk-markets-britain-stocks-idUKBRE8710BE20131022

- Asian stocks reversed their rally as traders worried about tightening interbank lending in China. The country's seven day repurchase rate, a measure of liquidity in the banking system, at one point rose 42 basis points to 4%. Investors flocked to safe haven assets with bonds, the yen and the dollar rallying. The Nikkei sold off 2%. European markets are off this morning.  http://www.ft.com/cms/s/0/5d4b837e-3b8a-11e3-87fa-00144feab7de.html?siteedition=uk#axzz2iX5GUUWU

- The ECB outlined its planned health checks of eurozone banks, with the assessment to include an asset quality review of bank balance sheets. The review will cover 85% of EU banking assets. European banking stocks are lower this morning. http://www.ft.com/cms/s/0/a27d75d0-3bb5-11e3-b85f-00144feab7de.html#axzz2iX5GUUWU

- Bank of England policy makers concluded at their October policy meeting that unemployment is falling faster than forecast and the economy is growing faster than expected. Policy was left unchanged. http://uk.reuters.com/article/2013/10/23/uk-britain-boe-idUKBRE99M06R20131023

- India and China signed a new agreement to ease tensions over their disputed Himalayan border while Indian PM Manmohan Singh, said it would take a lot longer for the two countries to settle their differences. The deal commits the two armies to maximum self restraint if they come into contact with each other and obliges them to prevent exchange of fire or armed conflict. http://www.ft.com/cms/s/0/3483a758-3bb9-11e3-b85f-00144feab7de.html#axzz2iX5GUUWU

Data

S&P 1754.67 0.57%

FTSE 6666.74  0.43%
Nikkei 14,426.05 1.95%

EUR/USD- 1.3760 0.15%
USD/JPY- 97.31 0.85%
GBP/USD- 1.6157 0.49%

Gold- 1332.06 0.60%
Oil (Brent)- 109.25 0.65%

Copper- 330.85 0.81%

 

 

10 year yields

US- 2.49 (-3bps)
UK- 2.60 (-4bps)
Japan- 0.60 (-1bps)

Market Update 22/10/13

One line- Markets flat as traders are cautious ahead of US jobs data released today.

- Global stocks sit near recent highs having been broadly flat over the last 24 hours. Treasuries and the dollar have rallied marginally as investors display caution before US jobs data released today. The data is forecast to show that 180 000 jobs have been created and that unemployment remained at 7.3%. Gold is up $2 to $1317 while industrial commodities are flat. The S&P/ASX 200 index gained 0.4% to its highest level since June 2008 thanks to BHP Billiton lifting its full year iron-ore production forecast. http://www.ft.com/cms/s/0/d429ab60-3ac7-11e3-b234-00144feab7de.html?siteedition=uk#axzz2iLKchalX

-Technology problems have prevented a successful launch of President Obama's healthcare reforms as problems with the registration website have prevented millions of uninsured Americans from signing up. The President has expressed his frustration at the problem and reassures the public that the glitches will be fixed. http://www.ft.com/cms/s/0/60de58f4-3a6d-11e3-b234-00144feab7de.html#axzz2iLKchalX

- Home prices in China's four major cities rallied the most since January 2011, fuelling speculation of a property bubble formation. New home prices in the year from September rose 20% in Shenzhen and Guangzhou, 17% in Shanghai and 16% in Beijing. http://www.bloomberg.com/news/2013-10-22/china-home-prices-rise-led-by-record-gains-in-four-major-cities.html

- The day Assad announced on Italian television that he would destroy his chemical weapon stockpile Syrian government forces were dropping some of the most powerful weapons used in the civil war. The rebels advance has faltered while it looks like supply lines from Qatar have slowed. Assad meanwhile has vast stockpiles of tanks, artillery and aircraft. While the disarmament raised hope of a peace treaty to be negotiated in Geneva there has been almost no progress towards that end. http://uk.reuters.com/article/2013/10/22/uk-syria-crisis-arms-idUKBRE99L06P20131022

Data

S&P 1744.66 0.01%

FTSE 6662.35  0.12%
Nikkei 14,713.25 0.13%

EUR/USD- 1.3670 0.08%
USD/JPY- 98.37 0.18%
GBP/USD- 1.6129 0.11%

Gold- 1315.30 0.05%
Oil (Brent)- 109.99 0.32%

Copper- 330.95 0.18%

 

 

10 year yields

US- 2.59 (-1bps)
UK- 2.73 (0bps)
Japan- 0.61 (0bps)

Market Update 21/10/13

One line- Risk on dominates the market on the back of positive US earnings, Chinese GDP data and tapering expectations.

