Investment Markets Overview — W/E 14th April 2017


“Liquidity”…… is defined as a measure or extent to which a person or organisation has cash to meet immediate and short-term obligations, or assets that can be quickly converted to cash to do this. Put another way, it’s the life-blood of the markets without which they cease-up. There are numerous clues to assist in identifying early warning signs of impending liquidity problems, such as the amount of cash held within mutual funds and/or looking for “carry-trade” excess. A carry trade is when investors borrow in a low-yielding currency, such as the yen or the euro, to fund investments in higher-yielding assets elsewhere. A weakening currency is central to the carry trade since it means that investors have less to repay when they cash out of the trade and the problem of late is that whilst the Yen carry-trade is showing excess, the yen has been strengthening thereby ill-liquidity and capital loss if unwound. Our latest “knowledge share, Yen’s Up” expands on this, with the implications for various asset classes. Meanwhile it is interesting to note that cash levels held within US stock-market funds have recently hit a historical low of 3.1%.

It was a 4-day trading week for the majority of markets so this week’s overview will be brief, returning to the usual service next week:

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Increased geo-political tension between the United States and the North Korea – China alliance plus the US led push against the Russia-Syria arrangement unsettled stocks.

Meanwhile, the $US index was unchanged at 100.5, with risers including the Yen and the Russian Ruble, higher by 2.3% and 1.6%, whilst losers included the South Korean Won and the Colombian Peso, lower by a respective 0.5% and 0.3%. Sovereign bond yields were lower in general as Japan’s JGB 10-year yield turned negative, at -0.005%, the UK 10 year yield gave up 10bps, at 1.04% whilst the German yield fell by 0.14bps, at 0.18%. Spain’s 10-year yield rose by 3bps, at 1.67% with Italy’s unchanged at 2.3%, whilst the Irish 10-year yield moved lower by 7bps at 0.9%. Portugal’s 10-year ended lower by 8bps at 3.85% whilst the Greek yield was lower by 30bps at 6.5%. US 5 and 10-year yields fell to 5-month lows, with the 5 at 1.76% and the ten at 2.2%.

Commodities were higher in the main, as the Oil price added 2.9% to $53.2 a barrel, the CRB rose by 0.5% whilst the economic sensitive Copper price fell by 3.3%. The precious metals saw $Gold higher by 2.8% at $1289, $Silver by 1.5% to $18.5oz, whilst in the paper market, the North American XAU gold-share index gained 3.6%.

Economic data due for release next week includes more on housing for the US, the UK and for Japan, plus the latest on trade for Japan and the Euro-Zone. The Euro-Zone also updates on CPI and new car registrations, whilst Japan and the UK release their latest on retail sales. It’s a very quite week for US data but does include a peek at manufacturing.

                           “Complacency, a feeling of quiet pleasure or security” 

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