Market Talk February 16, 2016

Despite weaker than expected Chinese Trade Balance stocks actually performed well on the back of PBOC rhetoric concerning the currency, taking it to its strongest level against the USD in almost a year (6.4935). It has however, weakened since China close and the off-shore was last seen in NY at 6.5200. Shanghai closed +3.3%, Hang Seng also closed better at +1.1% and after a volatile day in Japan the Nikkei closed small better +0.2%.

Late in Asian trading and just ahead of the European open, we heard rumours that Saudi and Russia had agreed to level current exports resulting in a huge 5% bounce in the oil price. These gains were short-lived and by the end of US trading all gains had been returned and were closing down on the day (below $30 at $29.12 -1.1%). This was the excuse provided by dealers as to why we saw a strong open for European stocks only to finish their day on the lows. German ZEW failed to live up to expectations, UK Inflation (0.3% for Jan) is still way off the annual 2% BOE target, EDF Energy saw a 68% decline in net profits (took a 3.6bn one-off impairment charge) and a vocal ECB still had the markets in a bit of a spin concerning direction and confidence. Amidst all of this Standard Charter’s stock (normally seen as stable) was down 5% as strategists cut forecasts. DAX, CAC and IBEX all closed around -0.5% lower. FTSE was the exception to core closing up +0.6% but they did see a 1.1% depreciation in the GBP.

The US indices performed well closing up +1.4% and on the days highs, this despite the Empire Manufacturing Index came in -16.6 but better than the January -19 number. One of the reasons talked this evening is the steady drift into the USD. DXY closed this evening at 96.93 a gain of 1% on the day.

Gold and Treasuries were the losers today with gold trading under $1200 at one stage. We closed this evening at $1202 a fall on the day of 3.2% or $38 lower. 10yr US Treasuries gained 3.5bp today to close 1.78%. The curve steepened 2/10 to close 106bp. In Europe the German 10yr Bund closed 0.26% which closes the spread at +152bp. Italy 10yr closed 1.62% (+2.5bp), Greece 10’s closed 10.68% (-16bp), Turkey 10’s 10.49% (-3bp) and finally UK 10yr Gilts closed 1.44% (+1bp).