Market Talk – October 27th, 2016

by Martin Armstrong
Armstrong Economics

Energy prices were hit quite quickly after a significant bounce upon the EIA news and that played out overnight in Asia. Energy stocks dragged the Hang Seng lower again today with the index closing down around 0.8% on the day. In Japan BOJ governor, Kuroda, said that he would not be surprised if long term JGB’s (>10yrs) yields were to rise a little. The Nikkei took this negatively, but then has recovered in futures trading since the -0.3% cash decline. It did start a bit of a sell-off in JGB’s in Japan but is also unnerving bond markets in Europe – probably more a realisation that manipulating the bond market does not create growth.

Deutsche Bank and Barclay’s earnings dominated the talk as the release beat forecasts but it was short-lived as economic data was soon to take the lead headline. UK Q3 GDP beat expectations of 0.3% with a print of 0.5% but below the previous 0.7% in Q2. It is significant in that the data is post the BREXIT vote and this morning we continue to watch the Gilt market re-price the BOE pre-vote alarms. GBP was the point of pressure as we saw the currency lose 0.75% against the USD on the day. Other core indices closed marginally unchanged (DAX +0.01%; CAC -0.01% and IBEX +0.1%) as the focus was more fixed-income that equity.

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