- Positive US earnings, Chinese GDP data released on Friday and expectations that tapering will be delayed mean global stocks are at a 5 year high. The Shanghai Composite added 1.6% overnight, the Nikkei added 0.9% as the yen weakened and Australian shares advanced 0.6% to a 5 year high. The dollar is marginally stronger but remains close to 8 month lows. In commodities brent is off by 0.2% while industrial metals and agricultural products are firmer this morning.  http://www.ft.com/cms/s/0/2fb1152c-3a00-11e3-a3a4-00144feab7de.html?siteedition=uk#axzz2iLKchalX

- Emerging stocks reversed a 4 day trend losing 0.1% overnight as investors locked in profits. The MSCI Emerging Markets index added 1.8% last week but for the year it is down 1.4%.  http://www.bloomberg.com/news/2013-10-21/emerging-stocks-retreat-from-5-month-high-as-industrials-slump.html

- Japan's exports slowed in September, while the nations trade deficit is a record 15 months long. Shipments climbed 11.5% down from 14.6% in August while imports increased by 16.5%. Even given this the Japanese economy grew at 3.8% annualized in the second quarter. http://www.bloomberg.com/news/2013-10-21/japan-exports-rise-less-than-expected-in-challenge-for-abe-1-.html

- ECB president Mario Draghi has called for EU bank-aid rules to be clarified and that public capital should be available to banks without forcing losses on junior bond holders. Draghi believes this implication of the revised state-aid guidelines will negatively impact the subordinated debt markets. http://www.bloomberg.com/news/2013-10-20/draghi-challenges-eu-bank-aid-rules-over-forced-losses.html

- Angela Merkel and the Christian Democrats have moved closer to a "grand coalition" as the centre left SPD voted strongly in favour of beginning formal talks. SPD leaders hope to form a government by Christmas if a coalition is possible. The SPD would like a national minimum wage of 8.50 euros an hour as well as increased investment in roads and schools. http://www.bloomberg.com/news/2013-10-20/merkel-moves-closer-to-coalition-as-german-spd-approves-talks.html

- The world's first bond backed by home rental income could come to the markets in the following weeks. Blackstone and Deutsche Bank have worked for some time to create the security which recently had its credit worthiness rated. http://www.ft.com/cms/s/0/8fae08fa-390f-11e3-a791-00144feab7de.html?siteedition=intl#axzz2iLKchalX

Data

S&P 1744.50 0.65%

FTSE 6640.31  0.27%
Nikkei 14,693.57 0.91%

EUR/USD- 1.3671 0.12%
USD/JPY- 98.08 0.37%
GBP/USD- 1.6171 0.02%

Gold- 1318.18 0.15%
Oil (Brent)- 109.68 0.24%

Copper- 330.65 0.23%

 

 

10 year yields

US- 2.58 (0bps)
UK- 2.72 (+1bps)
Japan- 0.62 (+1bps)

History, Philosophy, Science

Amazing database of podcasts with leading scholars discussing topics in History, Philosophy, Science and Culture - http://www.bbc.co.uk/radio4/features/in-our-time/archive

Market Update 18/10/13

One line- Markets buoyed by positive Chinese GDP data and the likelihood tapering is now further away than before the debt impasse.

- China's GDP grew in line with expectations at 7.8% the first acceleration in growth in 3 quarters. Chinese Premier Li Keqiang spurred investment and factory output to meet the governments growth goal for 2013. Industrial production increased by 10.2% while retail sales added 13.3%.  http://www.bloomberg.com/news/2013-10-18/china-s-economy-grew-7-8-in-third-quarter-matching-estimates.html

