In an old wives tale, we are told an apple a day keeps the doctor away but in this instance an Apple today kept the stock market spinning. Apple’s performance was the main reason why the equity market Friday hit new highs. Apple reported an improving outlook and that was enough to set markets ablaze with enthusiasm.

And in another development for the NYSE, Trump has suggested to the Saudi’s that they should list their trillion-dollar listing with the NYSE. This is interesting as the LSE rejected or is at least requiring significantly more information than the Saudi’s wish to say. What makes Trump’s comments all the more interesting is the SEC is about to require less disclosure or make exceptions for certain entities. Or is this Trump simply playing his game of America first and job creation? Neither of which at this stage are meaningful.

The jobs report was out Friday, and makes for interesting reading. Wages growth year on year is about 2.4% barely above current inflation levels, whilst productivity continues to be a concern. Job creation appears to be slowing and high value jobs appear to be slowing faster. Average earnings fell by a cent.  For a tight labour market this should be a concern. For Phillips curve aficionados this is an interesting conundrum.

Those companies seeing growth are not generally domestic companies rather those that have operations in Europe for example which is seeing good economic growth. American companies are benefitting from growth other than in the U.S. Jerome Powell, the new Fed Chairman once appointed, will have an interesting time of walking the tightrope of economic growth or failure should he err.

The markets are appearing somewhat sanguine about tax reform and the budget. It appears as though the clouds of uncertainty that are following Trump just keep growing. It appears now that Wilbur Ross the Commerce Secretary through his part ownership in Russian Pipelines through Navigator Holdings has an association with Sibur. Sibur has as owners two major shareholders that are under U.S. sanctions and a clear and direct link back to Putin. At some point the GOP and media will stop looking at these coincidences as just mere coincidences. This news is and will create distractions that will make any passage of Bills tedious.

Bonds appear to have thrown the shackles of payrolls and Tax Bills off and meandered. Bonds were marginally better on the day, by about half a basis point.  The U.S. yield curve settled to 71.1bp for 2/10’s, the flattest since November 2007 when circumstances were very different.

In the world of high yield yields fell below 5% on the Merrill Lynch global high yield bond index for the first time ever. The European index is barely above 2%. Historically, the correlation between junk bonds and stocks is positive. This broke down in 2014-15 just before the junk bonds and stocks slid causing a collapse. Junk rose from 6% to 10% in a couple of months.

The correlation is now at 0.18, its lowest level in three years. A move back towards historical levels would see the tow assets rising or falling at a much closer pace. The key is at these levels what is the probability of a rise in prices or prices falling. The falling scenario appears to be more probable but when, given rates are moving higher at a glacial pace.

On other Fed news. William Dudley the NY Fed Governor is expected to announce his retirement 6 months earlier than anticipated. This means that Powell will have a vastly different Fed to the Fed that Yellen inherited.  This is a cause of further uncertainty for markets.


Equities: the S&P 500 rose 0.3%, the Dow gained 0.4%. The Stoxx 600 rose 0.3%.

Currencies: The euro lost 0.1 %. The pound was unchanged

Bonds: the 2-year was steady to close at 1.61%. The U.S. 10-year closed 2.349 % in about 3bp. The 30-year closed at 2.827 % in about 3 bp on the day. The European 10-year benchmark closes were, gilts closed at 1.256%, bunds at 0.35% and OAT’s 0.594 %.

The US bond curve closes were as follows 2/10 at 73.5 bp, 2/30 at 121.4 bp and 10/30 at 47.7bp.

Commodities: Gold fell 0.6% and WTI rose 2%.  Copper fell 0.6%. China’s biggest coal mining province Shanxi has been told to restrict industrial activity beginning Saturday to curb smog.

Aussie Market Today.

The trend is your friend as they say and there is no reason for bonds to sell off just for the moment. I expect bonds to continue with the positive tone. Equities look set for another positive day although any rally will be somewhat muted.

Credit for the moment appears well bid and demand continues.