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)