- Markets are buoyed by the positive Chinese growth and the prospect that the extended government shutdown makes tapering unlikely in the near term. Global stocks hit a 5 year high while the S&P added 0.7%, the Nikkei lost 0.2% and the FTSE is up 0.2% this morning. Industrial commodities are firmer while bond yields continue to trend downwards. http://www.ft.com/cms/s/0/3c692f18-37a6-11e3-b42e-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- Gold had its biggest one day gain in a month (3.2%) yesterday as traders scrambled to cover their shorts. A downgrade of the US credit rating by the Chinese firm Dagong caused an initial rally while traders who were short expecting to profit following a fiscal deal were caught off-guard.  http://www.ft.com/cms/s/0/4dfb11a4-374e-11e3-9603-00144feab7de.html#axzz2hgOooFmp

- Investors expectation of a delayed tapering is pressuring the dollar which sold off against all its major counterparts on Thursday and early Friday. Among the gainers were the euro up 1%, the swiss franc up 1.2% and sterling up 1.4%. Emerging currencies have experienced some respite with many central banks tightening monetary policy. This coupled with the political turmoil in the US has helped reverse their slide which occurred earlier in the year when Bernanke announced the possibility of tapering.  http://www.ft.com/cms/s/0/c04a9bd8-37c8-11e3-8668-00144feab7de.html#axzz2hgOooFmp

- The economic recovery in the UK has helped David Cameron pull level in the polls against the Labour party 18 months before the election. Both parties have 35% support from the electorate.  http://uk.reuters.com/article/2013/10/17/uk-britain-politics-idUKBRE99G0PP20131017


Data

S&P 1733.15 0.67%

FTSE 6592.79  0.25%
Nikkei 14,561.54 0.17%

EUR/USD- 1.3623 0.10%
USD/JPY- 97.86 0.05%
GBP/USD- 1.6186 0.13%

Gold- 1315.87 0.34%
Oil (Brent)- 109.15 0.04%

Copper- 331.05 0.41%

 

 

10 year yields

US- 2.55 (-4bps)
UK- 2.70 (-4bps)
Japan- 0.61 (-1bps)

Market Update 17/10/13

One line- Relief from deal in Congress is short lived as investors contemplate the effect of the government shutdown.

- Congress finally passed a bill to end the government shutdown and to extend the debt ceiling until early next year. Senate approved the agreement 81 to 18 while the House of Representatives passed the bill 285 to 144. Government is reopened until January 15th while the debt ceiling is extended until February 7th. Budget deficit negotiations must be completed by December 13th. The deal is a huge blow for the Republicans who had virtually none of their demands met. http://www.ft.com/cms/s/0/d9c98224-364f-11e3-aaf1-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- Global stocks sit at a 5 year high following the successful deal in Congress. The S&P added 1.4%, the Nikkei added 0.8% but the relief was short lived in Europe where companies are lowering their financial targets. The Stoxx 50 is down 0.8% this morning. The dollar has fallen sharply this morning while gold has spiked after a Chinese rating agency lowered the credit rating of the US and as traders expect the budget impasse makes near term tapering unlikely. Ten year Treasuries yields eased 5 basis points while copper and WTI slid. http://www.ft.com/cms/s/0/f28bb18a-36cf-11e3-aaf1-00144feab7de.html#axzz2hgOooFmp  http://www.bloomberg.com/news/2013-10-17/european-stock-index-futures-little-changed-amid-earnings.html

- Greece is facing tough negotiations from international lenders as the troika spotted a potential 2 billion euro shortfall in the budget draft Greece submitted. Greek finance ministers claim the gap amounts to only 500 million euros and can be bridge by cracking down on social security fraud by small businesses. The troika want the government to commit to further austerity measures to breach the gap.  http://www.ft.com/cms/s/0/06f26484-3707-11e3-9603-00144feab7de.html#axzz2hgOooFmp

- UK September retail sales rose more than forecast adding to the positive jobless claims news yesterday. Retail sales increased 0.6% from August higher than the 0.4% forecast. With continued low rates from the Bank of England and general improvements in macro indicators the UK recovery seems to be gathering momentum. The pound pushed higher against the dollar this morning on the news.  http://www.bloomberg.com/news/2013-10-17/u-k-september-retail-sales-increase-more-than-forecast-1-.html

Data

S&P 1721.54 1.38%

FTSE 6546.55  0.38%
Nikkei 14,586.51 0.83%

EUR/USD- 1.3623 0.66%
USD/JPY- 98.02 0.76%
GBP/USD- 1.6082 0.82%

Gold- 1307.28 1.93%
Oil (Brent)- 110.86 0.82%

Copper- 328.80 0.60%

 

 

10 year yields

US- 2.62 (-4bps)
UK- 2.79 (-4bps)
Japan- 0.63 (-1bps)

Market Update 16/10/13

One line- Markets cautious on the lack of a deal emerging from Congress.

