Choppy trade in Asia and Europe
HK Security law passed
Nikkei 1.33% Dax 020%
UST 10Y 0.63
Asia and the EU
North America Open
It’s been a very quiet listless night of trade in both FX and equities with bond yields compressing further as the bullish sentiment continued to wane.
In FX the dollar was mildly better bid on risk-off sentiment with EURUSD testing the 1.1200 barrier and cable still below the 1.2300 mark as currency markets remained essentially moribund in absence of any major economic news this week.
The slight but persistent drift lower in US yields suggests that bonds markets are not anticipating the type of growth that equities are priced for and indeed today’s CPI data out of Europe confirmed that price pressures remain depressed with normalized series coming in at -0.4% versus 0.1% eyed.
US yields have been remarkably constant over the past several months with 10-year bond essentially trading at 60 to 70 bps, but the failure of yields to break above the 70 bps level may be an early signal that a risk-off correction is coming.
We have been noting for days that both Nasdaq and S&P have struggled to break higher with 10,000 level capping any advances in Nasdaq and 3100 containing the run up in S&P. The S&P is already trading below its 20 day SMA suggesting that it’s given up its bullish bias and Nas is teetering on the edge.
Still, the bulls refuse to go quietly as every dip continues to be bought but if the markets don’t make fresh high relatively soon the path of least resistance will go lower as risk assets brace for a much overdue correction after the massive run-up in the past few weeks.