E Market Deluge

Market Recap:

Equities: The S&P500 futures are off 0.8% after losing 3.29% yesterday with focus on 200-day at 2,774.  The Stoxx Europe 600 is off 1.7% - worst in 20 months – while the MSCI Asia Pacific fell 3.5% - worst in 17 months and largest drop in 2 years. The MSCI EM is off 3.3% to 19 month lows. 

  • Japan Nikkei off 3.89% to 22,590.86
  • Korea Kospi off 4.44% to 2,129.67
  • Hong Kong Hang Seng ooff 3.54% to 25,266.37
  • China Shanghai Composite off 5.22% to 2,583.46
  • Australia ASX off 2.78% to 5,993.50
  • India NSE50 off 2.16% to 10,234.65
  • UK FTSE so far off 1.9% to 7,011
  • German DAX so far off 1.5% to 11,538
  • French CAC40 so far off 1.7% to 5,120
  • Italian FTSE so far off 1.4% to 19,449

Fixed Income: Weaker equities leave front-end bid in bonds, but there is no joy in overall market. Supply in US and EU continues along with views that financial conditions are not yet a problem for further FOMC, ECB tightening actions. Biggest move in Gilts with UK 10Y yields off 4.5bps to 1.68% while German Bunds off 4bps to 0.515% and French OATs off 2.5bps to 0.87%. Periphery still watching Italian budget with Italy up 10bps to 3.6%, Spain up 1.5bps to 1.625%, Portugal up 2.5bps to 1.975% and Greece up 4.5bps to 4.455%. 

  • Italy sold E6.5bn of bonds with mixed demand and sharply higher rates– E3.5bn of 3Y 2.3% Oct 2021 BTP at 2.51% with 1.26 cover – previously 0.13% and 1.77 cover – E1.5bn of 7Y 2.5% Nov 2025 BTP at 3.28% with 1.9 cover – previously 2.55% with 1.28 cover – E942mn of 15Y 2.45% Sep 2033 BTP at 3.66% with 1.41 cover – previously 3.04% with 1.46 cover – and E558mn of 20Y 4% Feb 2037 BTP at 3.79% with 1.90 cover – previously 2.93% with 2.15 cover. 
  • US Bonds are lower with focus on CPI, 30Y supply– 2Y up 0.4bps to 2.846%, 5Y up 0.3bps to 3.006%, 10Y up 0.2bps to 3.165% and 30Y up 0.4bps to 3.352%
  • Japan JGBs rally with equities lower, curve flatter despite mixed 30Y sale –2Y flat at -0.127%, 5Y off 2bps to -0.077%, 10Y off 0.6bps to +0.136% and 30Y off 1.5bps to 0.914% – MOF sold Y567.4bn of 30Y JGBs at 0.898% with 3.92 cover – previously 0.838% with 4.231 cover. 
  • Australian bonds are bid with risk off trade– 3Y off 2.7bps to 2.035% and 10Y off 2.5bps to 2.725% – AOFM sold A$500mn of 6M notes Feb 2019 T22029 at 1.8343% with 5.59 cover. 
  • China PBOC skips open market operations, leaves liquidity unchanged. Money market rates mixed with 7-day steady at 2.595% and O/N off 3.5bps to 2.345%. The 10Y bond yields fell 3.5bps to 3.58%. 

Foreign Exchange: The US dollar index is off 0.35% to 95.16 with range 95.14-95.43.  In Emerging Markets, USD is mostly lower in Europe, bid in Asia – EMEA: ZAR up 0.8% to 14.642, TRY up 1.5% to 5.985, RUB up 0.4% to 66.54; ASIA: TWD off 0.35% to 31.102, KRW off 0.95% to 1144, INR up 0.15% to 74.09.

  • EUR: 1.1570 up 0.45%.Range 1.1520-1.1575 with USD weakness more than EUR strength driving 1.1580 pivot for 1.1650 restest. 
  • JPY: 112.15 off 0.1%.Range 111.97-112.38 with EUR/JPY 129.80 up 0.35% - suggesting 112 key with 110.50 and lower risk on equities.
  • GBP: 1.3210 up 0.1%.Range 1.3182-1.3244 with EUR/GBP .8760 up 0.3% - less Brexit, more equity fears with 1.3250-1.3300 key resistance.
  • AUD: .7095 up 0.6%.Range .7046-.7101 with crosses key and USD weakness theme. NZD up 0.65% to .6490. 
  • CAD: 1.3045 off 0.15%.Range 1.3033-1.3068 with oil lower not a problem as commodity currency games driver and 1.2990 base back in play. 
  • CHF: .9875 off 0.25%.Range .9857-.9902 with EUR/CHF 1.1430 up 0.2% - All about EUR strength rather than CHF safe-haven.
  • CNY: 6.9098 fixed 0.04% weakerfrom 6.9072, trade 6.9290 into London off from 6.9194 yesterday close. Now flat at 6.9210 after 6.9196-6.9364 range. 
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