Asia closed mixed but did see some corrections from Monday’s almost extreme moves. In Japan the Nikkei opened around 1% better and gradually managed to build upon those gains. Although closing up 1.15% led by pharmaceuticals, industrials and commodity companies we should still see things from the point of view in that, they many are bouncing from their YTD lows. The Hang Seng spent all morning in the red but managed to rally in the final couple of hours, to close up +0.7%. The Shanghai index traded heavy all day, but it too managed a bounce towards the close but remained and closed in negative territory. With the renewed bounce in commodity prices, we have seen the A$ and the ASX bounce +1% and +0.85% the past few days. The SENSEX could not maintain its early lead but did manage a positive close. However, the talk was that a close below the psychological 35k level remains a negative slant on the index.
Europe was quiet ahead of US elections and with probably only a neutral bias. The DAX did its best to attempt an unchanged or even positive close, but the best that could be achieved was a -0.1% negative result. The CAC lost -0.5% even as Emanuel Macron fights for recognition within the EUI community. Economic data remains poor and even todays October ISM (equivalent) saw growth slow to a two year low. Most of todays headlines centred on Italy and the impending budget – mostly in the hope that they will change their minds and alter the amount requested. In the UK the speculation was that the government may well round with the government and accept the EU offered proposal! Both the Euro and GBP did well against USD today so any light relief against either is a positive move for sure.
Too early to hear anything on midterms, but we did manage to maintain its advance until the close. Early reports were that the Democrats had the lead but pretty much as most had expected. We will need to wait until late in the day for any concrete result to be heard and so we will probably be forced to Asian trading for movement. We also have the FED later in the week but no-one is expecting anything until they hike again in December. The positive momentum in stocks, as people vote, is having a negative influence on bonds as expectations the FED will retain its hiking bias. This still reflects on the question of whether higher rates are positive or negative for stocks! Lets see how the vote swings, but is remains the capital flow continues to point towards the USA. This will be reflected in year end demand for US Dollars and that has already started.
Japan 0.12%, US 2’s closed 2.93% (+2bp), US 10’s closed 3.22% (+2bp), US 30’s 3.44% (+1bp), Bunds 0.43% (+1bp), France 0.8% (+1bp), Italy 3.39% (+7bp), Greece 4.28% (+3bp), Turkey 16.16% (+35bp), Portugal 1.89% (+1bp), Spain 1.58% (+2bp) and Gilts 1.53% (+3bp).