- The lack of a resolution from Congress is having a mixed effect on the markets. The dollar index is marginally stronger, although vs the euro and the pound it has softened. The S&P sold off 0.71% while the Nikkei added 0.18% on a weaker yen. European markets have opened down this morning with the FTSE off 0.39%. Commodities show a relative calm with gold and brent trading up slightly and copper is flat. Ten year yields in US and the UK are virtually unchanged following the sell off yesterday.  http://www.ft.com/cms/s/0/e64cd252-360a-11e3-b539-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- As Senate leaders look to put together a deal that will pass both houses two key Republicans have the power to push the US into a technical default. Senator Ted Cruz is yet to rule out stalling the bill by engaging the Senate in a debate which can last up to 30 hours. John Boehner Speaker of the House of Representatives has the option to amend the bill when it comes down from the Senate. Democrats believe they have enough votes to allow a bill to pass the House of Representatives.  http://www.bloomberg.com/news/2013-10-16/senate-leaders-resume-fiscal-talks-as-house-scraps-vote.html

- Merkel's talks with the Green Party in an effort to pursue other coalition options broke down yesterday as the two parties decided they didn't have enough in common.This leaves Merkel set to form a "grand coalition" with the centre left Social Democrats. http://uk.reuters.com/article/2013/10/16/uk-germany-coalition-greens-idUKBRE99E17X20131016

- Portugal is looking to cut spending by 3.2 billion euros next year in a effort to meet targets set by the IMF and the EU. Portugal's ten year yield is at 6.22%, unemployment is 16.5% and their budget deficit is 4.4%.  http://www.bloomberg.com/news/2013-10-15/portugal-plans-3-2-billion-euros-of-spending-cuts-for-next-year.html

- The Brazilian real has rallied 11% since its August 5 year lows buoyed by Bernanke's decision not to taper and continued interest rate increases from the central bank with the benchmark rate now at 9.5%. http://www.ft.com/cms/s/0/8fbf3f90-3571-11e3-b539-00144feab7de.html#axzz2hgOooFmp

- The UK unemployment rate held steady but the sharpest fall in the claimant figure for 16 years showed the labour market is healing. Unemployment held steady at 7.7% while the number claiming benefits dropped   41 700. http://uk.reuters.com/article/2013/10/16/uk-britain-jobs-idUKBRE99F07E20131016

Data

S&P 1698.14 0.71%

FTSE 6518.66  0.46%
Nikkei 14,467.14 0.18%

EUR/USD- 1.3533 0.07%
USD/JPY- 98.40 0.24%
GBP/USD- 1.6028 0.19%

Gold- 1277.20 0.40%
Oil (Brent)- 109.86 0.09%

Copper- 327.70 0.92%

 

 

10 year yields

US- 2.72 (0bps)
UK- 2.82 (+2bps)
Japan- 0.64 (-2bps)

Market Update 15/10/13

One line- Positive progress on a debt ceiling and government shutdown deal drives equities higher, while bonds sell off.

- A sentiment change regarding the US debt ceiling talks has reversed market caution yesterday as the S&P added 0.41%, the Nikkei added 0.26% and the FTSE has begun the day up 0.68%. Industrial commodities are unchanged, gold has sold off 1.3% and the dollar is showing strength this morning. Treasuries sold off adding 4bp to the ten year yield as did gilts and bunds. http://www.ft.com/cms/s/0/03057c8a-3540-11e3-8148-00144feab7de.html?siteedition=uk#axzz2hmPR6Cqx

- The US debt ceiling deal which is being brokered in the Senate would end the government shutdown and raise the nations borrowing limit in favour of three further deadlines in the next 4 months. The potential obstacles to the bill being passed are that a single senator such as Ted Cruz could stall the bill as when he spoke for 21 hours during a budget debate last month or that the Republican majority House of Representatives could send the bill back for amendment. http://www.bloomberg.com/news/2013-10-15/senate-debt-limit-deal-emerging-with-time-running-short.html

