Indices plumb new lows after US stocks post record

LONDON: European credit markets are opening on the front foot again after a solid night in Asia that saw most of the major indices post gains. In Japan the Nikkei closed 1.95 per cent higher, while the Hang Seng and US stock futures are also up. The one minor fly in the ointment is a small drop in the Shanghai Composite after weaker than expected prints of retail sales and industrial production in China.

As of 7:45am London time according to Tradeweb, the Main is 1bp tighter at 65.5bp, the Crossover 6bp tighter at 254bp and the Senior Financials 1.5bp tighter at 71.5bp, with all three on new S21 and multi-year tights.

Monday morning was a terribly dreary affair in Europe, with most markets flatlining on pitiful volumes. Thankfully, before we all went mad with the tedium, things picked up a bit as our US cousins injected some life into the market by the afternoon.

And that injection saw a continuation of the inexorable march north for US equities and south for the credit indices.

Led by a near 2 per cent rise in the Nasdaq, the Dow and the S&P both closed at record highs of 16,995 and 1,896 respectively, posting record intraday prints of 16,704 and 1,897 in the process. 10yr Treasury yields, meanwhile, ticked back up to 2.65 per cent, having been at 2.58 per cent after Yellen's testimony last week.

So once again the hordes of dip buyers in US equity markets have been fully paid out. Will that rally continue today?

Well, with sentiment good one can see no reason why not. What we have seen this year, though, is that when the indices hit new record levels, those dip buyers usually decide that it might be time to book some profits.

And with plenty on the data agenda across the pond over the next few days - starting with retail sales today - that might be the case again.

Before we get to those US numbers, there are a few matters to take care of in Europe. On the data front, we get the latest thoughts of the German ZEW institute, while there is an interesting test of peripheral appetite with a swathe of Italian supply, with BTP yields still hanging around euro-era record lows. It could be an interesting session.