Market Update 03/12/13

One line- Rally begins to show signs of slowing momentum as investors take profits.

- Global equities have broadly sold off while bonds and gold are gaining. The current moves potentially point to slowing down of the pace we have seen over the last 8 record gaining weeks on Wall Street. The Nikkei added 0.6% on talk of further easing by the JGB while the Hang Seng lost 0.5% and the ASX 200 lost 0.4%. The S&P finished down 0.3% while the FTSE is down 0.2% this morning. The dollar and industrial commodities are flat. Treasury yields hit an 11 week high of 2.81 for the ten year before easing to 2.79. The euro is stronger vs the dollar up to $1.3554 while the continued prospect of tapering helped to weaken emerging currencies. http://www.ft.com/cms/s/0/83def222-5bc5-11e3-848e-00144feabdc0.html#axzz2mJ6HA6Em

- China's yuan overtook the euro as the second most used trade finance currency. The move indicates the pace which China is seeking to liberalise its financial markets although there is still a very long way to go. The yuan accounted for 8.66% of letters and credit collection in October compared with the dollar's 81% share. The currency has appreciated 2.3% vs the dollar this year, the most of any Asian currency. http://www.bloomberg.com/news/2013-12-03/yuan-passes-euro-to-be-second-most-used-trade-finance-currency.html

- As Joe Biden is beginning a week of meetings with leaders in northeast Asia the US has called on China to renege on its implemented air defence zone. They argued that the air zone makes accidents far more likely and that procedures should change. The US has deployed spy air craft to Japan to monitor submarine activity around the disputed areas. The Obama administration has been accused of a confused response to the situation by first sending two bombers through the zone and then telling commercial airlines to respect the Chinese orders. Biden meets Japanese leaders today and then travels to Beijing tomorrow. http://www.ft.com/cms/s/0/2e8fda9c-5bc1-11e3-a2ba-00144feabdc0.html?siteedition=uk#axzz2mJ6HA6Em

- Thai police have stepped aside ending clashes with protesters who have now taken over a number of state buildings. The move has ended violence on the streets and allowed the protesters to enter and leave the Government House peacefully. Prime minister Yingluck is strongly supported by the poor and would win an election called today, her opposition are the upper middle class and the ruling elite- generals, bureaucrats and wealthy conservatives. The Thai financial markets showed relief yesterday with the currency and its equities rallying on the news.  http://uk.reuters.com/article/2013/12/03/uk-thailand-protest-idUKBRE9AS02120131203

- As turmoil continues in the Ukraine its bond yields have soared along with its corresponding CDS. Ukraines already fragile economy is likely to be hurt as 10 000's of people take to the streets. The price of insuring against Ukrainian government default over the next 5 years increased by over 10%. Putin again stuck himself into affairs condemning the protesters calling them "pogroms". Opposition lawmakers are looking to hold a vote of no confidence against Yanukovich's party which may pass as some of his members are defecting. http://www.ft.com/cms/s/0/e8b86a86-5b28-11e3-848e-00144feabdc0.html#axzz2mJ6HA6Em

Data

S&P 1800.90 0.27%

FTSE 6568.22 0.41%
Nikkei 15,749.66 0.60%

EUR/USD- 1.3570 0.21%
USD/JPY- 102.99 0.05%
GBP/USD- 1.6408 0.30%

Gold- 1222.42 0.21%
Oil (Brent)- 111.52 0.06%

Copper- 316.95 0.41%

 

 

10 year yields

US- 2.79 (0bps)
UK- 2.84 (0bps)
Japan- 0.62 (+2bps)