London Session Update Pre New York Opening

Sep 9 • Mind The Gap • 2308 Views • Comments Off on London Session Update Pre New York Opening

Japanese Data Defies Expectations, Whilst The UK’s Chancellor Beats The UK Business Drum

Good news and bad news greeted Japan’s economy this morning; a consumer confidence survey came in down for the third successive month in series, whilst Japan’s GDP figure increased to 0.9%, suggesting that once again the country’s economy is experiencing a form of economic polarisation…

“Japan’s consumer confidence deteriorated for the third successive month in August, contrary to economists’ forecast for an improvement, latest data showed Monday. The consumer confidence index dropped to 43 in August from 43.6 in July, the Cabinet Office said. In June and May, the readings were 44.3 and 45.7 respectively. The index was forecast improve to 44 in August. Among sub-components, the overall livelihood index dropped to 40.7 in August from 41.6 a month ago. Similarly, the measure of income growth eased to 40.2 from 41, and the sub-index for employment decreased to 46.9 from 47.7.”

“Japan’s economy expanded 0.9 percent in April-June from the previous quarter, government data showed on Monday. The result matched the median market forecast in a Thomson Reuters poll of economists. The revised gross domestic product figure translates into an annualised 3.8 percent growth, up from an initial reading of 2.6 percent and against a median market forecast for a 3.7 percent increase, the data released by the Cabinet Office showed. The upward revision underscores the view Japan’s economy is on track for a moderate recovery.”

New Zealand economy suffers set back

The New Zealand economy experienced a mild shock in the form of poor data in the overnight session, manufacturing sales fell by 3.4%. Meat and dairy products drove the fall in manufacturing sales for the June 2013 quarter, Statistics New Zealand reported earlier today. The drought earlier this year appears to have contributed to the fall. After adjusting for seasonal effects the volume of total manufacturing sales fell 3.4 percent. This fall was led by a 10 percent decrease in meat and dairy product manufacturing. “The volume decrease in meat and dairy product manufacturing is reflected in the fall of export volumes for dairy and meat products,” industry and labour statistics manager Blair Cardno said.

Is the UK’s recovery sustainable?

In Britain, chancellor George Osborne will declare today that the UK economy has “turned the corner”, and that critics of his plans have been defeated. Can the UK chancellor really claim that the UK economy has turned the corner? For many analysts it’s a debatable claim, particularly when the chancellor is laying claim to data which actually on closer inspection doesn’t actually support his theory. The Markit PMI for manufacturing is up to 57.1, construction PMI is up to 59.1 and the services PMI is up to 60.1. However, the official ONS manufacturing survey showed a fall in manufacturing from 2% to 0.2%. Therefore the chancellor may want to temper his bullish view just a little given that the ‘march of the makers” recovery he has championed looks distinctly fragile, as this ONS snippet proves;

Production output decreased by 1.6% between July 2012 and July 2013. Three of the four main sectors were lower than they were a year ago. Manufacturing fell by 0.7% over the same period. The main manufacturing components contributing to the decrease between July 2012 and July 2013 were the manufacture of machinery & equipment not elsewhere classified; the manufacture of basic metals & metal products; and the manufacture of basic pharmaceutical products & pharmaceutical preparations. Production was flat (0.0% growth) between June 2013 and July 2013.

Market snapshot at 11:00 am UK time

The Nikkei index spiked for two reasons; the belief that the Olympics will provide an infrastructure spending boost and the revision of current GDP to 0.9%, the latter suggesting that Abe Economics, or Abenomics as it’s become known, is turning around the country’s fortunes.

The Nikkei closed up 2.48%, the Hang Seng by 0.57% and the CSI by 3.51%. China’s index rising courtesy of overseas shipments rising by 7.2% beating expectations of 5.5% and July’s gain of 5.1%.

European markets are mainly in the red in the first part of the London and European session. The STOXX index is down 0.23%, UK FTSE is down 0.34%, the CAC is down 0.43%, whilst the DAX is down 0.02%. Our “Syrian tension index”; the Istanbul exchange, is up 2.45%, whilst the Athens exchange is up 1.88%, reacting positively to the Greek prime minister’s claims that the “worst of the Greek recession is over”.

ICE WTI crude is down 0.28% at $110.22 per barrel, whilst NYMEX natural is up 0.68% at $3.55 per therm. COMEX gold is up 0.06% at $1387.30 per ounce, whilst silver is down 0.47% at $23.75 per ounce.

Looking towards the New York open the DJIA equity index future is up 0.19%, the SPX up 0.21%, and the NASDAQ up 0.41%. All three key indices suggesting that the markets will open in positive territory.

Forex focus

The yen depreciated 0.3 percent to 99.37 per U.S. dollar early in the London session. It reached 100.23 on Sept 6th, the weakest level since July 25th. Japan’s currency dropped 0.4 percent to 131.12 per euro. The dollar traded at $1.3195 per euro after advancing 0.3 percent last week. The yen fell as Tokyo’s winning bid to host the 2020 Olympics boosted optimism in Japanese Prime Minister Shinzo Abe’s package of fiscal and monetary policies that have helped weaken the currency by over 13 percent this year.

Sterling strengthened 0.2 percent to 84.18 pence per euro in the London session, after appreciating to 83.92 pence on Sept 6th, the strongest level seen since Jan 24th. Sterling advanced 0.3 percent to $1.5674. The pound strengthened towards a seven-month high versus the euro as U.K. Chancellor of the Exchequer George Osborne delivers his speech today in which he will re-affirm his determination to stick to the government’s austerity plan.

The U.K. currency has risen 7.3 percent in the past six months, the best performer among 10 major currencies tracked by the Bloomberg Correlation-Weighted Index, amid optimism U.K. growth is accelerating. The dollar has gained 1.7 percent and the euro has advanced 3.3 percent.