A 5% Plunge in Japanese Share Prices on Christmas Day

December 25, 2018

Almost all markets are closed this Christmas Day, Japan’s being the most notable exception. The Nikkei 225 lost 1,010 points or 5.0% while the Topix index dropped 4.9% in continuing panic following yesterday’s largest slide ever in U.S. share prices on the last business day before Christmas. Equities in other open markets fell 2.3% in Thailand, 1.2% in Taiwan, and 0.9% in China and Vietnam. Besides worries about President Trump’s increasingly impulsive behavior, investors are spooked by a story overnight that Japanese regional banks with profits squeezed by the Bank of Japan’s tenacious adherence to ultra-low interest rate are becoming very stingy about extending fresh loans.

The other attention-grabbing move in the marketplace this Christmas Day has been a 6.7% slump in the price of West Texas Intermediate oil to around $42.50 per barrel. That drop of 22% since Thanksgiving to a year and a half low seemingly points to lower global inflation and a greater risk of next recession starting sooner rather than later. Gold has climbed 1.1% to a 6-month high.

The ten-year Japanese JGB yield fell three basis points to 0.01%.

The narrowly changed dollar rose overnight by 0.4% against the euro, 0.3% versus sterling, 0.2% vis-a-vis the Australian dollar and 0.1% relative to the loonie and Swiss franc but is unchanged against the yen and down 0.2% against the yuan and 0.1% versus the kiwi.

Japan’s index of leading economic indicators in October was revised down 0.9 points to 99.6, which is the same level as now estimated for September. The index of coincident indicators moved into a “weakening trend” in September for the first time in two years and stayed in that mode during October.

Japanese corporate service prices rose 0.2% in November and were 1.2% higher than a year earlier.

Many markets were stay closed Wednesday for Boxing Day, but those in the United States are not one of them, and the U.S. has been the leading force in the recent slide of global equities. Bank of Japan Governor Kuroda will be speaking publicly on Wednesday, and the U.S. Case Shiller housing market index and Richmond Fed manufacturing survey get released tomorrow.

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

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