The close of a healthy week and the Nikkei manages a close above the 22k figure. It has been flirting with the 22 handle all week and finally takes the YTD close above 15% and the 1yr to 27%. Initially, the rally was helped by the weaker Yen, which earlier was trading 114.20. This move has been constructive for exporters but the banks really have found fresh impetus as talk of higher yields circulate the markets. JGB 10yr touched almost 8bp in early trading when back in September they were negative. Lot of talk that Japan is feeling optimistic again and hoping to get back to double digits that they saw in February of this year! Shanghai and Hang Seng were also bid with banks (+3%) again leading much of the advance. Interesting that many are now pointing fingers towards the ECB and claiming they are the pushing money away, but lots on next week could be volatile. Australian dollar was weaker again following the coalition lose in parliament. ASX still lower, even with a lower dollar, Maquarie (+4%) beat expectations but banks (-1%) on the whole were weaker. It did manage a bounce on the Spanish news but rolled again just at the US close.
Weaker Euro has helped European equity markets and were supported by earnings, but the move continues to unsettle nerves. The ECB would not have pushed purchases further if this were that simple – they obviously remain worried and that is being reflected in markets. The CAC (+0.7%) set fresh ten year highs and the DAX (+0.6%) new highs (Auto’s better Banks lower). The late news that Catalonia had declared independence one hour after Madrid approved direct rule over the region; IBEX lost almost 1.5% on the day. Late in the day we hear that Spanish PM Rajoy has fired the Catalan leader and dissolved the government which will only accelerate the capital flow away from Europe given even more uncertainty. Probably good news its the weekend and see how things unfold over the next two days. Worth keeping in mind that the markets are not pricing this news in too much, many still believe it will be sorted soon….
