April 1, 2019 - Page 2 of 3 - Financial Occultist

Tokyo’s main index closes higher as Asian stocks rally on risk-on mood

NKY 01-04

Markets are generally in a more positive mood to begin the day and it’s very much risk-on sentiment across the board after China PMI figures showed hints of a rebound from over the weekend. Although, Japanese stocks mostly gave up earlier gains towards the end of the session but still managed to post a decent rally on the day.

European equities open should show similar sentiment and the mood here is what is helping to keep the aussie and kiwi buoyed while weighing on the yen as we begin the European morning.

China 10 year benchmark yield rise 5.6 Bps

01-Apr-19 10:20 am

Anirudh Sethi

EMs need $USD now! And for the next 2 years. Did someone say inversion?

01-Apr-19 10:18 am

Anirudh Sethi

China and New Zealand sign agreement on eliminating double taxation

01-Apr-19 10:17 am

Anirudh Sethi

A positive for both countries

But I reckon China will likely be the more happy of the two. This will help to facilitate further trade and business investments between the two countries as it essentially ensures that companies don’t get taxed twice.

Onshore China bonds enter the Bloomberg Barclays Global Aggregate Index today

01-Apr-19 07:18 am

Analysis

Anirudh Sethi

Via ANZ, a note on China bonds and what it means for the currency

Today sees formal entry of onshore China bonds into the Bloomberg Barclays Global Aggregate Index, another important milestone in the country’s financial market liberalisation.
We estimate potential foreign bond inflows of USD150bn over the 20-month phase-in period from asset managers tracking the Global Aggregate Index.
Inclusion in other major bond indexes is only a matter of time. Alongside equity index re-weighting and further FX reserve allocation into RMB, the expected pick-up in foreign portfolio inflows will help offset the narrowing in China’s current account surplus and support the yuan.

More on the yuan implications (in brief) :

The expected increase in foreign inflows into the China bond market from index inclusion, plus the ongoing allocation of global FX reserves into RMB, could see potential steady inflows of up to USD400bn over the next two years. To put this in context, foreign bond inflows over the past two years totalled USD142bn.
… Given the structural increase in foreign portfolio inflows over the next few years, we expect the yuan to stay supported.

3 Reasons why traders get shaken out just before their stock explodes higher… Hope. Fear. Greed.

01-Apr-19 07:03 am

Anirudh Sethi

Japan Manufacturing PMI (March, Nikkei / Markit ‘final’ ): 49.2 (Preliminary was 48.9)

01-Apr-19 06:19 am

Anirudh Sethi

The final reading for Japan manufacturing PMI from Nikkei/Markit for March 2019

49.2

preliminary 48.9
prior 48.9

Markit highlight ‘Key points’:

Demand remains sluggish, pulling output lower
Firms push resources to clearing backlogs due to lack of new work
Business confidence remain among lowest on record

Comment, Joe Hayes, Economist at IHS Markit:

“The final manufacturing PMI print of Q1 for Japan points to the worst quarterly performance in the sector since Q2 2016. The likelihood of the negative trend in output being stymied any time soon appears slim, with demand for goods from both domestic and international sources waning further.
Firms cut production at the fastest rate in almost three years and showed reluctance to replace out-going staff, with employment growth at the lowest since late-2016.
“The economic backdrop for the manufacturing sector in Japan remains fiercely challenging. Asian goods producers face headwinds from slowing growth in Europe and China, while global trade risks are yet to be mitigated by a breakthrough in US-Sino relations.
“For the Japanese economy to keep its head above water, the service sector will need to pick up any manufacturing slack, which will hinge on domestic demand pressures sustaining the strength that supported the growth rebound at the end of 2018.”