It’s just a number, but wow what a number. Today Apple became the first U.S. stock to hit the magical $1 trillion level. Let me write it out for you, 1,000,000,000,000,000,000. Apple’s rally continued today and that helped drag the Nasdaq and S&P 500 along.
Equity market were somewhat confused on the day. Exporters such as Boeing and Dow DuPont fell after Trump indicated he was going to hike tariffs worth $200 bio on Chinese goods. European equities fell. The trading day was not so good for the Chinese as the Shanghai 300 continued to reflect the heightening trade tensions and is now down 16.4% for the year.
Of the 400 members of the S&P 500 that have reported this season, 85% have beaten analysts’ estimates. Combine that with a strong economy and the equity market should be rallying. The one major factor that is holding the equity market back and adding strength to the dollar is Trump’s trade war.
Jobless claims were better than expected pointing to an economy which is still showing strength. And in another twist, mortgage rates hit a seven week high and levelled out at 4.6%.
Bonds were a subplot in the day’s activities. Just when traders thought it was safe to sell JGBs, the BOJ returned to the market to purchase 400 bio yen worth of 5-10-year JGBs. This caused a rally in Japan and in the treasury market and euro denominated debt. The BoE hiked rates for quite some time (nearly a decade) and with a 9-0 vote in favour of a hike the indicator rate was set at 0.75%. Central banks also increased their holdings of treasuries. Foreign central banks now hold some $3.06tr versus $3.036tr the week before and is the largest increase in two years.
For many participants in the U.S. and globally, one of the great conundrums is the amount of BBB debt issued and whether this wall of debt will be the cause of a malaise. About $2.6 tr of BBB debt is outstanding which is more than triple a decade ago. The concerns lie around where liquidity will be found and where we are in the credit cycle. There are still many opportunities. However, investors need to be continually found if this sector is to perform.
And we could not finish the week if we did not discuss Italy. Italian bonds rose 16 bp before finishing the day at 2.91%. The concerns are over Italy’s spending and challenging the EU budget requirements. Volatility in the Italian bond market is likely to remain for a while yet.
Equities: The S&P rose 0.48%. The Dow fell 0.03%. The Stoxx 600 fell 0.8%. Vix closed 12.19.
Currencies: The Bloomberg Dollar Index rose 0.4% and the pound fell 0.8% after rates were raised.
Bonds: The ten-year closed around at 2.98%. The 2-year closed at 2.665% and the 30-year closed at 3.119%. The ten-year bund closed at 0.46% and the UK gilt closed at 1.38% and the OAT closed at 0.78%. The U.S. curve closed the day with the following closes 2/10 at 32.1 bp, 2/30 at 45.3 bp and the 10/30 closed at 13 bp. The U.S. 5-year closed at 2.855%.
Commodities: WTI rose 2.1%. Gold fell 1%, and copper fell 0.6%. The Bloomberg Commodity Index rose 0.3%.
Bitcoin is trading around $7533.
Aussie Market Today.
Equity markets should strengthen on the day. Bonds could be a little tricky on the day. Watch for BOJ intervention and any news out of China.
Geopolitical risks remain high.