Global Capital Markets

The US dollar is mixed as month end-considerations and risk aversion dominates. Given the heightened concern about the possibility of BOJ intervention, the Swiss franc has taken over the safe haven lead from the Japanese yen. The Swiss franc is near it best level against the dollar of the year and is at new record highs against the euro. UK data, including consumer confidence and mortgage approvals were firm, but has failed to buoy sterling amid talk of month-end sales. The relative weakness of the antipodean currencies today is also being linked to month-end activity, though risk aversion operative and is weighing on emerging market currencies too.

Global equities are tumbling. The MSCI Asia-Pacific Index fell almost 2%, with the Nikkei dropping 3.5%, the most in 3-months. The tech sector and raw materials, including energy, were among the drivers. Of note, bellwether Hon Hai Precision missed profit expectations as did its Foxconn unit. Bears are in control in Europe. Initial losses in excess of 1% have been pared a bit, but all the major sectors are lower, with technology and financials the worst performers.

Core sovereign bond yields continue to slip lower. The 10-year JGB yield is off 5 bp at 0.96%. German and French bond yields are 1-2 bp lower. Gilts are playing catch-up as London markets re-open from yesterday’s holiday and 10-year yields are off 9 bp. Peripheral pressure also remains evident, especially in Ireland at the long-end and Portugal at the short-end. US Treasuries are firm and the US-German 2-year spread is little changed. At about 11 bp it is in the middle of last week’s range.