Asia roared-on, after all the fun and games in the US with the Nikkei and Shanghai indices closing up close to 2%. Mid price in Yuan was fixed even lower (by the PBoC) at 6.4757 – the Yuan is allowed to trade within 2% of official fixing rate (previous 6.4626). Also worth mentioning here is the HKMA (Hong Kong Monetary Authority) raised its base rate to 0.75bp (from 0.50%).

European Stock markets opened with a flurry of buying but by mid-session most had peaked and were on their way back down. All closed positive (DAX +2.6%; CAC +1.15% and FTSE +0.68%) but way off their highs.

US markets opened unchanged then started to drift on weaker oil prices, holiday liquidations and a weaker than forecast Phili Fed Index (-5.9 after a positive 1.8 last month). By the close of business the DOW all of yesterdays 156 points and lost an additional 100 points today closing down 1.43% at 17,595.

Oil and Gold both had poor days today with the black gold losing 2.2% whilst the yellow lost over $26 (-2.5%). There remains concerns about over supplies with many commenting on worries of a global glut. Obviously, given the US Dollars strength in today’s market this is having a knock-on effect on all asset classes. The DXY (Dollar basket) gained 1.34% and even more against many emerging market currencies. Strong performances against the Russian Rouble (+1.45%), KRW (+1.25%), CAD (+1.3%) and AUD (+1.55%).

We did see more curve flattening within the US Treasury market with 2/10 gaining 5.5BP to close +123BP. as we warned at the conferences. After the initial sell-off upon the FED announcement (10yr TY’s hit 2.33%) tonight they were last seen at 2.22% and 30’s last seen 2.93%.

The spread between US/Germany at 10yrs closed this evening at +162BP and this after the FED has raised and the ECB remains in easing and QE mode for it knows not what else to do. The 5yr US/Germany spread closed this evening at +100BP.