Asian Equity Market
The Nikkei and Kospi showed resilient strength in Asian trade, up +0.88% and +0.87% respectively, despite the general weakness in Asia. China dropped once again, with the SHCOMP falling -0.61% while the HSI gave up opening gains to record a -0.64% loss. Indonesia was the weakest in Asia, falling – 5.01% after news of the Jakarta lockdown emerged.
European Equity Market
In Europe, there were slight declines following the ECB; most of the indices closed within a +/-0.4% range. France’s CAC was the laggard at -0.38%, while Italy’s FTSE MIB led the pack, closing higher by +0.25%.
US Equity Market
In the US, the Nasdaq led the declines at -2.12% after opening gains were wiped out. The S&P 500 also dropped – 1.76% after filling Wednesday’s gap higher. Volatilities for the small-cap Russell 2000 and the S&P 500 inched higher on the day, though the VXN came in slightly. Dark pool activity showed some buying as it continued its rebound over the past 3 days. Amongst the S&P sectors, all closed negative, with energy having the biggest decline at -3.7%. Materials was the relative outperformer at -0.9%.
U.S. Treasury yields fell on Thursday and the yield curve flattened after the government sold $23 billion in 30-year bonds to solid demand, the final sale of $108 billion in new coupon-bearing supply this week. Long-term yields fell -2.29-3.83bps and the US 2Y yields dropped -0.79bps. This had the effect of flattening the US 2Y-10Y curve to 53.83bps. The Treasury said it will sell $22 billion in 20-year bonds on Tuesday. Bond weakness due to supply has been to some extent limited this week by volatility in stocks, which has at times increased demand for the safe haven debt. Germany’s benchmark 10-year bond yields edged up 2.90bps as the ECB left its policy unchanged.
The oil complex dipped again after yesterday’s brief recovery. Brent fell – 1.79% while WTI dropped -2.63% even as the EIA reported a slightly lower build than the API indicated. This was the first build in US crude inventories in 7 weeks. In precious metals, gold closed near unchanged after giving up most of its gains following the dollar strength from the NY session. In base metals, most lost ground going into the close, despite China’s new 5-year plan which called for increases in all strategic reserves for metals and farm goods among other commodities. Copper lagged on the day at -0.97% as it sought to consolidate near its near-term highest levels.
The euro rose to a one-week high against the dollar on Thursday, after European Central Bank President Christine Lagarde said that while the ECB is watching the exchange rate, it is not a monetary policy tool. The dollar index recovered 0.09% to 93.336 on better than expected U.S producer prices. The sterling was the biggest loser as it fell -1.52% at 1.2805, it dropped to a 7- week low against the dollar at $1.2777, weighed down by fears on failed Brexit negotiations. The aussie fell -0.34% on overall risk-off sentiment. The euro rose as high as $1.1917, a one-week peak, and was last up 0.21% at $1.1815. The euro’s high this year is $1.2014, with the currency surging roughly 6% so far this year.