- Emerging stocks have risen to 4 month highs on optimism about a potential debt ceiling deal while the yuan rose to its strongest level in 20 years as China reported record currency reserves. The MSCI Emerging Markets index has lost 2.2% this year as slowing growth and the prospect of the end of Fed QE changed investor sentiment. http://www.bloomberg.com/news/2013-10-15/emerging-stocks-rise-to-four-month-high-on-u-s-deal.html

- Angela Merkel is holding key talks with potential coalition partners this week with most analysts expecting her to create a "grand coalition" between her centre-right Christian Democrats and the centre-left Social Democratic party. She has talks scheduled today for meetings with the Green party although if they were to form a coalition it would surprise analysts as there are core issues that the parties disagree on.  http://www.ft.com/cms/s/0/f10b0f60-34ed-11e3-8148-00144feab7de.html#axzz2hmPR6Cqx

- China has granted UK based financial institutions an £8.2 billion quota to invest in Chinese securities. The two countries also agreed to allow direct renminbi-sterling trading in Shanghai and offshore making the pound the fourth currency to trade against the Chinese currency. http://www.ft.com/cms/s/0/9579f608-356e-11e3-b539-00144feab7de.html#axzz2hmPR6Cqx

Data

S&P 1710.14 0.41%

FTSE 6563.42  0.86%
Nikkei 14,441.54 0.26%
EUR/USD- 1.3506 0.41%
USD/JPY- 98.65 0.08%
GBP/USD- 1.5937 0.29%

Gold- 1256.19 1.28%
Oil (Brent)- 110.37 0.60%

Copper- 329.15 0.35%

 

 

10 year yields

US- 2.73 (+4bps)
UK- 2.80 (+6bps)
Japan- 0.66 (+1bps)

Market Update 14/10/13

One line- Continued budget stalemate weighing on the markets.

- Gold and yen are gaining while European equities, US futures and the dollar are softer this morning. The continued budget impasse is driving the risk off moves. Industrial commodities are up as data released by China showed increased imports. Chinese CPI came in at 3.1% exceeding the 2.8% prediction. Tokyo and Hong Kong markets are closed for a public holiday. http://www.ft.com/cms/s/0/8e9afd5a-347e-11e3-8f1d-00144feab7de.html?siteedition=uk#axzz2hgOooFmp

- Senate leaders were locked in talks yesterday as the budget ceiling deadline looms on Thursday. Harry Reid the Democrat majority leader in the Senate and Mitch McConnell the chamber's top Republican have taken over negotiations as talks broke down within the House of Representatives. Republicans drafted a bill to fund the government until March and lift the debt ceiling until January 2014 but this was rejected as it included automatic sequestration. http://www.ft.com/cms/s/0/32521868-3423-11e3-af0f-00144feab7de.html#axzz2hgOooFmp

-Indian inflation unexpectedly accelerated to a 7 month high in September to 6.46% increasing pressure on the RBI to further raise rates. New governor Raghuram Rajan raised the repurchase rate to 7.5% and is expected to increase the rate again to 7.75% at the end of this month. His actions have helped to reverse the rupee's colossal decline as it has gained 13% from its record low on the 28th of August. http://www.bloomberg.com/news/2013-10-14/india-inflation-unexpectedly-quickens-adding-to-rate-rise-case.html

- Despite mass protests, a slowing economy and inflation problems President Rousseff has a massive lead in the polls ahead of Brazil's 2014 presidential elections. A new alliance looks to be the only chance for a change as Marina Silva an environmentalist has joined forces with Eduardo Campos an economist and governor of Pernambuco. If Rousseff wins next year her party will have controlled Brazil for 16 years, the longest ruling period in Brazil's history. http://www.ft.com/cms/s/0/427d0010-31d8-11e3-817c-00144feab7de.html#axzz2hgOooFmp

Data

S&P 1703.20 0.63%

FTSE 6481.24  0.09%Nikkei closed

EUR/USD- 1.3547 0.02%
USD/JPY- 98.30 0.28%
GBP/USD- 1.5968 0.07%

Gold- 1275.83 0.29%
Oil (Brent)- 111.15 0.12%

Copper- 329.15 0.69%

10 year yields

US- 2.69 (0bps)
UK- 2.74 (0bps)
Japan- 0.65 (0bps)

The Week Ahead (key data releases)

Figures in brackets denote forecasts
Monday 14th -

Chinese CPI (2.8%)

Tuesday 15th -

UK CPI (2.6%)
German sentiment survey (49.6)

Wednesday 16th -

UK Unemployment (7.7%)
Eurozone CPI ( 1.0%)

Thursday 17th -

US Debt ceiling deadline
                         
Friday 18th -

Chinese GDP (7.8%)
                   

Market Update 11/10/13

One line- Risk on rally continues as the markets see a deal in the near future.

