It’s President’s Day on Monday and the markets are looking for a break after the herdy gerdy of the past couple of weeks. The equity market finished on a high note, closing the week up about 4.3% after recovering from the previous tumultuous week of declines.
Over the past two weeks, we saw the Vix at one-point trade to 50.30 on Feb 6 and is now trading around 17.6. The bulls are in control again. However, it’s not all one way. Friday was saw a strong trading session in the morning. That is, before the Mueller bus ran it over with the indictments of 13 Russians for trying to manipulate the U.S. political system.
Trump railed about collusion and his vindication. However, the indictments do show the sleazy hand of Russian involvement and something all western Governments need to guard against carefully.
Treasuries on Friday ended the week a little better, unless you were long 2-year bonds. The curve flattened, and the longer maturities showed a bid tone. Interestingly, the U.S. treasuries, so often the leader, on Friday were the laggard.
The European bonds saw a strong bid tone, and this carried over into the U.S. bond market. JGB’s also rallied after it was announced that Kuroda had been re-appointed for another term, suggesting several more years of monetary stimulus in Japan.
On a boy’s own note, it appears as though Trump has yet another been made public, this time with a former Playboy model. The Administration is in chaos as it struggles to deal with Mueller and his investigation, an infrastructure plan which many are suggesting is simply unworkable and requires way too much public money from State and local councils about 4 times the normal requirement, a budget that was never ever likely to be a budget and contradictions from senior staffers as to what America really wants and is likely to do.
Everyone appears to be confused except Trump. The big risks, however, lie with Israel should Israel up the ante with Iran. An attack on Iranian sovereignty with Israel could lead to a savage increase in hostilities between the two countries, threatening and engulfing the Middle East. Israel would need to have Russian assurances that should an attack happen, the Russians would remain neutral. This is high risk stuff and should not be underestimated.
Equities: The S&P 500 rose 0.1% The Dow rose 0.04%. The Stoxx rose 1.1%.
Currencies: The Bloomberg Dollar Spot Index rose 0.5%. The euro fell 0.8%.
Bonds: The ten-year rallied to close 2.87%. The 2-year closed at 2.19%. The ten-year bund closed at 0.705% and the UK gilt closed at 1.576% and the OAT closed at 0.95%. The U.S. curve closed 2/10 at 68.1bp, 2/30 at 93.8 bp and the 10/30, closed at 25.5 bp. The U.S. 5-year closed at 2.626.
Commodities: Gold fell 0.5% and WTI rose 0.5 %.
Bitcoin is trading around $10,778.05.
Aussie Market Today.
The Australian markets should be quiet as traders reassess the week’s trading. With the U.S. market closed, markets elsewhere are also likely to be quiet. As often happens in a quiet market, they drift, and small patches of selling lead the day weaker.
Expect some selling, a little profit taking later in the day.
The AUD is likely to be a little weaker on the day as the U.S. dollar is stronger.