Storm A-Brewing?

If you came in this morning and felt like you hadn’t missed much. That is the case, well in price action terms anyway. So far this week, the market has traded in a 1% range with the vast majority of the time being spent flatlining around the 1005 level. Volumes are tracking c60% of average and in general, equities are not where the excitement is at this week…so far anyway. This surprises me a little. While earnings may not be quite so plentiful as the last two weeks, there is hardly a dearth (although the big names haven’t been reporting to be fair). This aside however, there’s plenty of other news out there: Chinese CPI, industrial production and new bank lending all came in light. PPI was slightly better than expectations but down on last month, ditto the trade data (despite stimulus). In Japan, we had the monetary policy statement and an earthquake while Taiwan is suffering from a Typhoon. So all this happened yet Asia couldn’t muster much excitement at all.

And what about Europe? Well, we had a better RICS survey, the best since April 2007. The property names are taking a dirtnap however. The German wholesale price index exhibited further deflationary trends although the CPI came in slightly better but still at -0.5. Lithuania was placed on negative creditwatch by S&P following on from the downgrade of Estonia and Latvia yesterday. So lots of news but not much movement yet in the market.

That said, things are starting to lurch downward as I type…so I better hurry! The BDIY prints down another 2% and is now down 9 days in a row. Govvies have had a bid today with the 10yr now back at pre NFP levels and this is in spite of $37bn of 3 years coming today and $23bn of 10yrs and $15bn of 30yrs later in the week. Is this a flight to quality in aniticipation of a market correction? The VIX has been trading up too and risk currencies are finally moving down. All these things have been making these moves during the day and my point was going to be that this could well precipitate a sell off in equities. The market’s beaten me too it however, which is a bit frustrating. Who knows if this continues today and if it does, for how long, but the risk indicators are looking a bit more wary.