- Stocks continued the rally begun yesterday on optimism a deal will be brokered builds. The S&P added 2.2% yesterday with the Nikkei adding 1.5%. Longer term Treasuries sold off as did the yen two clear signs that the market is taking on risk. In contrast gold is up $5 to $1,291 and brent crude sold off. http://www.ft.com/cms/s/0/68fd5a5e-3224-11e3-a16d-00144feab7de.html#axzz2hJ0DClf5

- US debt ceiling talks are under way as the White House and Republicans held their first serious discussion on the matter. Both sides cited progress as the Republicans offered Obama a 6 week extension of borrowing but no end to the government shutdown. Even though this deal was rejected it shows a compromise and change of tone from the Republicans which financial markets looked positively on. http://www.ft.com/cms/s/0/b0abcde8-3190-11e3-817c-00144feab7de.html?siteedition=uk#axzz2hJ0DClf5

- Angela Merkel's Christian Democrats are looking to enter into further talks with the Greens party as she looks to form a coalition. Historically the two parties have been adversaries with senior CDU members rejecting any idea of a coalition being possible. http://uk.reuters.com/article/2013/10/11/uk-germany-coalition-idUKBRE9990W020131011

- Mario Draghi has said that the ECB pledge to keep rates low explicitly allows for cuts in borrowing costs if volatility resumes. Speaking in New York he said - “The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,”. http://www.bloomberg.com/news/2013-10-10/draghi-says-ecb-guidance-allows-rate-cuts-if-volatility-returns.html

Data

S&P 1692.56 2.18%

FTSE 6448.42  0.28%
Nikkei 14,404.74 1.48%

EUR/USD- 1.3556 0.27%
USD/JPY- 98.33 0.17%
GBP/USD- 1.5994 0.16%

Gold- 1291.40 0.32%
Oil (Brent)- 111.52 0.25%

Copper- 326.05 0.37%

10 year yields

US- 2.68 (-1bps)
UK- 2.67 (-1bps)
Japan- 0.65 (0bps)

Republican Favorability

Republican favorability has sunk to an all time low (since surveys began 1992) in the past week. I believe they will be forced to pass a clean bill as the weight of public pressure and criticism continues to build. http://www.gallup.com/poll/165317/republican-party-favorability-sinks-record-low.aspx

Market Update 10/10/13

One line- Risk on moves as scheduled talks in Washington spur on the belief that a deal will be made soon.

- Obama is stepping up discussions with Congress meeting 20 senior Republicans from the House of Representatives at the White House tomorrow. The White House invited all House Republicans to meet Obama but House leaders decided to send a more moderate delegation without Tea Party participation. http://www.ft.com/cms/s/0/0591a56a-3102-11e3-b478-00144feab7de.html#axzz2hJ0DClf5

- The flurry of talks in Washington and Yellen's confirmation have rallied global stocks. US bonds have fallen while industrial commodities and oil have advanced. The FTSE is up 0.62% this morning, the Nikkei added 1.12% and the S&P added 0.06%. The dollar gained 0.2% on the news.  http://www.ft.com/cms/s/0/749b7f0a-315a-11e3-b991-00144feab7de.html?siteedition=uk#axzz2hJ0DClf5

- Fed minutes released yesterday showed policy makers were split in half over whether to begin tapering in September or not. Obama nominated Yellen to head the Fed yesterday and she is expected to be easily confirmed by the Senate. http://www.ft.com/cms/s/0/de0b5b80-3106-11e3-b991-00144feab7de.html#axzz2hJ0DClf5

- Brazil lifted the Selic to 9.5% from 9% for a fifth straight time as the real continues to slide and contribute to inflation. Inflation has consistently remained above the 4.5% target while the IMF has cut Brazil's growth outlook for 2014 to 2.5% from 3.2%. http://www.bloomberg.com/news/2013-10-09/brazil-extends-record-rate-lift-as-inflation-outlook-worsens-1-.html

