A lack of direction resulted in a mixed session for Asia today. Probably a sigh of relief for many market participants, as they are still attempting to explain the past few days events! Although we are seeing volatile stock markets, it is worth keeping an eye on the currency movements. Again today we see the USD bid both for spot and forwards. The year-end carry sees good demand from Asia and is probably accentuated as the domestic demand accelerates. It is a good sign that trading volumes are increasing in most areas and given the increased volatility displays cash flow is in full swing. International investors must be concerned with the disappointing returns seen for core Asian equities this year, so if they start to see the currency depreciate also this decline could accelerate capital flow towards the USD. The Japanese Yen appears to be losing its safe-haven bid, so that may actually provide a helping hand for the Nikkei. Obviously, anticipation of a decline in the Yuan is gathering attention as increased option volume shows. India has been fortunate this week as the energy prices have retreated, however, still worth keeping an eye of the INR weakening trend. SENSEX did manage a +0.5% rally today but has been down for four days.

Both Deutsche Bank and Barclays reported Q3 results today, with Barclays probably standing better from its Cost of Capital. and Tier 1 ratio’s looking better. That said, Barclays shares are still off around 20% YTD even with a better outlook for its NPL book in relation to its European counterparts – DB closed down nearly 5%. Confidence is still key and with core financials still suffering from events 10 years ago, it is probably not surprising the capital flows towards the US Dollar. ECB meeting tomorrow but where no-one really expects Mario Draghi to embark on political statements there is a chance he may be dragged into commenting on the Italian budget or the BREXIT debate during the Q+A session. There is also the concern that France may be seeking a higher budget than expected! Let’s watch [peripheral spreads and the Euro again tomorrow.