Shanghai was the only one to underperform the core with a 1.4% decline and a weaker currency market. The Trade numbers missed expectations and that was probably the key reason why the Yuan took the hit. Closing down over 1% (at 6.286) was its weakest move in over two years. The balance of Asian saw a healthy day. The Nikkei closed better by 1.15% but still remains over 5% lower for the week. The Yen rallied late in Asian trading to high 108’s but spent much of the day playing around the mid 109’s. The fall in US markets (US session) is encouraging a safe-haven bid, but we need to see the Asian cash response in-order to ascertain that longevity. The currency markets appear to have taken much of the talk in Asia as people accept the thin volatility in equities. The fact that the DXY appears to have based is a concern for many if it were to appreciate at a similar pace to its decline.

Ahead and during the European session the US futures had whipped around in a 300 point range. Given this continued uncertainty, European indices opened weak and just drifted throughout the rest of the session. Having heard the Bank of England governor, Mark Carney, predict higher and faster rates shook traders confidence and prices. The DAX was the worst performer of a bad bunch, closing down over 2.6% on the day. Industrials, Technology and financials suffered in todays decline with Deutsche Bank again down nearly 3% and Commerzbank off 2% for the day. The CAC, FTSE, IBEX, FTSE MiB and AEX were all down roughly 1.9%. Higher rates is the storey main street is pushing as the reason for all the declines and given the early price action in the US cash markets, it is looking as though Fridays session will be weaker still!

US started weak and just trended lower even accelerating as we approached the close. Mid session we were around 700 points lower for the DOW and then accelerated past that level once again towards the close to finish the day down 4% (down over 1k points). S+P did open small better but was quick to join the free fall soon after. We are still not seeing the safe-haven bid move towards precious metals because quite honestly the fear does not appear to be in the market. Many tell us “the decline just feels orderly”! Interesting that the S+P is seeing more volatility than the NASDAQ. Many explaining that away as there are more derivatives priced off of the broader S+P than off of the NASDAQ. Leverage trades always come to the foreground with increasing vol. This will probably lead to an increased demand for USD, which is another reason why financials will be the worst performing sector. Oil lost another 2% but then currency is appreciating to off-set some of that decline.

Japan 0.075%, US 2’s 2.13% (u/c), 10’s at 2.85% (u/c), 30’s 3.14% (+1bp), Bunds 0.76% (+2bp), France 0.99% (+1bp), Italy 1.98% (+4bp), Greece 3.76% (+15bp), Turkey 11.60% (+3bp), Portugal 2% (+1bp), Spain 1.44% (+4bp), and finally Gilts 1.62% (+7bp). Interesting that European sov’s are starting to finally loose ground to US paper. It continues, keep your eye on both the currency and periphery against core Europe.