Marking Time On Monday

US markets are closed for the Presidents’ Day holiday, but it hasn’t prevented its pre-weekend gains giving a bullish tone to global equities. The S&P 500 and Nasdaq recovered from early weakness to close at new record levels before the weekend.Global equity markets are following suit today. 

The MSCI Asia Pacific Index eked out a small gain (0.05%). Japan’s minor gain held back the regional index. Without, the MSCI benchmark would have risen nearly 0.2%. China’s shares led the with the Shanghai Composite up 1.2%. China’s shares that trade in Hong Kong continue to perform well, rising another 0.8% to bring the year-to-date gains to an 11.2%.  

The Dow Jones Stoxx 600 is up about 0.25%, led by telecom and financials. The index gapped higher but held below last week’s high, which was the best level since December 2015. The gap is small (370.76-370.88). The fallout from Kraft Heinz withdrawing its bid for Unilever appears localized.  

Benchmark 10-year bond yields are most one-two basis points higher.  There does not seem to be much reaction to the weekend political developments, where Renzi has stepped down as PD chairman as a leadership battle is waged that could split the center-left party, which is seen as increasing the chances of electoral success by the 5-Star Movement. Also, the possibility of the united left candidate in France appears to have diminished, and Macron was criticized for comments critical of French history in Africa. The meeting of European finance ministers is not expected to reach an agreement to make another tranche payment available to Greece, but Greek bond yields are slightly softer. As we have noted, Greece does not need the funds until early Q3 and brinkmanship tactic requires approaching the brink.  

The economic calendar is light today. There are three main features:Japanese trade, Germany producer prices, and UK CBI trends. The Japan’s January trade deficit was larger than expected, as exports disappointed and imports surprised on the upside. It was the first deficit since last August. There is a large seasonal component, and in the most commentary, it is attributed to the Chinese New Year. We are a bit skeptical and note that for more than 20-years, which means that even before China became Japan’s largest trading partner, the seasonal pattern was evident.