Trump Grabs Spotlight… Japan Also in the News

January 23, 2018

President Trump is on a roll. Having secured a tax cut with benefits skewed to the rich and then trapping congressional democrats in a political snake pit over immigration, he’s turned his sight on the biggest campaign promise of all: so-called fair trade. A 30% tariff on U.S. imports of foreign-made solar equipment threatens to undermine the renewable energy industry. Tariffs on washing machines ranging from 20% to 50% also were imposed. All this is red meat for the Republican Party base.

President Trump will be attending the World Economic Forum in Davos, Switzerland, hob-nobbing with the titans of industry, politics and academia. The conference starts today and runs through the week.

Japan has shared the stage today with several items of interest.

  • The yen strengthened against most currencies overnight, climbing 0.5% against the dollar, which otherwise rose 0.8% versus the peso, 0.6% vis-a-vis the Aussie dollar, 0.3% relative to sterling, 0.2% against the loonie and 0.1% versus the euro. The Swissie, kiwi and yuan are unchanged on balance.
  • The Nikkei-225 index of Japanese share prices leaped 308 points or 1.3% in Tuesday’s session, moving back above the 24K level. After the BOJ reaffirmed a target of around zero percent for the 10-year JGB yield, such slid a basis point to 0.06%.
  • The Bank of Japan left its policy settings and released its quarterly Outlook for Economic Growth and Prices in which projected growth and inflation were not modified. Governor Kuroda doubled down on reaffirming that a stance as stimulative as the current one will be maintained for as long as necessary. And it’s become clear that although core CPI, which excludes only prices for fresh food and the impact of a planned consumption tax in October 2019, is the formal inflation measure used by policymakers, core-core CPI, which also excludes energy, will likely exert the most influence on policy going forward. Core-core inflation remains closer to zero than 1.0%, let alone the target of 2%. Kuroda explicitly denied that recently reduced JGB purchases implies any shift in the policy stance.
  • Japan’s all industry index jumped 1.0% in November and 2.1% from a year earlier. Such had risen 0.3% in October but fell 0.3% in the third quarter.
  • An on-year 48.3% increase in Japanese machine tool orders was confirmed for December. That’s a shade above November’s 46.9% increase but less than 49.8% in October. September also saw a 12-month advance of more than 40%.
  • Japanese nationwide department store sales, which had been 2.2% greater in November than a year earlier, posted a 0.6% on-year drop in the final month of 2017.

In other market developments overnight,

  • Equities rose 2.1% in Indonesia, 1.9% in Hong Kong, 1.3% in China, 1.4% in South Korea, 0.8% in Australia and 1.0% in India. The German Dax and British Ftse have advanced so far by 0.5% and 0.3%, but the French and Italian markets are down marginally.
  • Trump’s blow to solar energy saw WTI crude oil advance 0.5% to $63.87 per barrel. Gold went up 0.4% to $1,336.80, and copper has lost 1.8%.
  • Sovereign debt yields of 10 years in maturity are also lower in Germany (one basis point), the U.K. (2 bps), and U.S. futures (2 bps).

New Zealand’s services purchasing managers index settled back 0.5 points to a 2-month low of 56.0 in December. Such was at 58.3 a year earlier.

The German ZEW index of investor expectations leaped 3.0 points, far more than forecast, to an 8-month high of 20.4 in January. Current conditions advanced 5.9 points to a very elevated reading of 95.2. The expectations index for the whole euro area rose 2.8 points to a 6-month high of 31.8, and perceived current conditions in the common currency area went up 5.7 points to 56.4.

Consumer confidence improved in Turkey and Denmark this month. Danish retail sales, however, fell 0.3% on month and were just 1.1% higher than a year ago.

Singapore CPI inflation unexpectedly dipped 0.2 percentage points to 0.4% in December. But CPI inflation in Hong Kong edged up from 1.6% in November to a 4-month high of 1.7% in the year’s final month.

An early indication of consumer confidence this month in Euroland and the Richmond Fed manufacturing index will be reported later today.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission. 

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