Today was somewhat an up day, for the S&P500 at least. The FANGS were a drag but that seems to be a sign of the times. The transport sector roared off into the distance. The transport sector has now closed at its highest level, and testimony to the state of the U.S. economy. Either lots of people are buying stuff or business is making stuff or both, either way the sector appears to be doing well.
The S&P 500 broke its four day streak and there was still good news. Microsoft and Home Depot saw healthy gains on the day. Apple fell for a fourth day after a tweet from Trump targeted the company. And the Europe Stoxx 600 Index rose as news of a realistic Brexit was relayed and the Italians (new Government) appear to be taking debt seriously. The BTP’s rallied and are now at 2.75% (10-year). The 10-year about a week ago was 3.25% so that’s a nice rally.
Worries about trade tariffs appeared to evaporate on the day. However, emerging markets still had a rough day and look set to continue having bad days for as long as Trump targets China with tariffs.
So now that we have had our fun for the week, markets are likely to remain steady until Wednesday when we have $23 bio of 10-years and on Thursday $15 bio of 30-years. Thursday also sees the release of the inflation data which the bond market is starting to focus on following the strong jobs number. There is plenty of supply and market participants are happy to wait out the results. Once we are past Thursday the market will get a feel for whether demand is real or illusory and whether demand will flatten the curve.
Later this week, we also have the ECB meeting. Market participants will be looking for guidance for actions that the ECB may be looking to initiate. Economists currently believe that the economy in Europe will remain in reasonable shape due to some encouraging data. There is also the belief that the ECB’s QE exit won’t be held back by trade war fears.
Elsewhere, we are seeing the shoots of growth. In the UK, we are seeing the fastest rate of growth for nearly a year partly due to weather and the World Cup. The UK is on track for the fastest growth since 2016.
Equities: The S&P rose 0.2%, while the Dow fell 0.23%. The Stoxx 600 rose 0.5% while the Vix closed 14.16.
Currencies: The Bloomberg Dollar Index rose fell 0.2%, the yen fell 0.2% and the euro rose 0.4%. The pound increased 0.8%.
Bonds: The ten-year closed around at 2.935%. The 2-year closed at 2.715% and the 30-year closed at 3.084 %. The ten-year bund closed at 0.402% and the OAT closed at 0.713%. The U.S. curve closed on the day with the following closes 2/10 at 21.6 bp, 2/30 at 36.6 bp and the 10/30 closed at 14.8 bp. The U.S. 5-year closed at 2.825%.
Commodities: WTI fell 0.2%. Gold was unchanged.
Bitcoin is trading around $6289.
Aussie Market Today.
We could see a small rally in equities today judging by the movements overnight. The concern will be on trade and whether Trump makes any comments relating to trade. For the moment, we appear to be in a holding pattern.
Bonds are likely to sell. Unless the CPI comes in below expectations bonds are likely to be sold later in the week. We may see some shorting ahead of Thursday evenings CPI release in the U.S. Markets for the moment appear to be poised to move one way or the other, they are just looking for a reason.
The Aussie dollar continues to trade around the 71c level and this appears to be mostly trade and commodity related.
Geopolitical risks remain high.