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)