- Militants have abducted the Libyan prime minister, Ali Zeidan, after his government was accused of allowing US commandos to kidnap an alleged Al-Qaeda member. http://www.ft.com/cms/s/0/ed2b538c-3164-11e3-b478-00144feab7de.html#axzz2hJ0DClf5

Data

S&P 1656.40 0.06%

FTSE 6390.53  0.83%
Nikkei 14,194.74 1.12%

EUR/USD- 1.3519 0.04%
USD/JPY- 97.84 0.51%
GBP/USD- 1.5937 0.11%

Gold- 1304.96 0.05%
Oil (Brent)- 110.07 0.93%

Copper- 322.90 0.06%

10 year yields

US- 2.69 (+2bps)
UK- 2.70 (+2bps)
Japan- 0.65 (+1bps)

Market Update 09/10/13

One line- Markets mixed as positive news over Yellen confirmation contends with continued shutdown and debt ceiling stalemate.

- Obama will formally nominate Yellen to be the first female Fed chair today after administration officials broke the news yesterday. Yellen, seen as a dovish candidate, helped develop the Fed's forward guidance. Her term starts in January 2014 and will run for four years. http://www.ft.com/cms/s/0/48086982-306d-11e3-9eec-00144feab7de.html?siteedition=uk#axzz2hCuA2IQt

- Obama reiterated his position that he would not enter talks on the budget until after the Republicans have passed a clean bill raising the debt ceiling and ending the government shutdown. As the shutdown has continued the Republicans have shifted their focus away from Obamacare and towards the US fiscal position in general. Republican Speaker John Boehner has argued that 'There's never been a president in our history that did not negotiate over the debt ceiling'. http://www.ft.com/cms/s/0/77f90230-3033-11e3-80a4-00144feab7de.html#axzz2hCuA2IQt

- Equities are mixed as investors grapple with the continuing US debt talks and Yellen's nomination as Fed chairman. The S&P sold off 1.23% yesterday as both sides of the debt debate refused to budge although the dollar added 0.2% vs a basket of currencies. The Nikkei added 1% assisted by a weaker yen and positive comments from the Bank of Japan who said they believed the country was recovering.  http://www.ft.com/cms/s/0/ad8125c4-3090-11e3-80a4-00144feab7de.html#axzz2hCuA2IQt

- The IMF cut its economic forecast for developing nations causing emerging stocks to fall the most in a week. The rupee and the ringgitt slid 0.4% vs the dollar, while the MSCI emerging markets index sold off 0.4% also. http://www.bloomberg.com/news/2013-10-09/emerging-stocks-fall-most-in-a-week-as-imf-cuts-growth-forecast.html

- Italian and Spanish bonds are declining as they look to sell debt through banks. The market is reacting to oversupply with Italy selling 11 billion euros this week alone. Italian and Spanish bonds have rallied 5% and 9.3% this year. http://www.bloomberg.com/news/2013-10-09/german-bonds-little-changed-before-output-report-five-year-sale.html

Data

S&P 1655.45 1.23%

FTSE 6338.67  0.43%
Nikkei 14,037.84 1.03%

EUR/USD- 1.3524 0.36%
USD/JPY- 97.34 0.47%
GBP/USD- 1.6031 0.33%

Gold- 1316.65 0.20%
Oil (Brent)- 110.04 0.11%

Copper- 326.75 0.76%

10 year yields

US- 2.62 (-1bps)
UK- 2.68 (-1bps)
Japan- 0.65 (0bps)

Market Update 08/10/13

One line- Debt ceiling talks weigh on US and European markets while Asian markets rally as India reduces liquidity constraints and Australian business confidence hits a 3½ year high. 

- As the debt ceiling stand off continues its effects are beginning to increasingly weigh on markets although Asia rallied yesterday. The S&P lost 0.9%, the FTSE lost 0.26% while the Nikkei added 0.3%. US third quarter earning season begins this week and Fed minutes from the September meeting are released on Wednesday. http://www.ft.com/cms/s/0/9ab84b26-2fc7-11e3-8b7e-00144feab7de.html?siteedition=uk#axzz2h1BfprPx

- Treasuries continue to rally and the dollar continues to weaken as the lengthening shutdown increases the likelihood tapering will be delayed. The ten year yield fell to 2.63% while the dollar index lost 0.2%. Gold futures gained yesterday adding 1%. http://www.bloomberg.com/news/2013-10-07/gross-buying-bonds-tops-boehner-s-default-warning-reality-check.html

- Asian shares rose as China's markets reopened after a week long holiday and India's central bank curbed liquidity constraints. The yen which had climbed to an 8 week high vs the dollar slipped as Japan's current account unexpectedly hit a record low for August. http://www.bloomberg.com/news/2013-10-07/dollar-holds-yen-slump-as-australian-index-futures-drop.html

- Obama stated that he will not back down from his refusal to negotiate on a "clean" debt bill but he has left the door open for a short term increase in borrowings. Obama urged John Boehner (the Speaker of the House of Representatives) to hold a vote on the clean bill believing there was now enough votes for it to pass. http://www.ft.com/cms/s/0/940a9a12-2f5f-11e3-8cb2-00144feab7de.html#axzz2h1BfprPx

- Australian business confidence hit a 3½ year high in September with the federal election, a lower Aussie dollar and lower borrowing rates thought to be the main drivers. The S&P/ASX 200 climbed to a 5 year high last month as the pro business candidate Tony Abbott won September's general election. http://www.ft.com/cms/s/0/53ee0074-2fc1-11e3-8b7e-00144feab7de.html#axzz2h1BfprPx

Data

S&P 1676.12 0.85%
FTSE 6426.59  0.17%
Nikkei 13,894.61 0.30%

EUR/USD- 1.3567 0.09%
USD/JPY- 97.08 0.38%
GBP/USD- 1.6077 0.12%

Gold- 1326.34 0.24%
Oil (Brent)- 109.73 0.05%

Copper- 330.75 0.33%

10 year yields

US- 2.64 (+1bps)
UK- 2.71 (+1bps)
Japan- 0.65 (+1bps)

Market Update 07/10/13

One line- Market wide risk off moves as both sides of Congress pledge not to yield to the other.

- Equities, the dollar and oil are all under pressure this morning as a lack of progress in US debt ceiling talks weighs on the market. The Nikkei is down 1.2% while the yen strengthened 0.4% vs the dollar. Gold is stronger while the dollar index has slid 0.1% hovering above an 8 month low. http://www.ft.com/cms/s/0/87c7e75a-2f00-11e3-be22-00144feab7de.html?siteedition=uk#axzz2h1BfprPx http://www.bloomberg.com/news/2013-10-07/european-stock-index-futures-retreat-amid-u-s-shutdown.html

- US House speaker John Boehner vowed yesterday not to raise the debt ceiling without a "serious conversation" about what is driving the debt. He said that Obama's refusal to negotiate on passing a bill limiting government spending meant the country was headed in the direction of technical default. http://www.reuters.com/article/2013/10/06/us-usa-fiscal-idUSBRE98N11220131006

- Syria has begun to destroy some of its chemical weapon arsenal and looks to enter talks in mid-November aimed at ending the civil war. http://www.bloomberg.com/news/2013-10-06/syrians-start-destroying-chemical-weapons-under-un-supervision.html

- Last months Fed minutes are released on Wednesday but due to the government shutdown non farm payrolls will not be released along with other data points. The Bank of England meets this week with the market expecting no changes to policy. http://www.ft.com/cms/s/0/46419c8c-2cde-11e3-a0ac-00144feab7de.html#axzz2h1BfprPx

-As the government shutdown continues investors are moving to government bonds. The yield on 10 year Treasuries hit a two month low of 2.58 on the 3rd of October. Larry Fink and Bill Gross both dismiss the possibility of a US default and are looking ahead to the effect on monetary policy which is likely to be unchanged for a longer time period. http://www.bloomberg.com/news/2013-10-06/treasuries-becalmed-as-debt-ceiling-approaches-with-gross-buying.html

Data

S&P 1690.50 0.71%
FTSE 6403.19  0.79%
Nikkei 13,853.32 1.22%

EUR/USD- 1.3573 0.11%
USD/JPY- 96.96 0.53%
GBP/USD- 1.6046 0.22%

Gold- 1311.97 0.07%
Oil (Brent)- 108.44 0.93%

Copper- 327.75 0.71%

10 year yields

US- 2.62 (-3bps)
UK- 2.70 (-4bps)
Japan- 0.64 (0bps)